Reverse Charge under GST
SMEs your life is going to get difficult under GST. You will be liable to pay GST on all transactions with unregistered vendors. So cost will go up as I assume you have several of these unregistered vendors. Reverse Charge is applicable to you if you are registered under GST.
Reverse charge means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of goods or services or both under Section 9 (3) or Section 9 (4) of CGST Act, ( Central Goods and Service Tax Act) or Section 5 (3) or Section 5 (4) of the IGST Act ( Integrated Goods and Services Tax Act).
Section 9(4) of the CGST Act provides for Central Tax in respect of the supply of Taxable goods or Services or both by a supplier who is not registered, to a registered person. The Tax is paid by the registered person as the recipient of goods and services. All the provisions of the Act shall apply to such recipient as if he is the person liable for paying the tax.
If we examine the above provision of GST Liability to pay GST under reverse charge on purchases or services procured from un registered dealers or service providers, the Liability has been shifted from the supplier of goods or provider of services to the receiver of goods or receiver of services if he is a registered person.
On further understanding of the provisions, it will be clear that it is the liability of the person who is receiving goods and services and utilising them for the business or furtherance of business. All the business organisations whether small or big will have urgencies and necessity to use the services of small time vendors, service providers, and services of skilled man power who will be un organised sector and will not have registration under GST.
For example:
If we analyse an organisation or a small business house’s small time requirements, there will be petty purchases and expenses of staff welfare, where it requires for purchase of Milk, coffee powder, tea powder, sugar etc.
The supply of water to the business by a water taker provider (it is the most essential requirement in SMEs).
Services of a plumber where there is water leakage.
Photo copy services,
Book binding services,
Small electrical repair or a general up keep.
Purchase of a Bulb.
Purchase of Pen for office.
Purchases for Puja and payments to Pandit.
Every registered person availing services from anun registered dealer or purchasing goods from un registered dealer has to pay the GST under the respective HSN Code of the Service / Goods by raising an Invoice. It means all the registered persons, liable for GST for un registered services/ goods are to raise Invoice on self and file returns to take Input Tax Credit.
This will be additional activity for the registered dealers who are liable to pay GST under reverse charge mechanism and are supposed to know the rate of GST and HSN code for each and every category of service or goods procured.
Usual practice of the industry is to ascertain the service category and HSN code for the Goods produced or Services rendered by that industry for billing. But the effect of reverse charge under GST will make all the Tax Payers to know the rate of GST and HSN codes for all the purchases and services ( un registered). So an expert advice will be mandatory for all the GST payers. A small size business house/ SME/ distributor who has employed an accountant, need to take the services of an expert.
Why not a simple mechanism of reverse charge payment and filing of returns where the registered dealers pay the GST for all the un registered goods and services with one Invoice and the category registered by the registered person who is liable to pay the GST under reverse charge mechanism.
All most all of the emergency purchases and small repair and plumbing works and services are done by un registered persons. Hence the liability to pay GST will fall on the registered person who has availed these services or procured goods. It means SMEs/ business organisations are forced to incur additional tax liability, compliance, ( cash flow) on these procurements from an un registered person.
By this activity it is tendency of the business to reduce purchases from unregistered persons or to avoid services from un registered persons. We could see the news and articles from industry, preparations for GST, to comply with GST and to avoid / reduce purchases from unregistered persons.
If the industry/ business houses/ SMEs stop the services of un registered person, there will not be any purchases from small time vendors, or utilization of services from skilled man power who are self employed and not registered.
GST paid by the recipient under reverse charge on some of the purchases or services from un registered persons, may be available Input Tax Credit, but not on all the goods and services paid under revere charge, as there are restrictions and conditions for Input Tax Credit.
What is the motto of the Government, is it bringing all the activities of small timers to bring under tax net? Or ease of business for the industry or, /making it convenience for the Government.
Implementation of GST is evident and very short time for the industry to look for alternatives or change a vendor. It is the testing time for all till a clear path is ahead. more
Reverse charge means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of goods or services or both under Section 9 (3) or Section 9 (4) of CGST Act, ( Central Goods and Service Tax Act) or Section 5 (3) or Section 5 (4) of the IGST Act ( Integrated Goods and Services Tax Act).
