Reverse Charge Mechanism Under GST comes up with a lot of questions, especially for businesses receiving notified goods/services, or purchasing from unregistered suppliers in specified cases dealing with it for the first time. Here are clear answers to what we're asked most often.
Who pays tax under reverse charge?
The recipient of the goods or service, instead of the supplier.
Can reverse charge tax be paid using input tax credit?
No, it must generally be paid in cash.
Is credit available on tax paid under reverse charge?
Yes, typically it can be claimed as input tax credit if the purchase is for business use.
Does reverse charge apply to all unregistered supplier transactions?
No, it applies to specific notified categories, not all purchases from unregistered suppliers.
Still Have Questions?
Every business situation is a little different, and Reverse Charge Mechanism Under GST is no exception. If your case doesn't fit neatly into the questions above, it's worth getting a second opinion before proceeding.
What You'll Typically Need
- List of notified goods/services under reverse charge
- Self-invoice generated for the transaction, where required
- Tax paid in cash (reverse charge liability generally can't be set off against ITC)
- Input tax credit claim for the tax paid, where eligible
Need Help With This?
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