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    Reverse Charge Mechanism

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    Sayyad
    Under the reverse charge mechanism in GST, the recipient of goods or services is liable to pay tax instead of the supplier. The government has notified certain categories of supplies that are subject to reverse charge as per sections 9(3) and 9(4) of the CGST Act. Recipients under reverse charge must comply with requirements like registration, issuing invoices and payment vouchers, maintaining accounts of reverse charge supplies, and filing inward supply details.

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    Reverse Charge Mechanism

    Uploaded by

    Sayyad
    60 views19 pages
    Under the reverse charge mechanism in GST, the recipient of goods or services is liable to pay tax instead of the supplier. The government has notified certain categories of supplies that are subject to reverse charge as per sections 9(3) and 9(4) of the CGST Act. Recipients under reverse charge must comply with requirements like registration, issuing invoices and payment vouchers, maintaining accounts of reverse charge supplies, and filing inward supply details.

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    The GST reverse charge mechanism. For the students of commerce.

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    Reverse charge mechanism

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    Under the reverse charge mechanism in GST, the recipient of goods or services is liable to pay tax instead of the supplier. The government has notified certain categories of supplies that are subject to reverse charge as per sections 9(3) and 9(4) of the CGST Act. Recipients under reverse charge must comply with requirements like registration, issuing invoices and payment vouchers, maintaining accounts of reverse charge supplies, and filing inward supply details.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    60 views19 pages

    Reverse Charge Mechanism

    Uploaded by

    Sayyad
    Under the reverse charge mechanism in GST, the recipient of goods or services is liable to pay tax instead of the supplier. The government has notified certain categories of supplies that are subject to reverse charge as per sections 9(3) and 9(4) of the CGST Act. Recipients under reverse charge must comply with requirements like registration, issuing invoices and payment vouchers, maintaining accounts of reverse charge supplies, and filing inward supply details.

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    of 19

    REVERSE CHARGE MECHANISM UNDER GST

    1Prof. Somesh Kumar Shukla 2 Anjali


    Professor SRF
    Department of Commerce Department of Commerce
    University of Lucknow University of Lucknow
    Lucknow Lucknow

    Disclaimer: The e-content is exclusively meant for academic purposes and for enhancing teaching and learning. Any other use
    for economic/commercial purpose is strictly prohibited. The users of the content shall not distribute, disseminate or share it
    with anyone else and its use is restricted to advancement of individual knowledge. The information provided in this e-content
    is authentic and best as per our knowledge.
    Content
     Introduction
     Forward Charge vs Reverse Charge Mechanism
     Section 9(3) of CGST, 2017 / section 5(3)of IGST
    Act, 2017
     Section 9(4) of CGST, 2017 / section 5(4)of IGST
    Act, 2017
     Other Compliances under Reverse Charge
    Mechanism
    Introduction
     Generally, the supplier of goods or services is liable to pay GST.
    However, in specified cases like imports and other notified
    supplies, the recipient is liable to pay GST under the reverse
    charge mechanism.
     Section 2 (98) of CGST Act, 2017 defines Reverse Charge as
     the liability to pay tax by the recipient of supply of goods or
    services or both
     instead of the supplier of such goods or services or both
     under sub-section (3) or sub-section (4) of section 9 of the
    CGST Act,
    or
     under sub-section (3) or sub- section (4) of section 5 of the
    IGST Act.
    Forward Charge vs Reverse Charge
    Mechanism
     Forward charge/ Direct charge/ Normal Charge mechanism :
     This is the mechanism where the supplier of goods/services is liable to pay tax the
    Government.
     For instance, if a chartered accountant provided a service to his client, the service tax
    will be payable by the chartered accountant, (service Provider or supplier)
    Or
    if a car manufacturing company sold some auto parts to a trader and collected tax from
    the trader, the manufacturing company remits the tax.
     Reverse charge Mechanism:
     This is the mechanism where the receiver of services is liable to pay the tax the
    Government.
     In this mechanism, chartered accountant (CA), the client (Service receiver) would be
    liable to pay the GST, not the CA.
     It is defined u/s 2(98) of the CGST Act, 2017.
    Forward Charge vs Reverse Charge
    Mechanism
    Forward Charge

