Reverse charge under GST, mechanism explained
Reverse charge under GST:
Reverse charge mechanism under GST is a new phenomenon applied under the laws. Particularly in any Taxation system its the supplier who pays the tax on supply. But there are few cases in which, the receiver becomes liable to pay the tax, i.e., the phenomenon gets reversed and because of it, it is called as reverse charge.If we consider particularly in our country, this is a new concept introduced under GST. To generate tax revenues and different compliances, government has introduced this. Earlier, collection of service tax from various unorganised sectors like goods transport was becoming very difficult. It is believed that tax collections will be increased through reverse charge mechanism. The concept of reverse charge mechanism is already present in service tax to some extent. But in GST regime, reverse charge is for both services as well as goods.
In the present scenario reverse charge is applicable for only services which comes to be, Insurance agent, Services of a, director to a company, Manpower supply, Goods Transport Agencies, Non-resident service providers, Any service involving any external links. But after the roll out of GST reverse charge will be applied for goods as well.
List of services on which reverse charge is applicable as published by cbec
GST reverse charge mechanism in India
Reverse charge as the name suggests is the tax liability that is applicable for the recipient to pay the tax. But there are few conditions upon which this can be applicable.
- Unregistered supplier: If the buyer is registered and supplier is not registered.
- E-commerce portal: Supplier is supplying services but E-commerce operator has to pay tax. If there is no Physical for E-Commerce then the registered authority has to pay tax.
There are more to be notified once GST rolls out.
Determine the time of supply for goods and services under reverse charge:
In case of reverse charge, the time of supply shall be the earliest of the following dates —
the date of receipt of goods OR the date of payment OR the date immediately after THIRTY days from the date of issue of invoice by the supplier
the date of payment OR the date immediately after SIXTY days from the date of issue of invoice by the supplier
If it is not possible to determine the time of supply, the time of supply shall be the date of entry in the books of account of the receiver of service/recipient.
Reverse charge mechanism GST example, if goods are ordered and buyer pays discount on 30 October and invoice is raised on 9th November then the time of supply under Reverse charge will be 30th October.
And when talking about services there is not yet finalised about the rules of service tax and reverse charge under GST. It is believed that a Service provider if sends a bill mentioning at the bottom that the service tax will be borne by the receiver then the receiver will pay the bill payment to service provider and deposit tax liability to the Government.
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