Payment of GST on Supply of Goods under Reverse Charge Mechanism

As per the GST Act, the government has introduced reverse charge mechanism to ensure that the tax is paid on the goods/services by the recipient of the goods/services. In other words, if a registered dealer purchases goods/services from an unregistered dealer, then the registered dealer is liable to pay the tax on the goods/services instead of the unregistered dealer.

This mechanism is a deviation from the traditional method of taxation where the supplier is liable to pay the tax. The reverse charge mechanism was introduced to curb tax evasion by unregistered dealers.

Understanding Reverse Charge Mechanism

The reverse charge mechanism is applicable to certain categories of goods and services. The government has issued a list of goods and services that come under the reverse charge mechanism category. The list of goods and services is updated from time to time as per the government's requirements.

When a registered dealer purchases goods or services from an unregistered dealer or an e-commerce operator that doesn't have a permanent establishment in India, the recipient of the goods or services is responsible for paying the tax under reverse charge mechanism.

Who is Liable to Pay GST under Reverse Charge Mechanism?

As per the GST Act, the recipient of the goods or services is liable to pay the tax under reverse charge mechanism. However, there are certain categories of goods/services where the liability to pay tax under reverse charge is shared between the supplier and the recipient.

In case of goods, the liability to pay GST under reverse charge mechanism is shared between the supplier and the recipient in the following cases:- Where the value of the goods exceeds Rs. 5,000 per day and the goods are supplied by a registered dealer to an unregistered dealer.- Where the goods are supplied through an e-commerce operator that doesn't have a permanent establishment in India.

In case of services, the recipient of the services is liable to pay the tax under reverse charge mechanism in the following cases:- Where the services are provided by a goods transport agency to a registered dealer.- Where the services are provided by an advocate to a business entity.- Where the services are provided by a director to a company.- Where the services are provided by an insurance agent to an insurance company.

Procedures Involved in Paying GST under Reverse Charge Mechanism

The procedures involved in paying GST under reverse charge mechanism are the same as the procedures involved in paying GST under the normal method of taxation. However, the only difference is that the liability to pay tax has shifted from the supplier to the recipient.

The recipient of the goods or services is required to generate an invoice for the goods or services purchased and pay the tax under reverse charge mechanism. The recipient is also required to file a GST return and claim input tax credit on the GST paid under reverse charge mechanism.ConclusionThe payment of GST under reverse charge mechanism is a deviation from the traditional method of taxation. The reverse charge mechanism is a step taken by the government to curb tax evasion by unregistered dealers. As a registered dealer, it is important to understand the categories of goods and services that come under the reverse charge mechanism category and the procedures involved in paying GST under reverse charge mechanism.