Section 9(4) of the CGST Act provides for Central Tax in respect of the supply of Taxable goods or Services or both by a supplier who is not registered, to a registered person. The Tax is paid by the registered person as the recipient of goods and services. All the provisions of the Act shall apply to such recipient as if he is the person liable for paying the tax.
If we examine the above provision of GST Liability to pay GST under reverse charge on purchases or services procured from un registered dealers or service providers, the Liability has been shifted from the supplier of goods or provider of services to the receiver of goods or receiver of services if he is a registered person.
On further understanding of the provisions, it will be clear that it is the liability of the person who is receiving goods and services and utilising them for the business or furtherance of business. All the business organisations whether small or big will have urgencies and necessity to use the services of small time vendors, service providers, and services of skilled man power who will be un organised sector and will not have registration under GST.
For example:
If we analyse an organisation or a small business house’s small time requirements, there will be petty purchases and expenses of staff welfare, where it requires for purchase of Milk, coffee powder, tea powder, sugar etc.
The supply of water to the business by a water taker provider (it is the most essential requirement in SMEs).
Services of a plumber where there is water leakage.
Photo copy services,
Book binding services,
Small electrical repair or a general up keep.
Purchase of a Bulb.
Purchase of Pen for office.
Purchases for Puja and payments to Pandit.
Every registered person availing services from anun registered dealer or purchasing goods from un registered dealer has to pay the GST under the respective HSN Code of the Service / Goods by raising an Invoice. It means all the registered persons, liable for GST for un registered services/ goods are to raise Invoice on self and file returns to take Input Tax Credit.
This will be additional activity for the registered dealers who are liable to pay GST under reverse charge mechanism and are supposed to know the rate of GST and HSN code for each and every category of service or goods procured.
Usual practice of the industry is to ascertain the service category and HSN code for the Goods produced or Services rendered by that industry for billing. But the effect of reverse charge under GST will make all the Tax Payers to know the rate of GST and HSN codes for all the purchases and services ( un registered). So an expert advice will be mandatory for all the GST payers. A small size business house/ SME/ distributor who has employed an accountant, need to take the services of an expert.
Why not a simple mechanism of reverse charge payment and filing of returns where the registered dealers pay the GST for all the un registered goods and services with one Invoice and the category registered by the registered person who is liable to pay the GST under reverse charge mechanism.
All most all of the emergency purchases and small repair and plumbing works and services are done by un registered persons. Hence the liability to pay GST will fall on the registered person who has availed these services or procured goods. It means SMEs/ business organisations are forced to incur additional tax liability, compliance, ( cash flow) on these procurements from an un registered person.
By this activity it is tendency of the business to reduce purchases from unregistered persons or to avoid services from un registered persons. We could see the news and articles from industry, preparations for GST, to comply with GST and to avoid / reduce purchases from unregistered persons.
If the industry/ business houses/ SMEs stop the services of un registered person, there will not be any purchases from small time vendors, or utilization of services from skilled man power who are self employed and not registered.
GST paid by the recipient under reverse charge on some of the purchases or services from un registered persons, may be available Input Tax Credit, but not on all the goods and services paid under revere charge, as there are restrictions and conditions for Input Tax Credit.
What is the motto of the Government, is it bringing all the activities of small timers to bring under tax net? Or ease of business for the industry or, /making it convenience for the Government.
