GST: When the onus of tax on services shifts to the recipient

If the supply of goods or services or both is exempt under GST, then the recipient is not liable to pay tax under the reverse charge mechanism. The CGST law mandates registration for those who are required to pay tax under reverse charge, even if their turnover is less than the threshold limit of Rs 20 lakh.

Written by Aanchal Magazine | Published:June 29, 2017 1:53 am
GST, TAX, Goods and services tax, GST launch, GST: Usually, the supplier is liable to pay tax and avail input tax credit, if applicable, but in this case the mechanism is reversed. (Representational Image)

Under the reverse charge mechanism in the GST regime, the liability to pay tax is of the recipient of goods & services rather than the supplier when the goods or services have been received from an unregistered person. Usually, the supplier is liable to pay tax and avail input tax credit, if applicable, but in this case the mechanism is reversed.

Also, the GST Council has specified 12 categories of services for reverse charge that include radio taxi or passenger transport services provided through electronic commerce operators, taxable services provided by any person who is located in a non-taxable territory, services provided by an individual advocate or firm of advocates by way of legal services to any business entity, services provided or agreed to be provided by an arbitration tribunal directly or indirectly to any business entity, services provided by an insurance agent/recovery agent and services provided by government except renting of immovable property, services by Department of Posts, and services relating to transport of goods or passengers.

If these services are provided through an e-commerce operator, it will be liable to pay the tax. No separate list for reverse charge for goods has been issued by the CBEC.

If the supply of goods or services or both is exempt under GST, then the recipient is not liable to pay tax under the reverse charge mechanism. However, the CGST law mandates registration for those who are required to pay tax under reverse charge, even if their turnover is less than the threshold limit of Rs 20 lakh.

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  1. G
    Govil11
    Jun 30, 2017 at 1:54 pm
    Every tax scheme is a chalni. more holes then to hold. I want to ask Honorable fiance minister, can he explain why GST applies on the goods and services provided to Government bodies? You are taking money out of one pocket and putting in your other pocket. Meanwhile that money passes through 4 to 5 hands. All Government officers that approve contracts for procuring goods and services are the biggest thieves of public money and they force contractors to steal public money tax and other statutory liabilities and give lions share to them. Central Government has over 4.8 million employees and if we add Ministers, ambassadors state employees, judiciary personals and other bugs that are fed with public blood then the number of public money suckers go pass 200 millions. They are provided public blood for their nutrition by every Government. How many of them are covered under GST? A new category of rate slab for such vampires is not introduced by my Honorable finance minister. Thanx.
    Reply
    1. R
      RAKESH SINGHAL
      Jul 1, 2017 at 9:10 am
      I wonder after demonetisation not a single Corrupt Government officer or any politician was caught?Right from Traffic constable to higher and higher in government offices mint money but general public only gets crushed.
      Reply