Normally, the supplier of goods or services pays the tax on supply. In the case of Reverse Charge Mechanism, the receiver of goods or service is becomes liable to pay the tax, i.e., the charges get reversed.

Transactions where RCM is applicable

Supply from an unregistered dealer to a registered dealer: If a dealer who is not registered under GST, supplies goods to a person who is registered under GST, then Reverse Charge would apply.

In this case, Tax need to be paid by the Supplier directly to the government under self-invoicing.

Note: Reverse Charge Mechanism (in case of supplies made by unregistered persons to registered persons) deferred to 30th Sept 2019.

· Specified Services supplied through an e-commerce operator (ECO): In respect of specified services, tax shall be paid by the ECO on behalf of the service suppliers if such services are supplied through it and all the provisions of the Act shall apply to such ECO as if he is the supplier liable to pay tax in relation to the supply of such services.

The Government has notified following categories of services, the tax on intra-State/ inter-state supplies shall be paid by the ECO –

S. No	Description of supply of Service	Supplier of service	Person Liable to Pay GST
1	Transportation of passengers by a radio-taxi, motor-cab, maxi-cab and motorcycle	Any person	E-commerce operator
2	Providing accommodation in hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes	Any person except who is liable for registration under sub-section (1) of section 22 of the said CGST Act	E-commerce operator
3	Services by way of house-keeping, such as plumbing, carpentering etc	Any person except who is liable for registration under sub-section (1) of section 22 of the said CGST Act	E-commerce operator

Note: If the ECO does not have a physical presence in the taxable territory, then a person representing such ECO 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.

Supply of certain goods and services specified by CBEC: CBEC has issued a list of goods and a list of services List-of-Goods-and-Services-notified-under-RCM-1.pdf on which reverse charge is applicable.

Time of Supply under Reverse Charge Mechanism

· Time of supply for Goods

Under RCM, the time of supply shall be the earliest of the following dates:

· The date of receipt of goods

· The date immediately after 30 days from the date of issue of an invoice by the supplier

· Time of supply for Services

Under RCM, the time of supply shall be the earliest of the following dates:

· The date of Payment or the date of entry in the books of account of the recipient.

· The date immediately after 60 days from the date of issue of an invoice by the supplier

Payment of GST under Reverse Charge Mechanism

Any liability arises under RCM need to be paid only in cash, i.e through Cash ledger. ITC cannot be used to pay outward liability under RCM.

Input Tax Credit of GST paid under Reverse Charge Mechanism

ITC can be availed of tax paid under RCM immediately after the payment i.e ITC of RCM can be availed in the same month after making the Cash payment of Tax Under RCM.

Miscellaneous Points under Reverse Charge Mechanism

· If the composite dealer falls under reverse charge mechanism then the dealer is ineligible to claim any credit of tax paid. Along with the dealer is liable to pay tax at normal rates applicable to such supply and not the rate applicable for composition scheme.