Implementation of GST is evident and very short time for the industry to look for alternatives or change a vendor. It is the testing time for all till a clear path is ahead. more
Viewed by 916
[ ]( # ) [ ]( # )  [ ]( http://r.sigma-institute.website/mk/cl/f/l2BUfw9RAZZSAsHUGqJewUQHa1DlN6AvnU34lmr6xp-z0oBvqgMusYoDFewrXbc6YIPms-zBkVEbjayDn8ezYTMCjQlBHrZksEb_IDbzrPbCa7Pn8K473vCdLEJvbI8jdI2TKTGsMzjUzDkFLQxC1c0x4fCsZQSkxz_QfribMpuUiyxLqp-nmwCgcA3XiP2S7h0LU_riJLOyECkON9nrlqwceIfioHb9dqdgdIXIE8QzbesFUodWqcGcR6ZY3rURXKQ0BJzt0yyTCCAYCtRVyZJQaZnhqjEDWLulX9cDm1BTe4mPqQBkoo_dGFJofxNU7TUpnjr_V-QYLKiA4h7CgjadMcTY7tODemVBGgKwN5BADdpQUA )  [ ]( # ) COMPUTER FOR ONLINE CLASSES [ ]( # ) [ ]( http://r.sigma-institute.website/mk/cl/f/eXirpFZPyInHx2Lm-ICJk3EFtokLPu1j1scPt9L5f03KCtN4ljVnC2Waneowvk4WxeVsXNuDfTa6qnQntIidds-oy0G95q4d1tHZr6F7mjMnQFzx1-Il5oZ6cf4-AFbr4ieJiPyx6pI3CRWSmo4rXHmfKN80J0L4csBNJA_VfVvtj4AtcCz4WLvYqijWtW4JalEkURXkILHudabkRxD5e1uUTlskFQgCEv1FFg99FIew9-gyn_tUU6LE6hzHFckAbEGQNksnPJqDU_19Rq-6xRDPguAKYyDLkDZK91fv4UeQQCtadMID3xeDt9CO7DHOcSzFJ6TOSXKbUkhGG0e_lFtbHVDanib2gJ0h7YuqfGj0aBg9xw ) [ ]( # )  For online classes we are providing a complete set of computer with UPS in following specifications: Monitor 15"; Camera & headphone CPU: 160 GB HDD, 2 GB RAM, Core 2 duo Keyboard, mouse UPS ( Electronic voltage stabilizer ) This complete set we offer pan India for Rs. 21000/- ( All inclusive ) One extra 160 GB Hard disk will be supplied free of cost within 5 years, if present becomes in sufficient. All carry "M.I.'s" 1 year warranty.    [ ]( # ) [ ]( http://r.sigma-institute.website/mk/cl/f/hCoi1uSSeHvviCIakl0gVnx-RwJgfqo4dH3e-O9Yv3pYtU5j4WAKA-DY668eyY8V2VAtLZB0B1StLmo1AlzQaQ3s9SQBA5DrJqzjL_sMjwe6HZj6DBoPu2GGpdIJ_RwXH5o9-Y-QL45ZXkCNY0LDog7godcFaXes-absWeof69Zyr1EL9WovKm8njRI7pf5K6FerXjINZ6roBxV8QiEqgIbl96jWJTQh92Z9F_P2gGG9lX9BGB5C9bETjH1Lxl7LlyY7NZcqkpwWrXQy3QDHSJSfbDJQIZ2go280McYwNVNeJ3eDbA1EZ49jemE2rutp5MCE3QB-ohEf34Gt_g6dM7ZwzDLDOdxflJum2V6KmUIyQh9ElA ) We understand the hardships...  Hardships of the parents, hardships of teachers, hardships of every such individual who is now compelled to work from home; be it student or the the professional now computer set is must. we decided to help all such people by providing the complete set including UPS to save your machine for longer life. In comparison to laptops desktop is robust & long lasting and also cheap & best ! For getting this deal, please click the button below:  [ Button ]( http://r.sigma-institute.website/mk/cl/f/JXsUkz6xE6QpX-gPMLknECx9z37Fopku3uFDKiXLThCHT88SwBsl-lRYwqTqFeIDgvDRmW__eDu-yCYiGbLygVwMcTuJj6wUgL8QMuJcet7H-_qUIFhb-ZA7S5ert7VMgz6WY4HDUj115XSJhxpa5Ai4AW8zM1oBh_nzLCqTMswTsTq6367RUOnfhmLp8ztoLv1mRE-jOEfegBM3D_nZpRNgipwLAVRdofjXknlDwbD3atekpiTNW8wj6URKWie9BD5Xocb8_O46V-kpq-THYAOjEbUSFI9NctLuM_a_YCg0qaR5ZKiqwJbsDuu33h_Vr-P6cF1lz8Jn6ItsXaK5n1VUc-potMfXVWT9a-HiN8xl1eNlFw ) [ ]( # ) [ ]( # )  SIGMA INSTITUTE Delhi Cell: 9899075161 [ ]( http://r.sigma-institute.website/mk/cl/f/MAcZeo15nIl9O0UN0h0SDpH6JygUpKXsXPxpIb28NL43V95VXvgJZrBhoMtKRtBHe1diFRKoVzLvH_hhT-6faIWQvAZmsDy1JtYh0UCySeEHR_61Rdpeyf4OTKg13ijDzCf-lUSpy4DwbA1TEH5Qc92eOMeOc0wq55KAXmnFXiPPRIFzb7_3ECVqMHWeUmh44Oagt9mMZG3JxOYOUby6htdd7gkVrvpRaY2e7ZCHLewF1b7JuLNznubD1bW1D854w8NQqVuYUWxD7t6OBUVnMB6nBIjYAi9o3JgRQWWbupTBokZmjRNrKvBFw4jZSUYFT0xVteN19bE5201dQYKbXthlKjC87w ) [ ]( http://r.sigma-institute.website/mk/cl/f/G3l8J4j5FhfeS6tecdiWk5mv1jo1LPDTCcA8wrTeasRSBggjh-kh-ioGwQEMTppyse5Xa1eqWoTyl1bcCPn2V9gSYLzslD6pdoy_IqixoYvwQG1-xa7ihs3kIsedwmFuOELTEszDjBlu2uvJSZJX4ByBPauRP5ZG1_FApX3E8bYzIQM0UhWgk4AurA5aBBTKhCzrGa6ZeWVp6HM7Lv-GR-9ZAjC4NOdDR8IUEEKKQ4xnjw3nF4CujGGG1UY0hJcOVXj-W1PyW_hJKTiapovs_dvckuL13gIsrZ4Ke4wx3YWZSI8W_4IqqeZvaUHuLZCUE3j2DhZMguimJ7dLhcYyhlGNSg ) [ ]( http://r.sigma-institute.website/mk/cl/f/P-Vw7cWd9dfOuRnZg3FHmTs6gAR_7ijkYJY3_DrojNsj7x7qHdZv3HFsmj2gZPSF_xQe7RA-kpwCskFbqlnkIVo_sl2utQxt7xlwUBb-UWMz29zDxv6kHNslsFbJPbzYzM87Qw6tlKwybzyu2IzOx5RCQwaoCX5njQ5utxIHylnWGRqWhaJhYzU3qKN7jRZRxKI_TN5Q0CqxDddodK8HXAd4DsUim0Bgrps-rTHSyonLUwope8qAI-Wgm5LnP5BGwDs8O8I7aFhSXOOdDOjyHj5eEH-aNwUFHQ0cfXAAuJ9VLHYPo2m2KunqM72qEy1Zk8WlQdwHTyABrdR2V6qYSfs ) [ ]( http://r.sigma-institute.website/mk/cl/f/Kj6M6HmXP51YrxA9UJA1tSk2wxLUHiS_dxbt-NuyRmN2jbvXvQIAofPO02QxVPITCA1JPVAM7VHcX_gjVYgkz1Kh73wJ9--4qGWAVpg2YS84md0PwmaCVja84JVCxnRjGO7XiuGGqEssB-cjsGIZKsdrz-O5kJk8ksBuRfPdAt-nGo1pXOl3aLswY_84NLILcZRaYUyV7E10qIiA8YWCWjKamAmd5VZ27Zux4noyrNa_roBPrdh7HF5WOmLcGxYRtc4atXwAiftfwtu3thujnyYuESG5RfnjeOztwkW9V_RtbP5fZxfFK_Pv1e2iw5LgVjLaO12kdVnSTtaBjz73ddAleojn1Y-tin3HhI0 ) [ ]( http://r.sigma-institute.website/mk/cl/f/NMEBDJNrrVQq2GRGn3LJFBZt--3js2jpPaSjbZ8mpIyBuBA1lqjZFSPVX6KZtcGLBO6IcbjFfMqOY4FusZ1oUqd6zrYmRFCAFvpEVlA8VUdJvbuo3AcLNL5HwuRMtggXlgc5tpoJBxd6yTcwK354-rO08QJ2Sf6bSoqJNwqkb_MSN04sDG1SXiuVw6d--YLDJsca3JExdBWacJqOuhK0JYZQinL0XJQ1JdscK2QbVLTwoeWPTjhkOhYEX1ykMwBAkepBvN3StgTLO8QFQmByi-gf-iSCLyKHmd5JmPeY3TCZqgsonw34o6WbrzPVFBM3YrdLURvHdZTShLgZHf-ahRkg6Aq5Bw ) [ ]( http://r.sigma-institute.website/mk/cl/f/oxzEyAljSjFoObWZ1g688WU_E_0Afd7Vv3K6d5IZwJUkfXFXhQpD7AAO06RjOOaMAz_Tp7cd77pXv2S_PEqRPfBPwJbR10VM6AdeU_Jl7hQUVZb_tR2g0smPVbQmbCGY6dz4fXzzbK5QFDeIRRkuQTId93scK2dvcvRfKXSoGjDJmWMiTUmmceFLnahdZvqVPRHbq5SdwSmuvPTq4Yag3yIadLPJQrCC47ZZhvsQyqmwrTiWzcnVs0emFO48SwXDzdPCe6VtN7zc1z7VbNkeClKI0y7b9h68ou_LfsTVFFBHgXuhIh7Rm3XVia6Wb-pFPhd8Br1VKmVb5tluovhW7Qv5_wj-BlMOVgwhlo7Z7KKWMnH1tjrIY0NxyJtbvRq4QYlvCT97JDJzUDMhcmc ) [ ]( http://r.sigma-institute.website/mk/cl/f/0zM82taIjkb-6M5ZGnsMaWFLRjkUDhsG2i-Wq2_4dVn2gghfZDYJ-B9Sg2GwhUiThCQ4dXvb1cRJzmz-4-NWga3TXVoGKQhJj1eHTG2emTcxVtmHS0zYpEAsKzNnFWF5aqOTC611q2DbBMAlbCxdS7PnoujfKQOQ0ANcVHlGr1mb_sBS9o7O2_s5QeCtWBksu_inksikgmlQPIYheOc2uGvkl9yFURyMCob-iO8BTEB2XWJhPxlOac7XJH-ONpY6RXo6zksiRzqI-4n2dcM2UzqXhteJ_r7ay_PRLat-yH-KFc67JT3CiuWkZYOEaAlngL31BRJmBPg1qZVOd-C51Vfv1TcLkZQWR6rVwJ5R ) [ ]( http://r.sigma-institute.website/mk/cl/f/1KW_WR4cNWfYj4HlbPz86Q1rDWEHyFgTFnChlVCXO-77px2KGt0He8C5ZbrM1PKbeH-sGS7a5JpgrD9XNHtD8n1Y6a8W76iFPMiLg9YG5lPRzX_WXinBExsXCaBWIhdEUhGzROMFrEy7OyZTK6TKg6X-XWnt4R7uprJDcF8Nimbedvufq3VO2kD9n1i1Elw_ajrWf7Qx9xZq89-3ExZ51Wtf8EdIxsIcCOoohjCNzeD0mgoe2dEO6TqpG6FeqAkTp0PTrLDcObJeuXqmpu0IU_X-QJEiDksgfhehzteg9WWZuHBL0gQBhqT6MVA6hwbe-4vgUTMaH1tQrp8GCK-Y2xOGXs2nEC0vA7_8 )  [ ]( # )  You received this email because you are registered with Sigma Institute  [ Unsubscribe here ]( http://r.sigma-institute.website/mk/un/mo7QNDqR4bozu_qHKjxxRYaU3W4AXCzxqU9x5EG47TDrsarYvv1U88IuMSPKJgqugotl27O9T1PVw2smu9ijtjn6rURmXhhdXlWWZSwIsu0vS3fgPTuIzxzRUoMPp_TZHhSj80r_7kUZQ6WFdY1j9GsBLMMUzhePBnIrJ8zBwqJ4qqolRbhtFL3k_5Gd6tZhzttTetkRXfjuZkjZGeZdb1b5Ll4 )  [ ]( # )  © 2020 Sigma Institute  more
