Reverse charge is a mechanism where the recipient of the goods and/or services is liable to pay GST instead of the supplier.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 changeability gets reversed.
When is Reverse Charge Applicable?
1. Supply from an Unregistered dealer to a Registered dealer
If a vendor who is not registered under GST, supplies goods to a person who is registered under GST then Reverse Charge would apply. This means that the GST will have to be paid directly by the receiver to the Government instead of the supplier.
An unregistered dealer cannot make interstate supplies. This means that Reverse Charge in this case will apply only in case of intra-state supply by an unregistered dealer.
Only if the total supply from unregistered person exceeds Rs 5,000 in a day, then reverse charge will be applicable.
(Notification No.8/2017-Central Tax)
Supply of Specific Goods or Services
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.
For example, UrbanClap provides services of plumbers, electricians, teachers, beauticians etc. UrbanClap is liable to pay GST and collect it from the customers instead of the registered service providers.
If the e-commerce operator does not have a physical presence in the taxable territory, then a person representing such electronic commerce operator for any purpose will be liable to pay tax. If there is no representative, the operator will appoint a representative who will be held liable to pay GST.
Reverse charge apply in GST Some Certain Goods and Services.
Details list of goods and a list of services
on which reverse charge applicable