Government has notified a list of goods and services along with the type of recipient who is liable to pay tax on those supplies covered under reverse charge as per section 9(3). If the goods or the services are not listed or the recipient is not notified, then reverse charge does not apply. For example, tax in respect of services of advocate availed by a business entity is payable on reverse charge basis. If the recipient is a religious trust which means it is not a business entity, reverse charge is not applicable. Whereas, every inward supply of a registered person from an unregistered person will be liable to payment of tax on reverse charge basis by such recipient – this is covered under reverse charge as per section 9(4). It is important to note that only a reasonable inquiry can be undertaken by the recipient as to why the supplier did not charge tax when it was chargeable. However, the supplies made by unregistered suppliers to a registered person are exempted if the aggregate value of such supplies does not exceed ` 5,000/- in a day per registered person. Therefore, if one is located in three states with one business vertical within one State, each of the States and business vertical would be eligible.
(ICAI FAQ PUBLICATION REVERSE CHARGE: FAQ NO.25)