GST Reverse Charge Mechanism is basically the GST which is to be paid and deposited with the Government by the recipient of goods and services and not by the supplier of Goods and services.

It is applicable on reverse charge basis for certain transactions specified by the government which means it is not applicable under normal circumstances.

What the things required under the Reverse Charge Mechanism

  • The recipient of goods/services must be registered under GST.
  • Every registered business owner should maintain accurate records of supplies that would incur the reverse charge.
  • The supplier should clearly state the invoice that the tax payable for that specific transaction is through the reverse charge. Similarly, the same should be mentioned on receipt vouchers and refunds vouchers.
  • Advance paid on supplies that incur a reverse charge is taxable under GST. The taxpayer making advance payment should pay tax on a reverse charge basis

GST Reverse Charge

Time of Supply for Reverse Charge under GST

It is very important to ascertain the time of supply as GST would be required to be deposited with the Government within 20 days from the end of the month in which the services were provided.

Time of supply in case of supply of Goods

In this, a transaction is a date on which taxes are levied upon the supplies. The time of supply would be the earliest of the following

  • Date of receipt of goods or
  • Date of payment or
  • The date straight away after 30 days from the invoice date for goods and 60 days from the invoice date for services.

Note: If none of the above applies, then it can also be the date of entry in the books of the receiver.

Example:

Suppose the time of supply in the below-mentioned case of supply of goods:

  1. Date of Receipt of Goods: 12th Oct.
  2. Date of Payment: 15th Dec.
  3. Date of Invoice: 1st Nov
  4. Date of entry in Books: 16th Oct.

Solution: the time of supply of goods, in this case, will be 12th Oct

Time of supply in case of supply of services

In case of a Reverse charge, the time of supply would be the earliest for the below mentioned:

  1. The date of payment or
  2. The date immediately after 60 days from the date of issue on the invoice by the supplier

Note: 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.

Example:

  1. Date of payment 10th Aug
  2. Date of invoice 1st June
  3. Date of entry in books of receiver 13th Aug

The Time of supply of service, in this case, will be 1st June will be considered.

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