    Supplies & collects Payment with GST

    Supplier Receiver Government


    Receives & makes payment with GST

    Deposits collected tax (GST) from the Receiver

    Reverse Charge
    Supplies & collects Payment Deposits tax (GST) on the behalf
    without GST of Supplier
    Supplier Receiver Government
    Receives & makes payment
    without GST
    Section 9(3) of CGST, 2017 / section 5(3)of
    IGST Act, 2017
     The Government may, on the recommendations of the Council, by
    notification, specify categories of supply of goods or services or
    both, the tax on which shall be paid on reverse charge basis by the
    recipient of such goods or services or both and;
     all the provisions of this Act shall apply to such recipient as if he is
    the person liable for paying the tax in relation to the supply of such goods
    or services or both.
    Section 9(4) of CGST, 2017 / section 5(4)of
    IGST Act, 2017
     The Government may, on the recommendations of the Council, by notification,
    specify a class of registered persons who shall, in respect of supply of specified
    categories of goods or services or both received from an unregistered
    supplier, pay the tax on reverse charge basis as the recipient of such supply of
    goods or services or both and;
     all the provisions of this Act shall apply to such recipient as if he is the person
    liable for paying the tax in relation to such supply of goods or services or both.
    Other Compliances under Reverse Charge
    Mechanism
     Registration
    Persons who are required to pay tax under reverse charge shall be required to be
    registered under CGST Act, 2017 [Sec. 24(iii) of CGST Act, 2017].
     Invoice [Sec. 31 (f) and (g) of CGST Act, 2017]
     a registered person who is liable to pay tax under sub-section (3) or subsection (4)
    of section 9 shall issue an invoice in respect of goods or services or both received
    by him (recipient) from the supplier who is not registered on the date of receipt of
    goods or services or both;
     a registered person who is liable to pay tax under sub-section (3) or subsection (4)
    of section 9 shall issue a payment voucher at the time of making payment to the
    supplier.
    Other Compliances under Reverse Charge
    Mechanism
     Maintenance of Accounts [ Rule no. 56 (1) of Part-A, Central Goods and
    Services Tax (CGST) Rules, 2017]
     Every registered person shall keep and maintain,
     in addition to the particulars mentioned in sub-section (1) of section 35
    of CGST Act 2017,
     a true and correct account of the goods or services imported or
    exported or of supplies attracting payment of tax on reverse charge
     along with the relevant documents, including invoices, bills of supply,
    delivery challans, credit notes, debit notes, receipt vouchers, payment
    vouchers and refund vouchers.
    Other Compliances under Reverse Charge
    Mechanism
     Furnishing Details of Inward Supply [Sec. 38(2) of the CGST Act,
    2017]
     Every registered person, other than an Input Service Distributor or a
    nonresident taxable person or a person paying tax under the provisions
    of section 10 or section 51 or section 52 of CGST Act,
     shall furnish, electronically, the details of inward supplies of
    taxable goods or services or both,
     including inward supplies of goods or services or both on which the tax
    is payable on reverse charge basis under CGST Act.
    References
     https://www.cbic.gov.in/resources//htdocs-cbec/gst/CGST-Act-
    Updated-30.09.2020.pdf
     https://www.cbic.gov.in/resources//htdocs-
    cbec/gst/30.07.2020_CGST%20Rules,%202017_(Part-A_Rules).pdf
     https://www.cbic.gov.in/resources//htdocs-cbec/gst/IGST-Act-
    Updated.pdf
     https://www.cbic.gov.in/resources//htdocs-
    cbec/gst/51_GST_Flyer_Chapter12.pdf;jsessionid=C27171324C5E6701
    C3A5980D72E3857F
     Shukla,S. (2018), “Goods and Services Tax with Customs Duty”,
    published by New Royal Book Co., Lucknow, ISBN: 978-93-83138-85-2

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