I'm a newbie here:
Can anyone kindly tell me the meaning of reverse charge with an example
What is Reverse Charge in GST?
Reverse charge means the liability to pay tax is by the recipient of goods/services instead of the supplier.
In GST, normally the supplier is liable to collect tax on goods and services provided. But the central government has the power to notify categories of supplies against which service recipient has to discharge the tax liability. Hence, under RCM the provisions of the Act will be applicable to the recipient of such goods or services as if he is the supplier of such goods or services.
When a person becomes liable to pay tax on the reverse charge, certain provisions like threshold exemption, time of supply, availing of input credit changes. There is a threshold limit for turnover aggregating to Rs.20 Lakhs for registration for normal tax payers but under reverse charge, there is no such limit. The person has to be registered under GST irrespective of the aggregate limit.
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.For Example: Quikr supplies services of a plumber, a beautician, an electrician, etc. hence, instead of registered service providers, Quikr have to pay GST and collect from customers.
- 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.
For more clarification refer: reverse-charge-mechanism-under-gst
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