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PRESENTATION ON PAYMENT

UNDER REVERSE CHARGE IN GST


GUIDED BY: PRESENTED BY:
MR. BINEET KEDIA ANURAG SHARMA
(Asst. Prof) (1483031)
KIIT School of Law BA. LLB. A
KIIT University
GOODS AND SERVICE TAX (GST)
One of the biggest indirect tax reforms in the country that came into effect on July 1.

Any person whose aggregate turnover in a financial year exceeds the threshold limit of
Rs 20 lakh (Rs 10 lakh for north-eastern states), shall be liable to obtain registration.

where a registered person buys goods or services from an unregistered person, the
liability to discharge GST is cast upon the registered person.

the law casts an additional responsibility upon the registered buyer of goods/ services,
to raise an invoice on self.
REVERSE CHARGE
Means the liability to pay the tax by person receiving goods and/or services instead of
the person supplying the goods and/or services in respect of specified categories of
supplies

The concept of reverse charge under GST is being introduced which is already present in
service tax.

There is no reverse charge mechanism in supply of goods.

Two type of reverse charge-


covered by section 9 (3) of the CGST/SGST (UTGST) Act and section 5 (3) of the IGST
Act
covered by section 9 (4) of the CGST/SGST (UTGST) Act and section 5 (4) of the IGST
Act
REVERSE CHARGE
Section 9(3) of CGST/SGST (UTGST) Act, 2017/section 5(3)of IGST Act, 2017, the
Government may, on the recommendations of the Council, by notification, 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/SGST (UTGST) Act, 2017/section 5(4) of IGST Act, 2017 provides
that the tax in respect of the supply of taxable goods or services or both by a supplier,
who is not registered, to a registered person shall be paid by such person on reverse
charge basis as the recipient 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.
SITUATIONS WHERE THE REVERSE CHARGE WILL APPLY

Services supplied by an Electronic Commerce Operator will attract reverse charge and
they will be liable to pay GST. If the assessee has no physical presence in the taxable
area, then the representative of such e-commerce operator will be liable to pay tax. If
there is no representative, then the assessee has to appoint one who will be liable to
pay GST.

If the registered dealer is buying goods or services from an unregistered dealer then,
the registered dealer will be liable to pay tax on supply.

All other categories of supplies will be notified by Central or State government that will
fall under reverse charge.
TIME OF SUPPLY FOR GOODS UNDER REVERSE CHARGE

Provisions are different under reverse charge than normal scenario. Time of supply will be
the earliest of the below dates:

When the goods are received i.e. the date of receipt.


When the amount is paid i.e. the date of payment.
Date of payment shall be earliest of The date on which payment has been debited
from suppliers bank account Or When the recipient records the payment in his books
of account
The date immediately after 30 days from the date the supplier issues invoice.

If the assesse fails to determine the time of supply from the above-mentioned clauses,
then the time of supply shall be the date on which recipient enters in his books of account.
TIME OF SUPPLY FOR SERVICES UNDER REVERSE CHARGE
provisions are different for services under reverse charge. Time of supply will be the
earliest of the below dates:

When the amount is paid i.e. the date of payment OR


Date of payment shall be earliest of The date on which payment has been debited
from suppliers bank account Or when the recipient records the payment in his books
of account.
The date immediately after 30 days from the date the supplier issues invoice.

If the assesse fails to determine the time of supply from the above-mentioned clauses,
then the time of supply shall be the date on which recipient of service enters in his books
of account.
If the supplier is located outside India, then the time of supply shall be the earliest of
When the amount is paid i.e. the date of payment OR When the recipient records the
payment in his books of account.
Tax Invoice:

The supplier has to mention in his tax invoice that the tax is payable on reverse charge.
Registration

A person who is required to pay tax under reverse charge has to compulsorily register
under GST and the threshold limit of Rs. 20 lakhs (Rs. 10 lakhs for special category states
except J & K) is not applicable to him.
Registration

A person who is required to pay tax under reverse charge has to compulsorily register
under GST and the threshold limit of Rs. 20 lakhs (Rs. 10 lakhs for special category states
except J & K) is not applicable to him.
Input Tax Credit:

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. Unfortunately, ITC cannot
be used to pay output tax, which means that payment mode is only through cash under
reverse charge
Compliance in respect of supplies under reverse charge mechanism

As per section 31 of the CGST Act, 2017 read with Rule 46 of the CGST Rules, 2017,
every tax invoice has to mention whether the tax in respect of supply in the invoice is
payable on reverse charge. Similarly, this also needs to be mentioned in receipt voucher
as well as refund voucher, if tax is payable on reverse charge.

