General

Reverse charge mechanism under GST for supply of goods/services

Reverse charge mechanism under GST. Supply of Goods under RCM and description of nine supply of services covered under RCM-CBEC Paper.

Generally, the supplier of goods or services is liable to pay GST. However, in specified cases like imports and other notified supplies, the liability may be cast on the recipient under the reverse charge mechanism. Reverse charge means the liability to pay tax is on the recipient of supply of goods or services instead of the supplier of such goods or services in respect of notified categories of supply.

There are two type of reverse charge scenarios provided in law. First is dependent on the nature of supply and/or nature of supplier. This scenario is covered by section 9 (3) of the CGST/ SGST (UTGST) Act and section 5 (3) of the IGST Act. Second scenario is covered by section 9 (4) of the CGST/SGST (UTGST) Act and section 5 (4) of the IGST Act where taxable supplies by any unregistered person to a registered person is covered.

Supplies of goods under reverse charge mechanism:

  • Cashew nuts, not shelled or peeled
  • Bidi wrapper leaves (tendu)
  • Tobacco leaves
  • Supply of lottery
  • Silk yarn

Supplies of services under reverse charge mechanism:

  • GTA Services
  • Legal Services by advocate
  • Services supplied by an arbitral tribunal to a business entity
  • Services provided by way of sponsorship to anybody corporate or partnership firm
  • Services supplied by the Central Government, State Government, Union territory or local authority to a business entity.
  • Services supplied by a director of a company or a body corporate to the said company or the body corporate
  • Services supplied by an insurance agent to any person carrying on insurance business
  • Services supplied by a recovery agent to a banking company or a financial institution or a non-banking financial company.
  • Supply of services by an author, music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright covered under section 13(1)(a) of the Copyright Act, 1957 relating to original literary, dramatic, musical or artistic works to a publisher, music company, producer or the like.

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