Reverse Charge under GST
Reverse charge, where the recipient is liable to pay tax, is common to many countries like Canada where it is applicable on imports of services and intangible properties. Normally, the supplier pays the tax on supply. In certain cases, the receiver becomes liable to pay the tax, i.e., the chargeability gets reversed which is why it is called reverse charge. In India, this is a partly new concept introduced under GST. The purpose of this charge is to increase tax compliance and tax revenues. Earlier, the government was unable to collect service tax from various unorganized sectors like goods transport. Compliances and tax collections will therefore be increased through reverse charge mechanism. The concept of reverse charge mechanism is already present in service tax. In GST regime, reverse charge may be applicable for both services as well as goods.
Current scenario
*At present, reverse charge under Service Tax is applicable to
*services like:
*Insurance agent
*Services of a director to a company
*Supply of manpower
*Goods Transport Agencies
*Non-resident service providers
*Any service involving aggregators
*Currently there is no reverse charge mechanism for the supply of goods.
Reverse Charge under GST
Reverse charge means the liability to pay tax is directed to the recipient of goods/services instead of the supplier. Reverse charge may be applicable for both services as well as goods once GST is live. Situations where reverse charge will apply include:
1. Unregistered dealer selling to a registered dealer: In
such a case, the registered dealer has to pay GST on the supply.
2. Services through an e-commerce operator: If an e-commerce operator supplies services then the reverse charge will apply on the e-commerce operator who will be liable to pay GST.
For example, an online operator provides services of plumbers, electricians, teachers, beauticians etc. The operator will be liable to pay GST and collect it from the customers, instead of the registered service providers listed on its site. If the e-commerce operator does not have a physical presence in the taxable territory, then a person representing such electronic commerce operator for any purpose will be liable to pay tax. If there is no representative, the operator will need to appoint a representative who will be held liable to pay GST.
3. Other categories of supplies applicable for reverse charge as notified by the Centre or State Government.
