Reverse charge mechanism under GST for services and goods from April 2020

Reverse charge is a mechanism under which the recipient of the goods or services is liable to pay the tax instead of the provider of the goods and services. Under the normal tax regime, the supplier collects the tax from the buyer and deposit the same to the government. But under reverse charge mechanism (RCM), liability to pay tax moves from supplier to recipient.

As per section 24 of the CGST act 2017, person paying tax under reverse charge mechanism has to compulsorily get registered even if the turnover is below the threshold limit.

Time of supply under Reverse charge mechanism:

The time of supply determines the point when the liability to charge GST arises. It also indicates when a supply is deemed to have been made. GST provides separate time of supply for goods and services.

1. In case of supply of goods:

As per section 12(3) the time of supply in case of goods shall be the earliest of the following, namely:

• The date of the receipt of goods; or
• The date of Payment; or
• The date immediately following 30 days from the date of issue of invoice or any other documents, by whatever name called, in lieu thereof by the supplier.

Note: The date of payment must be determined as below:

i. the date of payment as entered in the books of account of the recipient; or

ii. the date on which the payment is debited in his bank account, whichever is earlier;

2 In case of supply of service:

As per section 13(3) the time of supply in case of service shall be the earliest of the following namely:

• The date of payment; or
• The date immediately following 60 days from the date of issue of invoice or any other documents, by whatever name called, in lieu thereof by the supplier.

Note: The date of payment must be determined as below:

i. the date of payment as entered in the books of account of the recipient; or

ii. the date on which the payment is debited in his bank account, whichever is earlier;

Categories of service on which tax will be payable under reverse charge mechanism under CGST act 2017:

The central government has notified the following categories of supply of services wherein the whole of central tax leviable under section 9 of the CGST act, shall be paid on reverse charge basis by the recipient of the such services:

