Reverse charge under GST Act

Reverse charge, where the recipient is liable to pay tax instead of service provider/seller.The concept of reverse charge mechanism is already present in service tax. In GST regime, reverse charge may be applicable for both services as well as goods.The purpose of this charge is to increase tax compliance and tax revenues. 

One of most discussed provisions of GST is that reverse charge on  goods/services supplied by Unregistered dealer  to a registered dealer.Here composite dealer shall be treated as Registered dealer.

In above case, the registered dealer has to pay GST on the supply. But now Govt has given two exemption for this clause.

1.     If a person registered under GST only for deduction of TDS/TCS then reverse charge from supply of goods and services shall not apply on such person.

2.     Further Cut off amount of 5000/- per day has been allowed to registered person.

3.     Exemption from reverse charge has been given to registered person on purchase of second hand goods from unregistered person subject to the condition that buyer will pay GST on its subsequent sales. 

Note :The below notification has used intra state supply as unregistered dealer cannot supply good/services inter state.

[TO BE PUBLISHED IN PART II, SECTION 3, SUB-SECTION (i) OF THE GAZETTE OF INDIA, EXTRAORDINARY] 

GOVERNMENT OF INDIA 

MINISTRY OF FINANCE 

(Department of Revenue) 

Notification No.9/2017-Union Territory Tax (Rate) 

New Delhi, the 28th June, 2017 G.S.R. (E).- 

In exercise of the powers conferred by sub-section (1) of section 8 of the Union Territory Goods and Services Tax Act, 2017 (14 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts intraState supplies of goods or services or both received by a deductor under section 51 of the Central Goods and Services Tax Act, 2017 (12 of 2017), from any supplier, who is not registered, from the whole of the Union Territory tax leviable thereon under sub-section (4) of section 7 of the said Union Territory Goods and Services Tax Act, subject to the condition that the deductor is not liable to be registered otherwise than under sub-clause (vi) of section 24 of the said Central Goods and Services Tax Act read with section 21 of the said Union Territory Goods and Services Tax Act. 

2. This notification shall come into force with effect from the 1 st day of July, 2017. [F.No.354/117/2017-TRU] (Mohit Tewari) Under Secretary to the Government of India

[TO BE PUBLISHED IN PART II, SECTION 3, SUB-SECTION (i) OF THE GAZETTE OF INDIA, EXTRAORDINARY] 

GOVERNMENT OF INDIA MINISTRY OF FINANCE (Department of Revenue) 

Notification No.8/2017-Central Tax (Rate) 

New Delhi, the 28th June, 2017 G.S.R. (E).- 

In exercise of the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts intra-State supplies of goods or services or both received by a registered person from any supplier, who is not registered, from the whole of the central tax leviable thereon under sub-section (4) of section 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017): 

Provided that the said exemption shall not be applicable where the aggregate value of such supplies of goods or service or both received by a registered person from any or all the suppliers, who is or are not registered, exceeds five thousand rupees in a day.

2. This notification shall come into force with effect from the 1st day of July, 2017.

[F.No.354/117/2017-TRU] (Mohit Tewari) Under Secretary to the Government of India

[TO BE PUBLISHED IN PART II, SECTION 3, SUB-SECTION (i) OF THE GAZETTE OF INDIA, EXTRAORDINARY] 

GOVERNMENT OF INDIA 

MINISTRY OF FINANCE 

(Department of Revenue) Notification 

No.10/2017-Union Territory Tax (Rate) New Delhi, the 28th June, 2017 

G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 8 of the Union Territory Goods and Services Tax Act, 2017 (14 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts intra-State supplies of second hand goods received by a registered person, dealing in buying and selling of second hand goods and who pays the Union territory tax on the value of outward supply of such second hand goods as determined under sub-rule (5) of rule 32 of the Central Goods and Services tax Rules, 2017, from any supplier, who is not registered, from the whole of the Union territory tax leviable thereon under sub-section (4) of section 7 of the Union Territory Good and Services Tax Act, 2017 (14 of 2017). 

2. This notification shall come into force with effect from the 1st day of July, 2017. [F.No.354/117/2017-TRU] (Mohit Tewari) Under Secretary to the Government of India

Interest Rate for Late payment of IGST

NOTIFICATION New Delhi, the 28th June, 2017 No. 6/2017-Integrated Tax G.S.R. 698(E).—In exercise of the powers conferred by section 20 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), read with sub-sections (1) and (3) of section 50, sub-section (12) of section 54 and section 56 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on the recommendations of the Council, hereby fixes the rate of interest per annum, for the purposes of the sections as specified in column (2) of the Table below, as mentioned in the corresponding entry in column (3) of the said Table. 

