GST, in typical scenarios has to be charged, collected and remitted to the government by the person supplying the goods or services, there are instances where the receiver of goods or services has to pay GST. Such instances are referred to as payment of GST under reverse charge mechanism.

Presently, the following supplies are covered under reverse charge mechanism
- Supply of specified goods (Refer FAQ No. 3)
- Supply of specified services (Refer FAQ No. 4)
- Services imported into India.

GST has to be paid under the reverse charge mechanism in respect of the services notified by the government in this regard,
The services on which GST is payable on reverse charge mechanism are notified in the “Notification No 13/2017 – CT (Rate) dated 28-06-2017 w.e.f. 01-07-2017”

When services are imported into India, GST has to be paid by the recipient of the service under reverse charge mechanism.
In the case of import of goods, even though the IGST is being paid by the importer before clearance for home consumption, it cannot be treated a payment of GST under Reverse charge. It has to be assumed that such GST is being levied by the government under forward charge mechanism similar to customs duty.

No GST has to be paid with respect of import of services if the service recipient is anyone of the below mentioned persons,
- the Central Government, State Government, Union territory, a local authority, a governmental authority in relation to any purpose other a non than commerce, industry or any other business or profession;
- an individual in relation to any purpose other a non than commerce, industry or any other business or profession
- an entity registered under section 12AA of the Income-tax Act, 1961 (43 of 1961) for the purposes of providing charitable activities
- a person located in non-taxable territory

Note: The above exemption shall not apply to,

Online information and database access or retrieval services received by persons specified in entry (a) or entry (b); or
(ii) Services by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India received by persons specified in the entry

Tax under reverse charge mechanism should be discharged in cash, available ITC (Input tax credit) cannot be used to set off the RCM liability.
However, the amount of GST paid on reverse charge basis can be availed as input in the same month and can be used to set off normal GST liability.

As per section 9 of CGST Act, a registered person was required to pay GST on RCM basis on purchase of goods or services from unregistered persons.
However, this provision has been put in abeyance by the government presently and hence is not in force.

GST Basics: Reverse Charge Mechanism (RCM)

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