What is Reverse charge under GST?
Under the GST system, there are three categories of people who are responsible for paying the tax:
· The supplier, who pays GST in the usual way under the forward charge system.
· The recipient, who must pay GST under the reverse charge rules—this typically applies when buying from unregistered sellers, importing services, or purchasing certain notified goods/services
· In select cases, the e-commerce operator is considered the supplier and must pay GST themselves—this applies to certain services offered via online platforms like cab bookings, lodging, food delivery, and housekeeping
In summary, the forward charge places tax liability on the seller, reverse charge shifts it to the buyer, and in some e-commerce cases, the platform itself takes on that role.
It is mandatory to get Registered under GST in case of RCM?
Yes. You must register under GST if you're liable to pay tax on a reverse-charge basis, regardless of how much you earn. The GST law specifically states that anyone who must pay tax under the reverse-charge mechanism is mandatorily required to register, even if your total turnover is below the usual threshold limit
Who is exempt for GST registration in case of RCM?
Supplier will exempt from GST registration if he only supplies goods taxable under reverse charge
Can we utilized ITC for payment of tax under reverse charge?
Under GST rules, you can use the credit available in your electronic credit ledger to pay for normal output tax, such as tax charged on your sales. However, taxes due under the reverse-charge mechanism cannot be paid using this credit. If tax is payable under RCM, it has to be paid only through the electronic cash ledger
How to avail ITC in case of purchase under reverse charge?
If you buy goods or services that are covered under reverse charge from an unregistered supplier, you must issue a self-invoice, pay the GST using your electronic cash ledger, and then claim the input tax credit (ITC) on that amount—once it’s paid. You cannot use credit ledger money to pay the reverse charge tax; it must come from your cash ledger. After paying in cash, you can claim that same amount as ITC in your returns, provided the purchase is for your business and all required documentation (self-invoice and payment) is in order
Do Composition supplier also liable to pay tax under RCM?
Even though the composition scheme under GST generally simplifies tax payment, it doesn't override the rule for reverse-charge supplies. So if you choose the composition scheme but make purchases for which GST is payable under reverse charge, you must pay that tax separately—just like a regular taxpayer—even if you’re under the simplified scheme
What are the services covered under reverse charge?
There are Key notified services covered under reverse charge:
1. Goods transportation agency services
2. Sponsorship services
3. Legal services
4. Insurance agent services
5. Recovery agent services
6. Government authority services
7. Use of copyright works
8. Renting of motor vehicles
9. Services by Director
10. Import of Goods
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