When is the Reverse Charge Mechanism applicable under GST?
Reverse Charge Mechanism i.e. RCM is the mechanism under which the buyer is liable to pay GST to the government instead of seller. Further, it is applicable on sale of notified goods and services or specified situations.
RCM is applicable in the following situations:
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 buyer must pay tax under reverse charge mechanism.
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 is liable to pay GST under RCM.
Notified List of Goods under RCM
|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|