<p>GST stands for Goods and services tax. It is an indirect tax that has replaced many taxes. Indirect taxes are applied to the supply of goods and services. Unlike a direct tax, this tax is not directly applicable to individuals and their earnings. Also, this tax is not directly levied by the Government of India. This is an alternative that applies to the supply of goods and services.</p><p>Goods and services tax was passed in Lok Sabha on 29th March 2017 and President assent was received on 12th April 2017. GST came w.e.f. 1st July 2017. The introduction of GST has eliminated many unnecessary indirect taxes which has reduced the price of commodities and services. Before GST was introduced, a specific amount of tax was levied on every stage of the sale. Right from purchasing the raw materials to selling the final product to the customer. Some major objectives of GST include introducing ‘one country, one tax rule’, increasing the taxpayer base, and an easy online procedure for doing business.</p><h2><strong>What is a reverse charge mechanism?</strong></h2><p>A reverse charge mechanism is a mechanism that comes under GST ( Goods and Services Tax). It is a mechanism where the recipient of the goods and services is liable to pay the Goods and Services Tax instead of the supplier. Usually, the supplier pays the tax on the supply. In reverse charge, the receiver becomes liable to pay tax. The charge ability gets reversed.</p><h2><strong>When is the reverse charge mechanism applicable?</strong></h2><p>Section 9(3) and 9(4) of the Central GST and State GST Act governs the reverse charge mechanism for intra-state transactions. Also, sections 5(3) &amp; 5(4) of the Integrated GST Act govern the reverse charge scenarios for inter-state transactions. Detailed information about the same is given below.</p><h3>CBIC specified supply of goods and services</h3><p>Central Board of indirect taxes and customs (CBIC) has specified certain goods and services on which reverse charge mechanism is applicable. This is as per the powers listed in section 9(3) of the CGST Act.</p><h3>Supply from an unregistered dealer to a registered dealer</h3><p>According to section 9(4) of the CGST Act, if a vendor who is not registered under GST supplies goods and services to a specified person who is registered under the act then, the reverse charge would apply. This means that the GST will have to be paid directly by the receiver and not by the supplier. The registered dealer who is required to pay GST under the reverse charge mechanism must self-invoice for sales made.</p><p>The purchaser has to pay CGST and SGST under the reverse charge mechanism in an intra-state purchase. Also in the case of inter-state purchases, the buyer has to pay the IGST. The government declares the list of goods and services on which this provision gets applicable from time to time.</p><h3>Supply of services through an e-commerce operator</h3><p>Section 9(5) of the CGST Act states that if a service provider uses an e-commerce operator to provide service then the reverse charge mechanism will apply to the e-commerce operator. He is liable to pay GST. All business types can use e-commerce operators to sell products or provide services. This section covers services such as:-</p><ul><li>Providing accommodation services in hotels, guest houses, clubs, or other commercial places meant for residential or lodging purposes except where the person supplying such services through electronic commerce operator is liable for registration due to turnover exceeding the original limit.</li><li>Transportation services provided to passengers by motorcycle, motor cab, etc.</li><li>Housekeeping services such as carpentering, plumbing, except where the person supplying such services through electronic commerce operators are liable for registration due to turnover beyond the threshold limit.</li></ul><h2><strong>Current reverse charge mechanism under GST</strong></h2><p>The reverse charge mechanism in the current situation is used in service tax for utilities such as insurance agents, manpower supply and goods transport agencies. In contrast to the Service Tax, there is no definition of a partial reversal fee. The recipient would pay the amount of tax on the supply.</p><p>Previously it was difficult to raise service tax from various unorganized markets. The attempt has been made to position the facilities according to the current system. As a result, compliance and tax revenues can be improved by the reverse charge mechanism process. The fee is now available on all goods and services.</p><p>Learning how to file GSTR is very important. This process can be fun with BBRSS. We at BBRSS offer a full-fledged course of GST. Here, we train you to perfection. Starting from what GST is? To the different sections in the GST Act, filing returns and every minute detail will be taught. Teaching every accounting term is included in this course. This course can bring you excellent opportunities in the professional world as well.</p>

What is the reverse charge mechanism under GST and when is it applicable?

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