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RESERVE CHARGE
UNDER GST

What is Reverse Charge?

Normally, the supplier of goods or services pays the tax on supply. In the case of Reverse Charge, the receiver becomes liable to pay the tax, i.e., the chargeability gets reversed.

When is Reverse Charge Applicable?

A. Supply from an unregistered dealer to a registered dealer

If a vendor who is not registered under GST supplies the goods to a person who is registered under GST, the reverse charge will apply. This means that the receiver will have to pay directly to the government instead of the GST supplier.

Self-invoicing is required for purchases made by a registered dealer who must pay GST on the reverse charge.

Under RCM by the purchaser for Intra-state purchased CGST and SGST has to be paid & for Inter state Purchase the buyer has to pay IGST.

B. Services through an e-commerce operator

If an e-commerce operator supplies services then reverse charge will be applicable to the e-commerce operator. He will be liable to pay GST.

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Time of Supply under Reverse Charge

A. Time of Supply in case of Goods

In case of reverse charge, time of supply will be first on the following dates:

  • Date of receipt of goods
  • Date of payment
  • Date after 30 days from the date the invoice is issued by           the supplier

If the delivery time cannot be determined, the delivery time will be the date of entry into the recipient's account books

B. Time of Supply in case of Services

In case of reverse charge, the time of supply shall be the earliest of the following dates:

  • The date of payment
  • The date immediately after 60 days from the date of issue of invoice by the supplier

If it is not possible to determine the time of supply, the time of supply shall be the date of entry in the books of account of the recipient.

 

 Reverse Charge Transactions in GST

A. In the Books of Supplier

Debtor A/c   ____________________Dr.

To Sales A/c

To CGST Payable A/c (% of CGST Payable by Supplier, if any)

To SGST Payable A/c (% of SGST Payable by Supplier, if any)

A. In the Books of Receiver 

Purchaser A/c   ____________________Dr.

CGST Input Credit A/c_______________Dr. (Total CGST on Input)

SGST Input Credit A/c_______________Dr.  (Total SGST on Input)

To Creditors A/c

To CGST Payable A/c (% of CGST Payable by Receiver under RCM)

To SGST Payable A/c (% of SGST Payable by Receiver under RCM)

Note: The above entries of reverse charge transaction is shown by assuming intra-State Supply. If there is inter-state supply then CGST and SGST a/c should be replaced with IGST a/c.