Sr no.	Category of supply of services	Supplier of service	Recipient of service
1.	Supply of Services by a Goods Transport Agency (GTA) in respect of transportation of goods by road to- Any factory registered under the factories act, 1948; orAny society registered under the societies registration act, 1860; orAny cooperative society established by or under any law; orAny person registered under the CGST act or the IGST act or the SGST act or the UTGST act; orAny body cooperate established under any law; orAny partnership firm whether registered or not under any law including association of persons; orAny casual taxable person. RCM not applicable if recipient registered only for TDS: However, nothing contained in this entry shall apply to services provided by a goods transport agency by way of transport of goods in a goods carriage by road, to-   A department or establishment of the central government or state government or union territory; orLocal authority; orGovernmental agencies, which has taken registration under the CGST act 2017 only for the purpose of deducting tax u/s 51 and not for making a taxable supply of goods or services.	Goods Transport Agency (GTA)	Any factory registered under the factories act, 1948; orAny society registered under the societies registration act, 1860; orAny cooperative society established by or under any law; orAny person registered under the CGST act or the IGST act or the SGST act or the UTGST act; orAny body cooperate established under any law; orAny partnership firm whether registered or not under any law including association of persons; orAny casual taxable person; Located in the taxable territory
2.	Services provided by an individual advocate including a senior advocate or firm of advocates by way of legal services, directly or indirectly.	An individual advocate including a senior advocate or firm or advocates	Any business entity located in the taxable territory. Business entity being, litigant, applicant or petitioner located in taxable territory.
3.	Services supplied by an arbitral tribunal to a business entity	An arbitral tribunal	An business entity located in the taxable territory
4.	Services provided by way of sponsorship to any body corporate or partnership firm	Any person	Any body corporate or partnership firm located in the taxable territory
5.	Services supplied by the central government, State government, Union territory or Local territory to a business entity excluding- renting of immovable property, andservices specified below- services by the department of posts by way of speed post, express parcel post, life insurance and agency services provided to a person other than central government, state government or union territory or local authority,Services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;Transport of goods or passengers	Central government, State government, Union territory or Local territory	Any business entity located in the taxable territory.
6.	Services supplied by the central government, State government, Union territory or Local authority by way of renting of immovable property to a person registered under the CGST act, 2017	Central government, state government, union territory or Local authority	Any person registered under the CGST act, 2017
7.	Services supplied by any person by way of transfer of development rights or floor space index for construction of a project by a promoter	Any person	Promoter
8.	Long term lease of land by any person against consideration in the form of upfront amount and/ or periodic rent for construction of a project by a promoter	Any person	Promoter
9.	Service supplied by an insurance agent to any person carrying on insurance business	An insurance agent	Any person carting on insurance business, located in taxable territory
10.	Services supplied by a director of a company or a body corporate to the said company or the body corporate	A director of a company or a body corporate	The company or a body corporate located in the taxable territory
11.	Services supplied by a recovery agent to a banking company or a financial institution or a non-banking company	A recovery agent	A banking company or a financial institution or a non-banking financial company, located in the taxable territory
12.	Supply of services by a music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright covered u/s 13(1)(a) of the Copyright act 1957 relating to original dramatic, musical or artistic works to a music company, producer or the like	Music composer, photographer, artist, or the like	Music company, producer or the like, located in the taxable territory.
13.	Supply of services by an author by way of transfer or permitting the use or enjoyment of a copyright covered u/s 13(1)(a) of the Copyright act 1957 relating to original literary works to a publisher.	Author.	Publisher located in the taxable territory. However, nothing contained in this entry shall apply where,- The author has taken registration under the CGST act, 2017 and filed a declaration in the specified form before the commencement of financial year with the jurisdictional CGST or SGST commissioner, as the case may be that he exercises the option to pay central tax on such services in accordance with section  9(1) of the CGST act 2017 under forward charge and to comply with all the provisions of CGST act, 2017 as they apply to a person liable for paying the tax in relation to the supply of any goods or services or both and that he shall not withdraw the said option within a period of 1 year from the date of exercising such optionThe author makes a declaration regarding payment of tax on forward charge on the invoice issued by him in Form GST Inv-I to the publisher
14	Supply of services by the members of the overseeing committee to RBI	Members of the overseeing committee constituted by RBI	RBI
15	Services supplied by an Individual direct selling agents other than a body corporate, firm or LLP to Bank or NBFCs	Individual direct selling agents other than a body corporate, firm or LLP	A Banking company or a non-banking financial company, located in the taxable territory
16	Services provided by business facilitator to a banking company	Business facilitator	A Banking company located in a taxable territory
17	Services provided by an agent of business correspondent to business correspondent	An agent of business correspondent	A business correspondent located in a taxable territory
18	Security services provided to a registered person	Any person other than a body corporate	A registered person, located in a taxable territory
19	Services provided by way of renting of a motor vehicle provided to a body corporate	Any person other than a body corporate paying central tax at the rate of 2.5% on renting of motor vehicles with ITC only if input service in the same line of business	Any body corporate located in the taxable territory
20	Services of lending of securities under securities lending scheme, 1997 of SEBI	Lender i.e. a person who deposit securities registered in his name or in the name of any other person duly authorized on his behalf with an approved intermediary for the purpose of lending under the scheme of SEBI	Borrower i.e. a person who borrows the securities under the scheme through an approved intermediary of SEBI
21	Any service supplied by any person who is located in a non-taxable territory to any person other than non-taxable online recipient	Any person located in a non-taxable territory	Any person located in the taxable territory other than nontaxable online recipient
22	Services supplied by a person located in non-taxable territory by way of transportation of goods by a vessel from a place outside India upto the customs station of clearance in India	A person located in nontaxable territory	Importer as per customs act 1962 who is located in the taxable territory.

Categories of goods on which tax will be payable under reverse charge mechanism under CGST act 2017:

The central government has notified the following categories of supply of goods wherein the whole of central tax leviable under section 9 of the CGST act, shall be paid on reverse charge basis by the recipient of the such goods:

S. No.	Tariff Item, Sub-heading, or Chapter	Description of Supply of Goods	Supplier of Goods	Recipient of Supply
1.	0801	Cashew nuts, not shelled or peeled	Agriculturist	Any registered person
2.	1404 90 10	Bidi wrapper leaves(tendu)	Agriculturist	Any registered person
3.	2401	Tobacco leaves	Agriculturist	Any registered person
4.	5004 to 5006	Silk yarn	Any person who manufactures silk yarn from raw silk or silk worm cocoons for supply of silk yarn	Any registered person
4A	5201 (Effective from 15-11-2017)	Raw cotton	Agriculturist	Any registered person
5.	–	Supply of lottery	State Government, Union Territory or any local authority	Lottery distributor or selling agent. Explanation. – For the purposes of this entry, lottery distributor or selling agent has the same meaning as assigned to it in clause (c) of Rule 2 of the Lotteries (Regulation) Rules, 2010, made under the 2 provisions of sub-section (1) of Section 11 of the Lotteries (Regulations) Act, 1998.
6.	Any Chapter (Effective from 13-10-2017)	Used vehicles seized and confiscated goods, old and used goods, waste and scrap	Central Government, State Government, Union territory or a Local authority.	Any registered person
7.	Any Chapter (Effective from 28-5-2018)	Priority Sector Lending Certificate	Any registered person	Any reg