Compliances under Reverse Charge Mechanism of GST

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Sakshi Shah

GST
Input Tax Credit
Reverse Charge Mechanism
Tax Invoice

Reverse Charge Mechanism (RCM) under GST is the mechanism under which the buyer of goods or services is liable to pay GST to the government instead of the seller. It is applicable on the sale of notified goods and services or specified situations. Read about the compliances when Reverse Charge Mechanism under GST is applicable.

What is Reverse Charge Mechanism (RCM) under GST?
Read about what is Reverse Charge Mechanism and how is it different from the normal mechanism of collection and deposit of tax under GST
Read More
What is Reverse Charge Mechanism (RCM) under GST?
Read about what is Reverse Charge Mechanism and how is it different from the normal mechanism of collection and deposit of tax under GST
Read More

Compliances under Reverse Charge Mechanism of GST

  1. Compulsory Registration
    The person liable to pay tax under RCM should compulsorily register under GST irrespective of the turnover. The threshold exemption of Rs.20 lacs is not applicable
  2. Input Tax Credit
    The buyer can claim the Input Tax Credit for which he has paid tax under RCM if all the conditions to claim ITC have been fulfilled. In this case, the buyer can claim ITC but not the seller
  3. Payment of Tax
    To pay the tax under RCM, the taxpayer can use balance from E-Cash Ledger only. They cannot use balance in the E-Credit Ledger. Both these ledgers can be viewed on GST Portal.
  4. Tax Invoice
    The Tax Invoice issued by the seller to the buyer must specifically mention that the tax has been paid by the buyer under the reverse charge mechanism.
  5. Maintenance of Accounts
    Each registered dealer must maintain accounts of all the sales on which he has paid tax under RCM. He must maintain all the proofs and records too.

FAQs

What is Self-Invoicing?

When a person buys goods or services from an unregistered dealer, he is liable to pay tax under RCM. He is also required to generate a self-invoice since the unregistered seller would not issue a GST compliant invoice.

I am registered under GST in Tamil Nadu. I am buying goods from unregistered dealer of Karnataka, should I take registration in Karnataka to discharge GST under Reverse Charge Mechanism?

Any person who makes inter-state sale of taxable goods must take compulsory registration under GST. Therefore, the dealer in Karnataka should opt for GST Registration since he/she is selling taxable goods outside his/her state.

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