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Safe Harbor Statement
The following is intended to outline our general product direction. It is intended for
information purposes only, and may not be incorporated into any contract. It is not a
commitment to deliver any material, code, or functionality, and should not be relied upon
in making purchasing decisions. The development, release, and timing of any features or
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Upcoming GST Webcast Schedule..
Date Time (IST) Topic Presenter
11-Aug-2017 4pm to 5pm Reverse Charge in GST Somdeep
(Fri)
17-Aug-2017 4pm to 5pm GST OSP Functionality Somdeep
(Thu)
22-Aug- 4pm to 5pm IRISO Somdeep
2017(Tue)
29-Aug- 4pm to 5pm Settlement, GSTR Reports, Somdeep
2017(Fri) Process Claim

01-Sep- 4pm to 5pm O2C Flows Somdeep

2017(Tue)

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 Oracle Webcast
GST Series: Session 3
Financials for India: Goods and Service
Tax Reverse Charge Mechanism Feature
•Somdeep Talapatra - Principal Software Engineer

Aug 11, 2017

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Objectives
 Learning about GST Reverse Charge Mechanism

 Understanding the Process Flow Reverse Charge

 Showing the EBS Mapping for Reverse Charge Mechanism

 Identifying the Accounting for these transactions

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Program Agenda

1 GST Reverse Charge Law

2 Reverse Charge Process Flows
3 Input Tax Credit of RC Tax
4 EBS Mapping of Reverse Charge
5 Reverse Charge Accounting

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GST Reverse Charge Mechanism

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Law:
• “Reverse charge’’ means the liability to pay tax by the recipient of supply of goods or services
instead of the supplier of such goods or services in respect of such categories of supplies as
notified under sub-section (3) of Section 8. The concept of Reverse Charge existed earlier under
the Service Tax provisions for services like Works Contract, Manpower, Goods transport
Agencies, Legal services etc., However, under the GST, Reverse charge mechanism has been
introduced both for Goods and Services. Accordingly, all other provisions of this Act and CGST
Act, as applicable, will apply to the recipient of such goods and / or services, as if the recipient is
the supplier of such goods and / or services i.e. for the limited purpose of such transactions, the
recipient would be deemed to be the ‘supplier’
• As per section 2(98) of CGST Act’ 2017, “reverse charge” means 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, or
 under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and Services Tax Act

Copyright © 2017, Oracle and/or its affiliates. All rights reserved. | 12

Reverse Charge Mechanism:
• “Reverse charge’’ means the liability to pay tax by the recipient of supply of goods or
services instead of the supplier of such goods or services in respect of such categories
of supplies as notified under sub-section (3) of Section 8. The concept of Reverse Charge
existed earlier under the Service Tax provisions for services like Works Contract,
Manpower, Goods transport Agencies, Legal services etc., However, under the GST,
Reverse charge mechanism has been introduced both for Goods and Services.
Accordingly, all other provisions of this Act and CGST Act, as applicable, will apply to the
recipient of such goods and / or services, as if the recipient is the supplier of such goods
and / or services i.e. for the limited purpose of such transactions, the recipient would be
deemed to be the ‘supplier’
• Under the normal taxation regime, supplier collects the tax from the buyer and deposits
the same after adjusting the output tax liability with the input tax credit available. But
under reverse charge mechanism, liability to pay tax shifts from supplier to recipient.

Copyright © 2017, Oracle and/or its affiliates. All rights reserved. | 13

Comparison of Normal Tax with RC Tax
Under the normal taxation regime,
supplier collects the tax from the
buyer and deposits the same after
adjusting the output tax liability with
the input tax credit available. But
under reverse charge mechanism,
liability to pay tax shifts from supplier
to recipient.
As per Section 24 of CGST Act’ 2017 ,
A person paying tax under the reverse
charge mechanism has to
compulsorily get registered even if
the turnover is below threshold limit.
Even advance payments are subject
to Reverse charge mechanism.
Unlike Service Tax, there is no
concept of partial reverse charge. The
recipient has to pay 100% tax on the
supply.

Copyright © 2017, Oracle and/or its affiliates. All rights reserved. | 14

When does the Liability to Pay GST under Reverse Charge
Mechanism Arise?
In case of supplies in respect of which tax is paid or liable to be paid on reverse charge
basis, the time of supply shall be the earliest of the following dates, namely:
• the date of the receipt of goods; or
• the date of payment as entered in the books of account of the recipient; or the date on
which the payment is debited in his bank account, whichever is earlier; or
• the date immediately following thirty days from the date of issue of invoice or any other
document, by whatever name called, in lieu thereof by the supplier

However, where it is not possible to determine the time of supply as above, the time of
supply shall be the date of entry in the books of account of the recipient of supply.

