Notification Article on All About Reverse Charge i.e Reverse Charge Goods and Services read with notifications and circulars till date

Financial Year: 2017

All About Reverse Charge you want to know

 

Section 2(98) defines reverse charge as

“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 section 9(3) or 9(4) of CGST Act or

Section 5(4) of IGST Act 2017

 

 

Section 9(3) defines as

The Government may, on the recommendations of the Council,

 by notification,

specify categories of supply of goods or services or both,

the tax on which shall be paid on reverse charge basis

by the recipient of such goods or services or both and

all the provisions of this Act shall apply to such recipient

as if he is the person liable for paying the tax

in relation to the supply of such goods or services or both

 

 

Govt has issued two notifications viz

Notification No 13/2017 Central Tax Rate

and Notification No 10/2017 IGST Tax rate

and government has specified list of services on which GST is to be paid on reverse charge basis in both notifications,

 

A comparative list of services mentioned in notifications has been specified for you along with amendments in notifications.

 

S No	Name of Services	13/2017 Central Tax Rate	10/2017 IGST Tax Rate	Amendment Notification No
1	Goods Transport Agency Services	Yes	Yes
2	Advocate Services	Yes	Yes
3	Arbitral Tribunal Services	Yes	Yes
4	Sponsorship Services	Yes	Yes
5	Selected Services provided by Central Govt and Other	Yes	Yes
5A	Services Provided by Govt of Renting of Immovable property			03/2018 Central Tax Rate wef 25th Jan 2018
5B	Transfer of development rights			05/2019 Central Tax Rate wef 1st April 2019
5C	Long Term Lease of land by promoter			05/2019 Central Tax Rate wef 1st April 2019
6	Independent Director Services	Yes	Yes
7	Services of Insurance Agent	Yes	Yes
8	Services of Recovery Agent	Yes	Yes
9	Services by Music Composer, Photographer, Artist	Yes	Yes
9A	Services Provided by Author			22/2019 Central Tax Rate wef 1st Oct 2019
10	Services by Overseeing Committee to RBI			33/2017 Central Tax Rate wef 13th Oct 2017
11	Services Provided by DSAs to Banks, NBFCs			15/2018 Central Tax Rate wef 27th July 2018
12	Services provided by business facilitator to banking company			29/2018 Central Tax Rate wef 31st Dec 2018
13	Services provided by agent of business correspondent to business correspondent			29/2018 Central Tax Rate wef 31st Dec 2018
14	Security Services provided to Registered Person			29/2018 Central Tax Rate wef 31st Dec 2018
15	Renting of Motor Vehicle by a body corporate			22/2019 Central Tax Rate wef 1st Oct 2019
16	Lending of Securities			22/2019 Central Tax Rate wef 1st Oct 2019
	Services Relating to Import
	Import of Service	No	Yes
	Ocean Freight Service	No	Yes

 

 

Please be noted that import of service and ocean freight service has been enumerated in IGST Tax Rate notification only because there will only be IGST Applicable on these services and no matter what the situation is CGST and SGST will not be applicable on these services.

 

Notification No 04/2017 Central Tax Rate provides goods on which GST is to be paid on reverse charge basis

 

(a) Cashew Nuts

(b) Bidi Wrapper leaves (tendu leaves)

(c) Tobacco Leaves

(d) Silk Yarn

(e) Supply of Lottery

 

 

 

Section 9(4) of CGST Act 2017 and Section 5(4) of IGST Act says same thing,

We are producing Section 9(4) of CGST Act for your reference.

 

The central tax in respect of the supply of

taxable goods or services or

both by a supplier, who is not registered,

to a registered person

shall be paid by such person on reverse charge basis

as the recipient and all the provisions of this Act

shall apply to such recipient

as if he is the person liable for paying the tax

 in relation to the supply of such goods or services or both.

 

Section 9(4) has been amended and the amended section is reproduced for your reference

 

 

Section 9(4)

The Govt may, on recommendation of the council

 by notification

specify a class of registered persons who shall,

in respect of supply of specified categories of goods or services or both

received from an unregistered supplier,

pay the tax on reverse charge basis

as the recipient of such supply of goods or services or both, and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax 

in relation to the supply of such goods or services or both.

(Substituted by CGST Amendment Act 2018, wef 1^st Feb 2019)

 

Author Comments  As per section 9(4)        The current situation is that there is no reverse charge for supplies received by Registered persons from  unregistered persons and govt may notify any registered persons to fall under this section in near future.    The applicability of this section became applicable only for the period 1st July 2017 to 13th Oct 2017 only. Please read complete changes in this section from following link along with notifications.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Question 1:-

Whether reverse charge supplies will be added in turnover of the recipient  as Section 9(3) and 9(4) says that  all the provisions of this Act shall apply to such recipient ??

 

Answer 1:-

No it will no be termed as turnover of the assessee.

 

Section 2(6) defines aggregate turnover as

 “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess;

 

Also

                                          

Section 2(112) defines turnover as

“turnover in State” or “turnover in Union territory” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis) and exempt supplies made within a State or Union territory by a taxable person, exports of goods or services or both and inter-State supplies of goods or services or both made from the State or Union territory by the said taxable person but excludes central tax, State tax, Union territory tax, integrated tax and cess.

 

So henceforth the supplies liable to reverse charge will always be a turnover for provider of supply and not for receiver of supply.

 

Question 2

 

Whether GST payable on reverse charge is to treated as output tax??

 

Answer 2

 

As per section 2(82) output tax means

“output tax” in relation to a taxable person, means the tax chargeable under this Act on taxable supply of goods or services or both made by him or by his agent but excludes tax payable by him on reverse charge basis;

 

Question 3:-

 

Mr A provides exempt supplies and is not registered in GST but he uses transport services on which GST is payable under reverse charge, whether he is required to get GST registration and need to pay GST under reverse charge ??Whether benefit of Registration below turnover of Rs 20 Lakhs will be available to such person.

 

Answer 3:-

 

Mr A is required to get his registration and needs to pay GST under reverse charge only on Transport charges or if he receives any other service liable to reverse charge.

 

Section 22(1)

 Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees.

As per section 22(1) Mr A is not liable to get registered because he doesnt provide taxable supply of goods or services. Lets read Section 24 also.

 

Section 24.

Notwithstanding anything contained in Section 22(1),

The following categories of persons shall be required to be registered under this Act,––

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