GST Reverse Charge – Question Answers with Chartered Accountant

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GST Reverse Charge – Question Answers with Chartered Accountant. “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 sub-section (4) of section 5 of the Integrated Goods and Services Tax Act. Now check more details for Reverse Charge Under GST From Below….

GST Reverse Charge

Mr AHello sir, Good day to you. How are you?
CAI am doing fine Mr. A, how about you?
Mr ADoing good, Sir I have heard that in GST if we deal with unregistered dealer then we have to pay tax on behalf of them?
CAHi Mr. A, Be Calm. Yes, what you are saying is true. This concept is called “Reverse Charge”. Previously it had a very little scope in Service Tax but in GST it has very wider scope and if a registered person deals with unregistered supplier then the registered person has to raise the invoice and pay the tax on it. I understand this is huge compliance burden but this is what the current design in GST

 

For example, If a registered purchases stationery from an unregistered person, then such registered person has to pay tax on such transaction under reverse charge mechanism.

Mr AOh, so that tax is additional burden on the registered person?
CAFrom compliance point of view it is really an additional task but the registered person can claim the tax paid as input tax credit in the subsequent month. So from cost point of view, registered person will not be affected.
Mr AOk, so what will be the time of supply considered under reverse charge transactions?
CAGood Question. The time of supply of goods under reverse charge will be earlier of the following:

 

  • i) Date of receipt of goods or
  • ii) Date on which payment is made
  • iii) Date after 30 days from the date of issue of invoice or document by the supplier

For example, If a registered person is purchasing stationery from an unregistered person on 2nd October and the supplier is providing bill on 10th October and the amount was paid to supplier on 25th October. Then in this case the time of supply will be considered is on 2nd October being date of receipt of goods.

And time of supply in case of services under reverse charge will be earlier of the below:

  • i) The date on which payment is made
  • ii) Date after 60 days from the date of issue of invoice or document by the supplier
Mr AOk, so seriously these provisions are going to make transactions with unregistered persons a thing of past?
CAYes Mr A. Purchase from unregistered person can prove costly and will also increase compliance burden as every time registered person has to take care of such transaction. Definitely people will deal more with registered players in GST regime and hence the number of registered persons will increase under GST. But this will really affect drastically a large number of small traders or service providers.

Author Details

MJL & Co, Jaipur (Chartered Accountants)

Email – MJLco.jaipur@gmail.com (ph – 0141-4915113)

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