Maintenance of accounts by registered persons: Every registered person is required to


keep and maintain records of all supplies attracting payment of tax on reverse charge.

Any amount payable under reverse charge shall be paid by debiting the electronic cash
ledger. In other words, reverse charge liability cannot be discharged by using input tax
credit. However, after discharging reverse charge liability, credit of the same can be
taken by the recipient, if he is otherwise eligible.
Compliance in respect of supplies under reverse charge mechanism

Invoice level information in respect of all supplies attracting reverse charge, rate wise,
are to be furnished separately in the table 4B of GSTR-1.

Advance paid for reverse charge supplies is also leviable to GST. The person making
advance payment has to pay tax on reverse charge basis.
Supplies of goods under reverse charge mechanism:
S. No. Description of supply of goods Supplier of goods Recipient of goods

1. Cashew nuts, not shelled or Agriculturist Any registered person


peeled

2. Bidi wrapper leaves (tendu) Agriculturist Any registered person

3. Tobacco leaves Agriculturist Any registered person

4. Supply of lottery State government, union territory Lottery distributor and selling agent
and any other local authority

5. Silk yarn Any person who manufacture silk Any registered person
from raw silk yarn
FOLLOWING SERVICES COME UNDER THE NET OF REVERSE CHARGE MECHANISM-

In respect of services provided or agreed to be provided by an insurance agent to any


person carrying on insurance business 100%

In respect of services provided or agreed to be provided by a recovery agent to a


banking company or a financial institution or a non-banking financial company 100%

In respect of services provided or agreed to be provided by a selling or marketing agent


of lottery tickets in relation to lottery in any manner to a lottery distributor or selling
agent of the State Government under the provisions of the Lottery (Regulations) Act,
1998 (17 of 1998)- 100%
FOLLOWING SERVICES COME UNDER THE NET OF REVERSE CHARGE MECHANISM-

In respect of services provided or agreed to be provided by a goods transport agency


in respect of transportation of goods by road 100%;

In respect of services provided or agreed to be provided by way of sponsorship


100%;

In respect of services provided or agreed to be provided by an arbitral tribunal


100%;

In respect of services provided or agreed to be provided by an individual advocate or


firm of advocates by way of legal services, directly or indirectly
FOLLOWING SERVICES COME UNDER THE NET OF REVERSE CHARGE MECHANISM-

In respect of services provided or agreed to be provided by Government or local


authority excluding,-

(1) Renting of immovable property, and


(2) Services specified in sub-clauses (i), (ii) and (iii) of clause (a) of section 66D of
the Finance Act, 1994 100%

In respect of services provided or agreed to be provided by way of renting of a motor


vehicle designed to carry passengers on abated value to any person who is not engaged
in the similar line of business 100%

In respect of services provided or agreed to be provided by way of supply of


manpower for any purpose or security services 100%
FOLLOWING SERVICES COME UNDER THE NET OF REVERSE CHARGE MECHANISM-

in respect of any taxable services provided or agreed to be provided by any person


who is located in a non-taxable territory and received by any person located in the
taxable territory other than non-assessee online recipient 100%

n respect of any service provided or agreed to be provided by a person involving an


aggregator in any manner 100%

in respect of services provided or agreed to be provided by way of transportation of


goods by a vessel from a place outside India up to the customs station of clearance in
India 100%
Under partial reverse charge

In respect of services provided or agreed to be provided by way of renting of a motor


vehicle designed to carry passengers on non-abated value to any person who is not
engaged in the similar line of business service provider 50% and service receiver
50%

In respect of services provided or agreed to be provided in service portion in


execution of works contract service provider 50% and the service receiver 50%
Miscellaneous Points for Attention:

If the composite dealer falls under reverse charge mechanism then the dealer is
ineligible to claim any credit of tax paid. Along with the dealer is liable to pay tax at
normal rates applicable to such supply and not the rate applicable for composition
scheme.

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.

As per the proposed Bill, GST compensation cess will be levied and collected at a date
which will be notified by the government at a later date.
THANK YOU

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