Reverse Charge Mechanism under GST

Introduction-

The following cases when reverse charge is mandatory –

Under reverse charge mechanism, GST is payable on the supply of goods or services or both from unregistered supplier to a registered supplier. If any person who is not registered under GST Act, but supplies goods/services to those persons who are registered dealer, then GST has to be paid by the registered buyer against such supplies of goods/services instead of supplier.

Purchases up to Rs. 5,000 per day from unregistered suppliers will not attract GST.  It attract on buying from unregistered dealers and making payments above Rs. 5,000.

Under reverse charge mechanism the buyer has to generate self-invoice for purchases and to pay GST.

Answer-

Under reverse charge mechanism M/s ABC & Company will be liable to pay GST on purchase of Rs. 10,000.

Answer-

When the limit of Rs 5,000 in a day is crossed, the GST is payable on the entire amount of Rs 10,000

An e-commerce operator supplies services, the reverse charge will be applicable to the e-commerce operator and he will be liable to pay GST on such services.

If the e-commerce operator does not have a physical presence in the taxable territory, then a person representing such electronic commerce operator for any purpose will be liable to pay tax. If there is no representative, the operator will appoint a representative who will be held liable to pay GST.

Answer- M/s XYZ & Company is liable to pay GST and collect it from the customers.

There is a list of goods/services which are notified by CBEC is as follows, on which the recipient has to be paid tax under reverse charge mechanism –

• Supplies of Goods under Reverse Charge Mechanism-
• Supplies of Services under Reverse Charge Mechanism-{Notification No. 10/2017- Integrated Tax (Rate)}

Items of Profit & Loss which attract GST under RCM-

• Advertisement
• Audit Fees
• Business promotion expenses
• Computer maintenance
• Commission payments
• Consultancy Fees
• Freight and transportation expenses (GTA)
• Gift expenses
• Legal Fees
• Office Maintenance
• Printing and stationery
• Professional Fees
• Rent
• Repairs and Maintenance
• Vehicle maintenance

Items of Profit & Loss which does not attract GST under RCM-

• Car fuel (Diesel/petrol)
• Electricity
• Government Fees (MCA fees, land registration fees etc.).
• Interest
• Salary and wages

A. Time of Supply in case of Goods-

In case of reverse charge, the time of supply shall be the earliest of the following dates:

• Date of receipt of goods
• Date of payment*
• Date immediately after 30 days from the date of issue of an invoice by the supplier

If it is not possible to determine the time of supply, the time of supply shall be the date of entry in the books of account of the recipient.

B. Time of Supply in case of Services

In case of reverse charge, the time of supply shall be the earliest of the following dates:

• Date of receipt of services
• Date of payment
• Date immediately after 60 days from the date of issue of invoice by the supplier

If it is not possible to determine the time of supply, the time of supply shall be the date of entry in the books of account of the recipient.

1. Date of receipt of goods 10.06.2018
2. Date of payment 15.07.2018
3. Date of invoice 01.07.2018
4. Date of entry in books of receiver 01.07.2018

What will be date in case of time of supply?

Answer-

The Time of supply of goods, will be 10.06.2018 (earliest of the above)

1. Date of receipt of services 10.06.2018
2. Date of payment 15.07.2018
3. Date of invoice 01.07.2018
4. Date of entry in books is 01.07.2018’

What will be date in case of time of supply?

Answer-

The Time of supply of service, in this case, will be 10.06.2018