File Your Income Tax Return Before 31st July 2024.
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What is reverse charge?
The Goods and service tax impose liability to be deposited by supplier but there is an exception of this called reverse charge. Reverse charge is a mechanism where the recipient of the goods or services or both is liable to pay GST instead of the supplier.
Applicability of reverse charge
There are three case of applicability of reverse charge mechanism which are as follows:
- Supply by unregistered person (Section 9(4) : If a person who is not registered (Unregistered dealer) under Goods and Services Act 2017 supplies goods to any registered person under GST than the registered person should be liable to pay and deposit the tax to the government. The registered dealer who has to pay GST under reverse charge mechanism has to do self-invoicing for the purchases made.
- Services through an e-commerce operator : If an e-commerce operator provides any services then reverse charge will be applicable to the e-commerce operator and he will be liable to pay GST.
- Supply of goods and services specified by CBEC (Section 9(3)) : CBEC has issued a list of goods and a list of services on which reverse charge mechanism is applicable
List of Services taxable under reverse charge
The services where tax is payable by the recipient was notified vide Notification No. 13/2017 CT (R) dated 28.06.2017 the following categories of supply of services wherein whole of the CGST shall be paid on reverse charge basis by the recipient of services:
(c) any co-operative society established by or under any law; or (d) any person registered under theCentral Goods and Services TaxAct or the Integrated Goods and Services Tax Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act; or(e) anybody corporate established, by or under any law; or(f) any partnership firm whether registered or not under any law including association of persons; or(g) any casual taxable person.
(c) any co-operative society established by or under any law; or
(d) any person registered under the CGST/IGST/SGST/UTGST Act; or
(e) any body corporate established, by or under any law; or
(f) any partnership firm whether registered or not under any law including association of persons; or
(g) any casual taxable person;
located in the taxable territory.
| S. No. | Category of Supply of Services | Supplier of service | Recipient of Service |
| 1 | Supply of Services by a goods transport agency (GTA) in respect of transportation of goods by road to-
(a) any factory registered under or governed by the Factories Act, 1948(63 of 1948); or (b) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; or (c) any co-operative society established by or under any law; or (d) any person registered under the |
Goods Transport Agency (GTA) who has not paid central and state tax at the rate of 6% each, or integrated tax at the rate of 12% | (a) Any factory registered under or governed by the Factories Act, 1948; or
(b) any society registered under the Societies Registration Act, 1860 ; or (c) any co-operative society established by or under any law; or (d) any person registered under the CGST/IGST/SGST/UTGST Act; or
located in the taxable territory. |
| 2 | Services supplied by an individual advocate including a senior advocate or firm* of advocates by way of legal services, directly or indirectly, including where contract for provision of such service has been entered through another advocate or a firm of advocates, or by a firm of advocates, by way of legal services, to a business entity.”
Explanation: “legal service” means any service provided in relation to advice, consultancy or assistance in any branch of law, in any manner and includes representational services before any court, tribunal or authority.”. |
An individual advocate including a senior advocate or firm* of advocates. | Any business entity located in the taxable territory. |
| 3 | Services supplied by an arbitral tribunal to a business entity. | An arbitral tribunal. | Any business entity located in the taxable territory. |
| 4 | Services provided by way of
sponsorship to anybody corporate or partnership firm. |
Any person | Anybody corporate or partnership
firm located in the taxable territory. |
| 5 | Services supplied by the Central
Government, State Government, Union territory or local authority to a business entity excluding, – (1) renting of immovable property, and (2) services as specified below- (i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Central Government, State Government or Union territory or local authority; (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. |
Central Government, State Government, Union territory or local authority | Any business entity located in the taxable territory. |
| 6 | Services supplied by the Central Government, State Government, Union territory or local authority by way of renting of immovable property to a person registered under the Central Goods and Services Tax Act, 2017 (12 of 2017). | Central Government, State Government, Union territory or local authority | Any person registered under the CGST Act, 2017. |
| 7 | Services supplied by any person by way of transfer of development rights or Floor Space Index (FSI) (including additional FSI) for construction of a project by a promoter | Any person | Promoter |
| 8 | Long term lease of land (30 years or more) by any person against consideration in the form of upfront amount (called as premium, salami, cost, price, development charges or by any other name) and/or periodic rent for construction of a project by a promoter | Any person | Promoter |
| 9 | Services supplied by a director of a company or a body corporate to the said company or the body corporate. | A director of a company or a body corporate | The company or a body corporate located in the taxable territory. |
| 10 | Services supplied by an insurance agent to any person carrying on insurance business. | An insurance agent | Any person carrying on insurance business, located in the taxable territory. |
| 11 | Services supplied by a recovery agent to a banking company or a financial institution or a non- banking financial company. | A recovery agent | A banking company or a financial institution or a non-banking financial company, located in the taxable territory. |
| 12 | Supply of services by a 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 dramatic, musical or artistic works to a music company, producer or the like. | Music composer, photographer, artist, or the like | Music company, producer or the like, located in the taxable territory. |
| 13 | Supply of services by an author 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 works to a publisher. | Author | Publisher located in the taxable territory |
| 14 | Supply of services by the members of Overseeing Committee to Reserve Bank of India | Members of Overseeing Committee constituted by the Reserve Bank of India | Reserve Bank of India. |
| 15 | Services supplied by individual Direct Selling Agents (DSAs) other than a body corporate, partnership or limited liability partnership firm to bank or non-banking financial company (NBFCs) | Individual Direct Selling Agents (DSAs) other than a body corporate, partnership or limited liability partnership firm | A banking company or a NBFC, located in the taxable territory |
| 16 | Services provided by business facilitator (BF) to a banking company | Business facilitator (BF) | A banking company, located in the taxable territory |
| 17 | Services provided by an agent of business correspondent (BC) to business correspondent (BC) | An agent of business correspondent (BC) | A business correspondent, located in the taxable territory |
| 18 | Security services (services provided by way of supply of security personnel) provided to a registered person
Provided that nothing contained in this entry shall apply to, – (1) The below persons registered only purpose of making TDS u/s 51 but not for supply of goods or services (i) a Department or Establishment of the Central Government or State Government or Union territory; (ii) local authority; (iii) Governmental agencies. (2) a registered person registered under Composition Scheme u/s 10 |
Any person other than a body corporate | A registered person, located in the taxable territory |
| 19 | Services provided by way of renting of a motor vehicle provided to a body corporate | Any person other than a body corporate, who opts to pay tax at the rate of 5% and he is eligible to claim input tax credit | Any body corporate located in the taxable territory |
| 20 | Services of lending of securities under Securities Lending Scheme, 1997 (“Scheme”) of the Securities and Exchange Board of India (“SEBI”), as amended | Lender | Borrower |
List of goods Chargeable under RCM
| S. No. | Description of supply of Goods | Supplier of goods | Recipient of supply |
| 1. | Cashew nuts, not shelled or peeled | Agriculturist | Any registered person |
| 2. | Bidi wrapper leaves (tendu) | Agriculturist | Any registered person |
| 3. | Tobacco leaves | Agriculturist | Any registered person |
| 4. | Silk yarn | Any person who manufactures silk yarn from raw silk or silk worm cocoons for supply of silk yarn | Any registered person |
| 5 | Raw Cotton | Agriculturist | Any registered person |
| 6 | Supply of lottery. | State Government, Union Territory or any local authority | Lottery distributor or selling agent. |
| 7 | Used vehicles, seized and confiscated goods, old and used goods, waste and scrap | Central Government, State Government, Union territory or a local authority | Any registered person |
| 8 | Priority Sector Lending Certificate | Any registered person | Any registered person |
