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.
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.
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
|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
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.
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.