In the normal course of business the supplier of goods or services is liable to pay GST. However, in specified cases like imports and other notified supplies, the liability to pay GST has been cast on the recipient under the reverse charge mechanism.
There are two type of reverse charge scenarios provided in GST law.
- Nature of supply and/or nature of supplier. This scenario is covered by section 9 (3) of the CGST/ SGST (UTGST) Act and section 5 (3) of the IGST Act.
- Taxable supplies by any unregistered person to a registered person, covered by section 9 (4) of the CGST/SGST (UTGST) Act and section 5 (4) of the IGST Act
As per Sec 2(98) of the 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;
In exercise of the power conferred by Sec 9(3) & 9(4) of the CGST Act,2017 and Sec 5(3) & 5(4) of the 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.
Reverse charge - Tax payable by recipient of 'goods or services or both'
GST shall be paid by the recipient of goods or services or both, on reverse charge basis, in the following cases:
- Supply of goods or services or both, notified by the Government u/s 9(3) of CGST Act,2017 or u/s 5(3) of IGST Act, 2017 on the recommendations of the GST Council (e.g. Notification No. 13/2017 Dated 28th June 2017, Notification No. 33/2017 Dated 13th Oct 2017 & Notification No. 03/2018 Dated 25th Jan 2018 - Central Tax (Rate) and Notification No. 10/2017- Dated 28th June 2017, Notification No. 34/2017- Dated 13th June 2017 & Notification No. 03/2018- Dated 25th Jan 2018 -Integrated Tax (Rate)
- Supply of taxable goods or services or both by an unregistered supplier to a registered person u/s 9(4) of CGST Act, 2017 or u/s 5(4) of IGST Act, 2017 (This provision has been suspended till 31.03.2018 vide Notification No. 38/2017- Central Tax (Rate) Dated 13th October 2017 & Notification No. 32/2017 Dated 13th October 2017 - Integrated Tax (Rate)).
In case of goods or services covered under RCM, all the provisions of the CGST Act shall apply to the recipient in the aforesaid cases as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
GOODS COVERED UNDER REVERSE CHARGE
The Central Government, vide Notification No.4/2017-Central Tax (Rate) Dated 28th June 2017 and vide Notification No.43/2017-Central Tax (Rate) Dated 14th November 2017 has specifies the supply of following goods, tax on which shall be paid on reverse charge basis by the recipient of such goods, if he is a registered person.
- Cashew nuts, not shelled or peeled
- Bidi Wrapper leaves (tendu)
- Tobacco leaves
- Silk yarn
- Supply of Lottery
- Raw Cotton by Agriculturist
SERVICES COVERED UNDER REVERSE CHARGE
The Central Government vide Notification No.13/2017-Central Tax(Rate) Dated 28-06-2017, Notification No.33/2017-Central Tax(Rate) Dated 13-10-2017 & vide Notification No. 03/2018 Dated 25th Jan 2018 - Central Tax (Rate) has notified following categories of services wherein whole of the tax shall be payable by the recipient on services U/s 9(3) of CGST Act,2017 on Reverse charge basis.
|
Sl No. |
Category of supply of services |
Supplier of Service |
Recipient of service |
|
1 |
Supply of services by a Goods Transport Agency (GTA) [who has not paid central tax at the rate of 6%], in respect of transportation of goods by road. |
Goods Transport Agency (GTA) |
(a) any factory registered under or governed by the Factories Act, 1948; or (b) any society registered under the Societies Registration Act 1860 or under any other law for the time being in force in any part of India; or (c) any co-operative society established by or under any law; or (d) any person registered under the CGST Act or the IGST Act or the SGST Act or the UTGST Act; or (e) any Body corporate established, by or under any law; or (f) any partnership firm whether registered or not under any law including association of persons; or (g) any casual taxable person |
|
2 |
Services provided by an individual advocate including a senior advocate or firm of advocates by way of legal services, directly or indirectly |
An individual advocate including a senior advocate or firm of advocates |
Any business entity located in the taxable territory. |
|
3 |
Services supplied by an arbitral tribunal to a business entity. |
An arbitral tribunal |
Any business entity located in the taxable territory. |
|
4 |
Services provided by way of sponsorship to any Body corporate or partnership firm. |
Any person |
Any Body corporate or partnership firm located in the taxable territory. |
|
5 |
Services supplied by the Central Government, State Government, Union territory or local authority to a business entity excluding, - (1) renting of immovable property, and (2) services specified below- (i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Central Government, State Government or Union territory or local authority; (ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport; (iii) transport of goods or passengers. |
Central Government, State Government, Union territory or local authority |
Any business entity located in the taxable territory. |
|
5A |
Services supplied by the Central Government, State Government, Union territory or local authority by way of renting of immovable property to a person registered under the Central Goods and Services Tax Act, 2017 (12 of 2017) |
Central Government, State Government, Union territory or local authority |
Any person registered under the Central Goods and Services Tax Act, 2017 |
|
6 |
Services supplied by a director of a company/body corporate to the said company/body corporate. |
A director of a company or a body corporate |
The company or a body corporate located in the taxable territory. |
|
7 |
Services supplied by an insurance agent to any person carrying on insurance business |
An insurance agent |
Any person carrying on insurance business, located in the taxable territory. |
|
8 |
Services supplied by a recovery agent to a banking company or a financial institution or a non- banking financial company. |
A recovery agent |
A banking company or a financial institution or a non banking financial company, located in the taxable territory. |
|
9 |
Supply of services by an author, music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright covered under section 13(1)(a) of the Copyright Act,1957 relating to original literary, dramatic, musical or artistic works to a publisher, music company, producer or the like. |
Author or music composer, photographer, artist, or the like |
Publisher, music company, producer or the like, located in the taxable territory. |
|
10 |
Supply of service by the members of overseeing committee to Reserve Bank of India |
Members of the Overseeing Committee constituted by the Reserve Bank of India |
Reserve Bank of India |
In addition to above services, following two additional services has been notified by the Central Government vide Notification No.10/2017-Integrated Tax(Rate) Dated 28-06-2017 wherein whole of the tax shall be payable by the recipient on services U/s 5(3) of IGST Act,2017 on Reverse charge basis.
|
Sl No. |
Category of supply of services |
Supplier of Service |
Recipient of service |
|
01 |
Any service supplied by any person who is located in a non-taxable territory to any person other than non-taxable online recipient. |
Any person located in a non-taxable territory. |
Any person located in the taxable territory other than non-taxable online recipient. |
|
02 |
Services supplied by a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India up to the Customs Station of clearance in India. |
A person located in a non-taxable territory. |
Importer, as defined in Sec 2(26) of the Customs Act,1962, located in the taxable territory. |
Note: For conceptual clarity & latest provisions of GST laws, the readers may refer 'Systematic Approach to GST' & 'Indirect Tax Laws' (GST +Customs Law) By S K Mishra, FCA at following links.
https://www.amazon.in/dp/194832105X
https://www.amazon.in/dp/164249030X
The author is a Fellow member of The Institute of Chartered Accountants of India, New Delhi & Fellow member of The Institute of Cost Accountants of India, Kolkata and can be reached at gstresolve@gmail.com
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