What is reverse charge mechanism in GST?

Wondering to know

what is reverse charge in GST? Here is the complete answer.

In the GST system, the supplier collects the tax from the buyer and pays it to the government. But under the reverse charge mechanism, the liability to pay tax shifts from the supplier to the buyer.

• If you are a registered person and receive services from an unregistered person, the recipient is liable to pay tax under the reverse charge mechanism. It is given under section 9 (4) of CGST/SGST (UTGST) Act, 2017.

• The government specifies certain goods and services for which the reverse charge mechanism is applicable. It is given under section 9 (3) of CGST/SGST (UTGST) Act 2017.

The government modifies the reverse charge based on policy decisions. Therefore, it is advisable to stay updated to the latest GST laws, notifications, and circulars.

This mechanism ensures that tax is paid even when the supplier is not liable to collect it. It prevents potential tax evasion. I hope this will help you in understanding

what is reverse charge in GST.

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The supplier of goods and services usually is responsible to pay the GST. But when it comes to a few cases such as imports and other specified supplies, the onus of making GST payment falls on the receiver of goods and services. This is known what is reverse charge mechanism in GST about. I will take you further into detail about reverse charge mechanism under GST and talk a little bit about its applicability as well.

• Under Section 9(3) of CGST/SGST (UTGST) Act the government may specify the categories of goods and services under which GST will be payable on reverse charge basis. Therefore, the receiver of the goods and services shall pay the GST.

• Under section 9(4) of CGST/SGST (UTGST) Act 2017, if the supplier or goods and services is unregistered then the receiver of the goods or services will be liable to pay GST in accordance with reverse charge in GST upon procurement. However, this shall not be applicable if the supplies are made to TDS deductors under Section 51 of CGST Act 2015

• Under section 9(5) of CGST/SGST (UTGST) Act if a service provider is using an e commerce operator to provide specified services then reverse charge under GST will apply on the e com operator

The time of supply is determined separately for goods and services. Here is a quick look into the same:

• Date on which goods were received

• Date of payment as per books of account or date of debit in bank account, whichever is earlier

• Date immediately following thirty days from the date of issue of invoice

• Date of payment as per books of account or date of debit in bank account, whichever is earlier

• Date immediately following sixty days from the date of issue of invoice 

This is a quick look into

reverse charge mechanism under GST. I hope you have a fair idea now.