REVERSE CHARGE UNDER ‘IGST’ ACT
By: – DR.MARIAPPAN GOVINDARAJAN
Goods and Services Tax – GST
Dated:- 3-9-2018
Reverse Charge
Section 2(24) of the Integrated Goods and Services Tax Act, 2017 ('Act' for short) provides that words and expressions used and not defined in this Act but defined in the Central Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act shall have the same meaning as assigned to them in those Acts. The expression 'reverse charge' has not been defined in the Act. Therefore we may take the definition as contained in CGST Act, 2017. Section 2(98) of CGST Act defines the phrase 'reverse charge' as the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and
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es or both.
Vide Notification No. 32/2017-Central Tax (Rate), dated 13.10.2017, the Central Government exempted the inter-State supply of goods or services or both received by a registered person from any supplier, who is not registered, from the whole of the integrated tax leviable thereon under section 5(4) of the said Act. The said time line has been extended to by the Notifications as mentioned below-
* Vide Notification No.11/2018-IGST (Rate), dated 23.03.2018 the exemption was granted up to 30.06.2018;
* Vide Notification No. 13/2018-IGST (Rate), dated 29.06.2018 the exemption was further extended up to 30.09.2018;
* Vide Notification No. 23/2018-IGST (Rate), dated 06.08.2018, the exemption is further granted for a long term i.e., up to 30.09.2019.
The Integrated Goods and Services Tax (Amendment) Act, 2018 substituted new section for section 5(4). The newly substituted section 5(4) provides that The Government may, on the recommendations of the Council, by notification,
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iculturist
Any registered person
2.
1404 90 10
Bidi wrapper leaves (tendu)
Agriculturist
Any registered person
3.
2401
Tobacco leaves
Agriculturist
Any registered person
4.
5004 to 5006
Silk yarn
Any person who manufactures silk yarn from raw silk or silk worm cocoons for supply of silk yarn
Any registered person
4A.
5201
Raw cotton (with effect from 15.11.2017)
Agriculturist
Any registered person
5.
–
Supply of lottery.
State Government, Union Territory or any local authority
Lottery distributor or selling agent. Explanation.- For the purposes of this entry, lottery distributor or selling agent has the same meaning as assigned to it in clause (c) of Rule 2 of the Lotteries (Regulation) Rules, 2010, made under the provisions of sub section 1 of section 11 of the Lotteries (Regulations) Act, 1998 (17 of 1998).
6.
Any Chapter
Used vehicles, seized and confiscated goods, old and used goods, waste and scrap (with effect from 13.10.2017)
Central Government, Sta
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rt agency (GTA) in respect of transportation of goods by road to-
(a) any factory registered under or governed by the Factories Act, 1948(63 of 1948);or
(b) any society registered under the Societies Registration Act, 1860 (21 of 1860) or under any other law for the time being in force in any part of India; or
(c) any co-operative society established by or under any law; or
(d) any person registered under the Central Goods and Services Tax Act or the Integrated Goods and Services Tax Act or the State Goods and Services Tax Act or the Union Territory Goods and Services Tax Act; or
(e) any body corporate established, by or under any law; or
(f) any partnership firm whether registered or not under any law including association of persons; or
(g) any casual taxable person.
Goods Transport Agency (GTA) *[who has not paid integrated tax at the rate of 12%]
* inserted with effect from 22.08.2017.
(a) Any factory registered under or governed by the Factories Act, 1948(63 of 1948); o
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before any court, tribunal or authority.
An individual advocate including a senior advocate or firm of advocates.
Any business entity located in the taxable territory.
4
Services supplied by an arbitral tribunal to a business entity.
An arbitral tribunal.
Any business entity located in the taxable territory.
5
Services provided by way of sponsorship to any body corporate or partnership firm.
Any person
Any body corporate or partnership firm located in the taxable territory.
6
Services supplied by the Central Government, State Government, Union territory or local authority to a business entity excluding, –
(1) renting of immovable property, and
(2) services specified below-
(i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Central Government, State Government or Union territory or local authority;
(ii) services in relation to an aircraft or a vessel, inside or outside th
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ce business.
An insurance agent
Any person carrying on insurance business, located in the taxable territory.
9
Services supplied by a recovery agent to a banking company or a financial institution or a non-banking financial company.
A recovery agent
A banking company or a financial institution or a non-banking financial company, located in the taxable territory.
10
Services supplied by a person located in non- taxable territory by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India.
A person located in non-taxable territory
Importer, as defined in clause (26) of section 2 of the Customs Act, 1962(52 of 1962), located in the taxable territory.
11
Supply of services by an author, music composer, photographer, artist or the like by way of transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 relating to original literary, d
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vocate including a senior advocate by way of representational services before any court, tribunal or authority, directly or indirectly, to any business entity located in the taxable territory, including where contract for provision of such service has been entered through another advocate or a firm of advocates, or by a firm of advocates, by way of legal services, to a business entity."
Registration
Section 20(v) of the Act provides that the provisions of CGST Act for registration will be applicable for IGST Act.
Section 24 of CGST Act provides for compulsory registration under CGST Act. Section 24(iii) provides that the persons who are required to pay tax under reverse charge is compulsorily liable to register under CGST.
The threshold exemption of ₹ 20 lakhs or ₹ 10 lakhs (to special category of States but the CGST (Amendment) Bill, proposes to increase this limit to ₹ 20 lakhs) is not applicable to the reverse charge mechanism.
Composition scheme
Secti
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or
* the date immediately following 30 days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier.
Where it is not possible to determine the time of supply as above, the time of supply shall be the date of entry in the books of account of the recipient of supply.
Time of supply of services
Section 13(3) of CGST Act provides that In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earlier of the following dates, namely:-
* the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or
* the date immediately following 60 days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier.
Where it is not possible to determine the time of supply as above, the time of supply shall be the date of e
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equired to be issued section 31(3)(f) of CGST Act, a registered person may issue a consolidated invoice at the end of a month for supplies covered under section 5(4), the aggregate value of such supplies exceeds rupees five thousand in a day from any or all the suppliers.
Payment of tax
Section 20(ix) of the Act provides that the provisions of CGST Act for payment of tax shall be applicable to IGST also.
Payment of Tax under reverse charge mechanism shall be paid through Electronic Cash Ledger. Reverse Charge liability cannot be paid through Input Tax Credit. Section 31(3) (g) CGST Act provides that a registered person who is liable to pay tax under section 5(3) or 5(4) shall issue a payment voucher at the time of making payment to the supplier. The said payment voucher shall contain the details as specified in Rule 52 of CGST Rules, 2017. The payment of tax on reverse charge is to be paid on or before 20th of the succeeding month. The payment shall be made only in cash and not to
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