Reverse Charge Mechanism Under GST [Section 9(4)]:
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Reverse charge may be applicable in case of supply of notified goods or services or both.

• Reverse charge is also applicable in case of supply by an UNREGISTERED person to a REGISTERED person, where such supply is of taxable goods or services   (Reverse Charge in case of Unregistered dealers has been suspended till 31.03.2018. This decision has been taken in 22nd council meeting dated 06.10.2018)
• Exempt supply received from an un-registered person is not covered under reverse charge mechanism.

Sec 2(62) of CGST, input tax in relation to a registered person, means the central tax, State tax, integrated tax or Union territory tax charged on any supply of goods or services or both made to him .
So, such Tax paid under reverse charge mechanism is available as ITC to the registered recipient person. But registered person shall avail credit of this ITC only if such input supply is not otherwise specifically mentioned, to be of category of supplies on which ITC is restricted under this Act
Q When does the liability to Pay Tax under Reverse Charge Mechanism arise
In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earliest of the following dates, namely:

• the date of the receipt of goods; or
• the date of payment as entered in the books of account of the recipient; or
• the date on which the payment is debited in his bank account, whichever is earlier; or
• the date immediately following thirty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier:

However, where it is not possible to determine the time of supply as above, the time of supply shall be the date of entry in the books of account of the recipient of supply. [Section 12(3) of CGST Act 2017]
Q How to pay tax under Reverse Charge Mechanism
Since section 49(4) allows the ITC to be used for payment of only Output Tax, so it can be interpreted that ITC cannot be used for payment of tax under Reverse Charge Mechanism i.e. tax under Reverse Charge Mechanism can be paid through cash mode only.
Q In case of normal supplies where payment to supplier is not made within 180 days of supply, ITC is not available on such supply. Do the same provisions apply for tax paid under Reverse Charge Mechanism also
No, registered person will not lose the ITC for tax paid under Reverse Charge Mechanism in case payment to supplier is not made within 180 days of time of supply, as Second Proviso to Section 16 specifically excludes supplies made under reverse charge mechanism.
Second Proviso to Section 16
where a recipient fails to pay to the supplier of goods or services or both, other than the supplies on which tax is payable on reverse charge basis, the amount towards the value of supply along with tax payable thereon within a period of one hundred and eighty days from the date of issue of invoice by the supplier, an amount equal to the input tax credit availed by the recipient shall be added to his output tax liability, along with interest thereon, in such manner as may be prescribed.
Payment of tax by Electronic Commerce Operator
Provided that where an electronic commerce operator does not have a physical presence in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax:
Provided further that where an electronic commerce operator does not have a physical presence in the taxable territory and also he does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.
 
LIST OF SERVICES ON WHICH REVERSE CHARGE PAYMENT IS COMPOULSORILY APPLICABLE

• GTA service provided by a GTA to a registered persons, casual taxable person, Factory, Society, Co-operative Societies, any Body Corporate, partnership firm or an AOP are covered under Reverse Charge Mechanism and tax has to be paid by the recipient of supply.
• Even advance payments are subject to Reverse Charge Mechanism.

 any other body corporate (not being a company as defined in this Act), which the Central  Government may, by notification, specify in this behalf.

• Services of recovery agent availed by a banking company, NBFC or financial institution are covered under Reverse Charge Mechanism and tax has to be paid by recipient of such services.
• Even advance payments are subject to Reverse Charge Mechanism.

 Services  provided by director to the company

• Services provided or agreed to be provided by a director of a company or a body corporate to the said company or the body corporate otherwise than in capacity of employee shall be taxable under Reverse Charge Mechanism and tax shall be paid such company or body corporate.
• Even advance payments are subject to Reverse Charge Mechanism.

      Services  provided by INDIVIDUAL ADVOCATE or FIRMS OF ADVOCATE

However as per Entry no. 16, following services are exempt from tax under GST:

• Where Arbitral tribunal, Senior advocate, Junior advocate or firm of advocates provides legal services
• to non-business entity.
• to a business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year;
• Where Junior advocate or firm of advocates provides legal services to an advocate or partnership firm of advocates providing legal services.
• So Reverse Charge Mechanism shall not be applicable in the above-mentioned cases.

