REVERSE CHARGE UNDER GST
Meaning of reverse charge
Normally, GST is payable by ‘taxable person’ who is supplying goods and service. This is provided in clause 7(2) of GST Model Law, 2016 and clause 4(2) of IGST Model Law, 2016
However, in some cases, GST is payable by person receiving the goods or services. This is termed as ‘reverse charge’.
Reverse charge is the liability to pay tax by the person who is receiving goods and/or services instead of the person supplying the goods and/or services in respect of the categories mentioned here of supplies as the Central or a State Government may, on the recommendation of the Council, by notification, specify – clause 2(85) of Model GST Law, 2016.
Services and persons Covered under reverse charge
Clause 7(3) of Model GST Law, 2016 reads as follows —
Contained in sub-section (2), the Central or a State Government can be , on the recommendation of the Council, by notification, specify categories of supply of goods and/or services the tax on which is payable on reverse charge basis and the tax thereon shall be paid by the person receiving such goods and/or services and all the provisions of this Act shall apply to such person as he is the only person who is liable for paying the tax in relation to such goods and/or services
Identical provision has been made in clause 4(3) of Model IGST Law, 2016, in respect of IGST.
General provisions applicable where reverse charge applies
Though person receiving the goods or services is liable to pay GST and IGST, he is not supplier of those goods and services. He is only discharging liability, which is of supplier of goods and services.
Hence, some specific provisions have been made, which are summa-rised below.
Aggregate turnover – ‘Aggregate turnover’ does not include value of supplies in which tax is levied under reverse charge – clause 2(6) of Model GST Law, 2016.
Output tax excludes tax payable on reverse charge basis – clause 2(72) of GST Model Law, 2016 and clause 2(1)(g) of IGST Model Law, 2016.
Outward suppl y – “Outward supply” of goods and/or services does not include supplies where the tax is payable on reverse charge basis – clause 2(73) of GST Model Law, 2016.
Time of supply of goods – Clause 12(5) of Model GST Law, 2016 makes separate provisions relating to supply of goods where tax is payable on reverse charge basis.
Time of supply of service – Clause 13(5) of Model GST Law, 2016 makes separate provisions relating to supply of services where tax is payable on reverse charge basis.
Furnishing details of inward supplies – Every person liable to pay service tax under reverse charge is required to Furnish details of inward supplies – clause 26(2) of GST Model Law, 2016
Liability to be registered – Persons who are required to pay tax under reverse charge are required to be registered, irrespective of the threshold limit specified – para 5(iii) of Schedule III of GST Model Law, 2016.