SN	Section	Interest Rate
(1)	(2)	(3)
1.	Delay in Payment of Tax	18
2.	Undue or excess Claim of Input Tax credit	24
3.	Withholding of refund	6
4.	Delay in refund More than 60 days	6
5.	Delay in Refund  more than 60 days ordered by  an adjudicating authority or Appellate Authority or Appellate Tribunal or court	9

This notification shall come into force from the 1st day of July, 2017. [F. No. 349/72/2017-GST] Dr. SREEPARVATHY S. L., Under Secy.

Reverse Charge Mechanism in GST Act

I Definition of Reverse Charge

(98) '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;

Thus in reverse charge recipient of goods or services or both is liable to pay to pay GST.

II The provisions relating to Reverse charge in the GST Act

 

9(3) 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.

Essential ingredients :

1. It shall be recommended by GST Council .List of services under Reverse charge is as follows http://www.cbec.gov.in/resources/htdocs-cbec/gst/list-of-services-under-reverse-charge-2.pdf

2. The Central or State Government shall issue notification specifying the categories of supply of goods or services or both and the person liable to pay the tax. Thus the issuance of notification is a mandatory condition. 

3. The recipient of service or goods will be considered as a person liable to pay GST.

The recipient steps into the shoes of the person making the supply. Where tax is payable on reverse charge basis then in such case who is liable to pay on reverse charge has to compulsorily obtain registration irrespective of their turnover. i.e even if his turnover does not exceed 20 lakh still he is liable to register. The registration is to be obtained in Form GST-REG-1 

However as per Notification No. 5/2017 - Central Tax the persons who are only engaged in making supplies of taxable goods or services or both, the total tax on which is liable to be paid on reverse charge basis by the recipient of such goods or services or both under sub-section (3) of section 9 of the said Act as the category of persons exempted from obtaining registration under the aforesaid Act. 

4. Reverse charge is applicable in case of supply of goods also.

III Supply from an unregistered person

In addition to section 9(3) of the GST Act , the section 9(4) of the GST Act states that in case of supply of taxable goods or services or both from an supplier who is not registered then in such case tax will be paid by the recipient of goods or services or both. In this case the recipient is required to prepare invoice as stated in section 31(3)(f) of the GST Act. 

As per Sec 9(4) of CGST Act, GST has to be discharged on Reverse charge basis on purchase of goods/services from unregistered persons. In a relief to the assessee, the government has exempted the following supplies from GST under reverse charge vide NotificationNo.8/2017-Central tax rate.

• Exemption is available only for intra-state supplies - Thus location of supplier and place of supply should be in the same state.
• The exemption is eligible only when the total value of supplies of goods or services or both received from any or all the unregistered persons does not exceed Rs. 5,000 in a day. If the value exceeds Rs. 5000 per day then the GST will be payable on the entire value. Eg. If a person buys goods worth Rs. 2000/- and Rs. 3500/- from two unregistered supplier in a day, then GST will be paid on the entire value of Rs. 5500/- under RCM by the buyer.
• Also, an amendment has been made in the invoice rules to provide that a single invoice can be prepared at the month end for all reverse charge supplies ( other than those covered by the exemption explained above).

IV. Return filing in case of Reverse Charge -

Supplies from Registered Person:

• The supplier will show supplies of goods or services which attract reverse charge in table 4B of GSTR-1.
• Such details will be auto populated in table 4 of Part A of GSTR-2A of the recipient of goods or services.
• Recipient of goods or services will have following option after auto-population in GSTR-2A

a. Accept,

b. Reject,

c. Modify (if information provided by supplier is incorrect), or

d. Keep the transaction pending for action (if goods or services have not been received)

If recipient accepts or modifies then such details of supplies will be taken to table 4A of GSTR -2 . 

Supplies from Unregistered Person: In such recipient himself will prepare invoice as per the invoicing provisions and rules which will be reflected in table 4B of GSTR-2 by the recipient. Import of Services 

• In case of import of services recipient himself will prepare invoice as per the invoicing provisions and rules which will be reflected in table 4C of GSTR-2 by the recipient.
• In this table GSTIN will be of the recipient himself.

Read more at: http://www.caclubindia.com/articles/concept-of-reverse-charge-mechanism-in-gst-act-30382.asp