Reverse Charge Mechanism u/s 9 (4) - Double collection of GST

The Reverse Charge Mechanism (RCM) is a mechanism under which the recipient of goods and/or services becomes liable to pay the tax instead of the supplier. In other words, the supplier is relieved of his tax liability and the recipient is made liable to pay the tax. Reverse Charge Mechanism is applicable when the supplier is not registered or is unregistered, or when the recipient is a registered dealer or a taxable person.

Under Section 9(4) of the Central Goods and Services Tax (CGST) Act, 2017, the reverse charge mechanism applies to certain specified goods and services. This means that the recipient of these goods and services, instead of the supplier, will be liable to pay the tax.

Double collection of GST under Section 9(4) of the CGST Act, 2017 occurs when both the supplier and the recipient pay GST on the same transaction. This happens when the supplier has charged GST on the supply and the recipient also pays GST under the RCM.

Double taxation is a serious issue, and it can cause financial hardship to the recipient of goods and services. To avoid double taxation, the GST Council has issued certain notifications and circulars, which provide clarity on the application of the RCM and the cases where it is applicable.

Applicability of RCM under Section 9(4) of the CGST Act, 2017

Section 9(4) of the CGST Act, 2017 specifies the goods and services on which the reverse charge mechanism is applicable. Some of the goods and services on which RCM is applicable are as follows:

1. Goods and services supplied by an unregistered person to a registered person

2. Services provided by a director of a company or a body corporate to the said company or the body corporate

3. Services provided by an agent of a supplier to the supplier of goods or services

4. Services provided by an e-commerce operator to an e-commerce supplier.

Procedure for payment of GST under RCM

The procedure for payment of GST under the RCM is different from that of normal GST payment. Under the RCM, the recipient of goods and services has to self-invoice for the purchases made and then declare this amount in the GST return. The recipient also has to pay the GST amount due on the purchases made under the RCM.

The recipient of goods and services under RCM is required to maintain a register of invoices and other documents relating to the purchases made. This register should contain details such as the name and address of the supplier, the date of purchase, the description of goods or services, and the amount of tax paid.

Impact of double collection of GST under Section 9(4) of the CGST Act, 2017

The double collection of GST under Section 9(4) of the CGST Act, 2017 can cause financial hardship to the recipient of goods and services. This is because the recipient has to pay the GST amount twice, once to the supplier and then again under the RCM.

However, the GST Council has taken steps to prevent double taxation under Section 9(4) of the CGST Act, 2017. The council has issued notifications and circulars which clarify the cases where RCM is applicable and the cases where it is not applicable. This has resulted in greater clarity for businesses and has reduced the instances of double taxation.

Conclusion

The Reverse Charge Mechanism is a mechanism under which the recipient of goods and/or services becomes liable to pay the tax instead of the supplier. Double collection of GST under Section 9(4) of the CGST Act, 2017 occurs when both the supplier and the recipient pay GST on the same transaction. This can cause financial hardship to the recipient of goods and services. However, the GST Council has taken steps to prevent double taxation under Section 9(4) of the CGST Act, 2017. It has issued notifications and circulars which clarify the cases where RCM is applicable and the cases where it is not applicable.