Entry no. 15 of list of exempted services
Services provided by-
(a) an arbitral tribunal to
(i) any person other than a business entity; or
(ii) a business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year;
(b) a partnership firm of advocates or an individual as an advocate other than a senior advocate, by way of legal services to-
(i) an advocate or partnership firm of advocates providing legal services;
(ii) any person other than a business entity; or
(iii) a business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year; or
(c)  a senior advocate by way of legal services to–
(i) any person other than a business entity; or
(ii) a business entity up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year;

Services provided by Government or Local Authority

• Services provided by the department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government.

Exempt if provided to a business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year. [Entry no. 39 in list of exempted services]

• In other cases, taxable if provided to non government customers for personal or business use. [Entry no. 1 in list of exempted services.]

Do not fall under Reverse Charge Mechanism but taxable under forward charge mechanism. [Entry no. 6 in list of services under reverse charge as approved by GST Council]

• Services provided by Government or local authority in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport.

Exempt if provided to a business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year. [Entry no. 39 in list of exempted services]

• In other cases, taxable even if provided to Government. [Entry no. 1 in list of exempted services.]

Do not fall under RCM i.e. taxable under forward charge mechanism. [Entry no. 6 in list of services under reverse charge as approved by GST Council]

• Services provided by Government or local authority in relation to transport of goods or passengers.

Exempt if provided to a business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year. [Entry no. 39 in list of exempted services]

• In other cases, taxable even if provided to Government. [Entry no. 1 in list of exempted services.]

Do not fall under Reverse Charge Mechanism e. taxable under forward charge mechanism. [Entry no. 6 in list of services under reverse charge as approved by GST Council]

• Services provided by Government or local authority in relation to renting of immovable property.

Exempt if provided to a business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year. [Entry no. 39 in list of exempted services]
Taxable only if provided to business entities [under clause iv of Entry no. 1 in list of exempted services.]
Do not fall under Reverse Charge Mechanism e. taxable under forward charge mechanism. [Entry no. 6 in list of services under reverse charge as approved by GST Council]
All other services provided by Government or local authority.
Taxable only if provided to business entities [under clause iv of Entry no. 1 in list of exempted services.]
Taxable under Reverse Charge Mechanism. [Entry no. 6 in list of services under reverse charge as approved by GST Council]

Entry no. 1 of list of exempted services
Services by Government or a local authority excluding the following services:
(i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency
(ii) services provided to a person other than Government;
(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; or
(iv) any service, other than services covered under clauses (i) to (iii) above, provided to business entities.

 Entry no. 39 of list of exempted services
Services provided by Government or a local authority to a business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year.
Explanation.- For the purposes of this entry, it is hereby clarified that the provisions of this entry shall not be applicable to
(a) services at S. No. 1 (i), (ii)and (iii); and
(b) services by way of renting of immovable property

Services through Radio Taxi or Passenger Transport Services through Electronic Commerce Operator

Radio taxi or Passenger Transport Services provided through electronic commerce operator provide by Taxi driver or Rent a cab operator to any person shall be taxable under Reverse Charge Mechanism to be paid by E-commerce operator.
Services provided by an Insurance Agent

Services provided by any person located in non- taxable territory

In case of B2B import of OIDAR services, recipient of services shall pay tax under reverse charge mechanism.
In case of B2C import of OIDAR services, supplier or his intermediary shall pay tax under forward charge mechanism.
Such supplier shall, for payment of IGST, take a single registration under the Simplified Registration Scheme to be notified by the Government. Alternatively, any person located in the taxable territory representing such supplier for any purpose in the taxable territory shall get registered and pay IGST on behalf of the supplier. In case such supplier does not have a physical presence or does not have a representative for any purpose in the taxable territory, he may appoint a person in the taxable territory for the purpose of paying integrated tax and such person shall be liable for payment of such tax.
Since CGST & IGST Acts are not applicable to the State of Jammu & Kashmir as it is a non-taxable territory, so for the purpose of this discussion only import includes services received from Jammu & Kashmir.
Other miscellaneous provisions:
In case of B2C import of other services, no tax shall be payable under GST.
In case of B2B import of other services, tax shall be payable by recipient of services.
In case of B2B import of goods, tax shall be payable by recipient of goods.
As per entry no. 1 of chapter 24 of GST rate schedule for goods as suggested by GST Council in its meeting held on 18th May 2017 tax @5% on Tobacco leaves shall be paid under reverse charge by the recipient of goods.

This Article has been shared by CS Kirandeep Kaur. She can be reached @ cskirandeep@gmail.com

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