Oct 31
Dear Mohit, Yes true so you automatically tend to buy from vendors who have GST registered - you generally tend to help small people become gst registered - The smallest of people when effected(when they become gst compliant) are going to be our biggest and most valuable ally against petty corruption/harassment(once they become GST compliant) and the more knowledgeable better positioned traders and government should help people become GST compliant - It is not easy - but very tough because it is a massive change and I personally am most affected - but I do think it is the way to go in the long run for India - Some of us may even shut down in the process of integration complicated with massive corruption/inefficiency and its other ramifications but thats just "collateral damage" - not good but we have to go through it. Things (corruption/inefficiency) had come to a "limit of tolerance" under previous governments and it was becoming unsustainable. Its just that from governments side there should be better efficiency - better utilisation of money earned - reduced corruption - and when all these things start coming together - will we see the change and because we are a big country (Population) this can happen faster that one imagines if successful - lets be patient ! I am not for BJP - or Congress - just a small businessman struggling like all others and badly affected by this "moving environment" of continuous change first by Demon and then by GST. Continuous change is not good for any business (Stable environment is) - But to get there - I guess we all have to sacrifice even ourselves sometimes if it comes to that ! I personally feel that our PM is not a "finance guy" - but he knows only one thing - lets do what is good for whole of India in the long run first - then look at short run or then adjust some minor things for short run - He may not always be right in all things - but I believe if we give him eight years and then judge - then evaluate - I predict that it would be better than the direction we were going in by previous regimes ! Lets see - your analysis of "Reverse Charge under GST" is what is required by us all. Discussion will help us all go in the right direction ! Problem is that our PM would/should also take decisions of bitter pill with regard to government officials/systems/methods/corruption/harassment simultaneously ! more
Aug 26
I agree with you that 'PM would/should also take decisions of bitter pill with regard to government 0fficials / systems / methods / corruption / harassment simultaneously !' Unless that is done GST which essentially should be read as God Saves Taxpayer may be read as Government Slays Taxpayer. more
Sep 03
