Reverse Charge Mechanism

Prelims level : Mains level : Paper - II Indian Economy
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Reverse charge is a mechanism where the recipient of the goods and/or services is liable to pay tax instead of the supplier.

Application of Reverse Charge in GST:

  • 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.
  • The registered dealer who has to pay GST under reverse charge has to do self-invoicing for the purchases made.
  • For Inter-state purchases the buyer has to pay IGST. For Intra-state purchased CGST and SGST has to be paid under RCM by the purchaser.
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