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Reverse Charge Mechanism in GST


In general GST is collected by the supplier from the recipient and remitted to the government. However, in order to plug tax evasion, in some cases taxes must be paid by the recipient directly to the Government instead of remitting to the supplier. Under section 2(98), it is called reverse charge. As per Sec 9(3) of CGST Act and Sec 5(3) of IGST Act, reverse charge shall be applicable in the following cases.



Please note we are only mentioning those below which are common to most businesses. There are few which are not commonly applicable and relate to Insurance Agent, Recovery agent, Cinema, Authors, RBI, DSA, Business Facilitators, Business Correspondents which are not mentioned in the table below.

OTHER IMPORTANT NOTES a. Tax under reverse charge can only be paid through electronic cash ledger only because ITC can only be used on outward supplies. b. Recipient can avail ITC for the tax paid under reverse charge if goods and services are used for business or furtherance of business. c. Person paying tax under composition scheme can not avail ITC for the tax paid under reverse charge mechanism. d. A person liable to pay tax under reverse charge has to compulsorily get registered irrespective of the threshold limit.


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