Applicability of Reverse Charge Mechanism under GST

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Sakshi Shah

GST
ITC
Reverse Charge Mechanism

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

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

Applicability of Reverse Charge Mechanism (RCM) in GST

A. Purchase from Unregistered Dealer

If a person buys goods or services from an unregistered dealer and the value exceeds Rs.5000 in a day, such a buyer must pay tax under reverse charge mechanism in GSTR-3B.

The above provision is not applicable in case of government entities who are registered as TDS Deductors under GST.

This provision has been deferred up to 30/09/2019. It means that reverse charge mechanism would not be applicable on purchases made from unregistered dealers up to 30th September 2019
This provision has been deferred up to 30/09/2019. It means that reverse charge mechanism would not be applicable on purchases made from unregistered dealers up to 30th September 2019

B. Purchase of Notified Goods and Services

CBEC has notified a list of goods and services on which RCM is applicable. As a result, if a person buys goods or services mentioned in this notified list, he/she is liable to pay GST in GSTR-3B under RCM.

Notified List of Goods in Reverse Charge Mechanism (RCM) GST

Description Supplier Recipient
Cashew nuts not shelled or peeled Agriculturist Any registered person
Bidi wrapper leaves (tendu) Agriculturist Any registered person
Tobacco leaves Agriculturist Any registered person
Silk yarn Manufacturer of silk yarn from raw silk or silk worm cocoons Any registered person
Raw cotton Agriculturist Any registered person
Supply of lottery State Government / Union Territory / Local Authority Lottery distributor or selling agent
Used vehicles / seized and confiscated goods / old and used goods / waste and scrap Central Government / State Government / Union Territory / Local Authority Any registered person

Notified List of Services under RCM – Refer here

FAQs

How can a buyer pay GST under reverse charge if he/she does not have a GST registration?

If a person is required to pay GST as per the provisions of the reverse charge mechanism, it is compulsory to take registration irrespective of the turnover. The threshold limit of Rs.20 lacs is not applicable in these cases.

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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