Copyright © 2017, Oracle and/or its affiliates. All rights reserved. | 15

Input tax credit of RCM tax
• The service recipient can avail Input Tax credit on the Tax amount that is paid under
reverse charge on goods and services. The only condition is that the goods and services
are used or will be used for business or furtherance of business.
• If the composite dealer falls under reverse charge mechanism then the dealer is
ineligible to claim any credit of tax paid. Also , tax in this case will be paid at the normal
applicable rates and not at the composition rates.

• Points to be noted:
 No partial reverse charge will be applicable under GST. 100% tax will be paid by the recipient if reverse
charge mechanism applies.
 In case of B2B import of other services, tax shall be payable by recipient of services
 In case of B2B import of goods, tax shall be payable by recipient of goods

Copyright © 2017, Oracle and/or its affiliates. All rights reserved. | 16

Scenario where Reverse Charge will be Applicable under
GST
• For Goods:
In case of unregistered dealer is selling goods to the registered dealer, then the
liability to pay tax shifts on the registered dealer i.e. the recipient of goods, where
such supply is of taxable supplies. No reverse charge mechanism in case of exempted
supplies

• For Services
CBEC has notified a list of services on which reverse charge mechanism will be
applicable under GST
Import of Services

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RCM in EBS

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Tax Type Setup

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Tax Type Accounting Setup

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Invoice

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India Tax Details

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Repository Update

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India – Period Ending process

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Reverse Charge Settlement in EBS

India Period Ending Process for RC Taxes

Centralized Repository
1. Liability Transactions Claim/Settle
Settlement
2. Interim Recovery
Transactions Reconcile
3. Reverse Charge Data
liability
4. Advances received Upload to
GSTN

GSTN System

Copyright © 2017, Oracle and/or its affiliates. All rights reserved. |

India – Period Ending Process
• Data should get populated into the Repository(table jai_rgm_recovery_lines) once the
prepayment is applied to the Standard invoice
• A new concurrent program: India - Period Ending Process is introduced for the period
ending process. There are 2 valid modes of running the period end process
a. Save - In this mode, the invoices will be prepared for GSTN and the user can view those details
b. Final - In this mode all the records will be locked and the accounting will get created in GL.
• Based on the data populated, the Period Ending Process shall create the accounting in
GL
• For Standard invoice there will be a record inserted into the repository table with
liability account and for Prepayment also there will be a liability account. Once the
Prepayment is applied to Standard Invoice, there will be a negative Reversal entry
against liability to adjust the prepayment application

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India – Period Ending process – SAVE Mode

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Repository Update

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India – Period Ending process – FINAL Mode

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Repository Update

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Review Journal

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Tax Accounting

Cr: Tax Liability

Dr: Interim Recovery

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RC Taxes in Prepayment
Invoices

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Flow Diagram

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Prepayment Invoice

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Prepayment Taxes

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Invoice Validated and Paid

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Repository Update

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Apply PP Invoice To Std Invoice

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India – Period Ending process – FINAL Mode

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Offset Entry against the Liability Booked

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Journal Import

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Reverse Journal and offset accounting generated

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Summary
What we covered today
Reverse Charge Law
Reverse Charge Process
Input Tax Credit for Reverse Charge
Reverse Charge Mapping to EBS
Reverse Charge Accounting

Copyright © 2017, Oracle and/or its affiliates. All rights reserved. | 44

Top Articles and Community Links
• Financials for India My Oracle Support
Community
• Financials for India Goods and Service
Tax Reverse Charge Mechanism
Webcast specific thread
• See Q&A from today’s webcast
• Ask related follow up questions
• Access recording & presentation PDF

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Oracle Advisor Webcast Series
Locating Current Schedule & Archived Recordings

Review the current schedule

and archived recording for your
product from Doc 740966.1

Select your Product Area

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Oracle Advisor Webcast Program
Locating Current Schedule & Archived Recordings
 Access the FIN area directly via Document
1455839.1and drill down to your area of
interest

 Recording can be played back within the

MOS document 2291319.1
 Recordings available within 48 hours

 Use ‘Questions?’ Link to ask webcast

related questions and ‘.pdf’ link to access
the slides from the session
 Financial for India Community thread:
https://community.oracle.com/thread/4067684

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Q&A
• Please post your Questions on to
your chat
• Your question will be read aloud in
the order received.
• Question can also be asked on the
My Oracle Support Communities

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THANK YOU

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