It is their own interest that SMEs patronize only GST registered vendors. This is an indirect pressure on small vendors to get registered under GST and come in the tax net; and a very much correct approach. Today even a samosawala does a business of two or 3 thousand PER DAY but does not even file income tax return. more
Aug 25
Samosawala was just an example. Take a better example of a wholesaler selling cigarettes and soaps etc. His lifestyle is lavish. He sells thousand of rupees goods EVERYDAY but just gives a simple printout of the total.
How do you bring him in the tax net.
If we want a change, we need to change first.
If we want chalata hai, so be it. Then we must not complain.
And we get leaders that WE elect. more
How do you bring him in the tax net.
If we want a change, we need to change first.
If we want chalata hai, so be it. Then we must not complain.
And we get leaders that WE elect. more
Aug 26
Dear Parimalbhai, You become a samosawala - live the way that he is living - be the person that he is and then judge whether he (you) can handle this massive change - mind you all other conditions like petty corruption/harassment remaining the same all around in the world around you. No clean water around you - no good roads around you - no clean air around you - daily grind taking same amount of extra time around you - one is just a small samosawala because you are not that educated enough as one has not got equal opportunities in life - No subsidy for the small guy - this is a method of taking or leeching out a tax from those who do not pay tax in any form i.e. now even a beggar is paying tax (or you are paying it for him). Still I say - I do not know what the solution is - we are going the right way - but the government should concentrate on utilising the funds got properly - build proper roads - give clean drinking water - clean air - then only will India prosper - government should try and reduce/remove petty corruption (again digitisation is a step in the right direction towards this). A samosawala's live is not easy - Live like he does and then comment so easily ! Not easy - this massive change in GST - not easy for the small businessman and not easy for the samosawala - still it is a step in the right direction - its just that initially - and especially for the small person - some subsidies should be there ( not put onto the bigger person - which makes it infructious) - Compliance cost in India for the small businessman is extremely high - That is something that the goverment should subsidise by reducing/removing corruption and increasing efficiency within the government ! more
Aug 26
Dear Mr Vijay, if you get time, I would like to hear on this as I am not getting any training program. My TO last year was only around 4 lacks and thus exempted. Plz let me have your opinion. Regards, Ajoy K Guha more
Aug 25
Hello, Due to High Workload, I am Currently Checking and responding to email twice a day at 12:00pm(IST) and 4:00pm(IST) If you require urgent assistance that cannot wait either 12:00pm or 4:00 pm,please contact me directly on my cell phone. Thank you for understanding this move to more efficiency and effectiveness.It helps me accomplish more to serve you better. Sincerely, Vijay Chaudhari. more
Aug 25
