Is reverse charge applicable on awarding contract or issuing Purchase Order (PO)?

Reverse charge is applicable only when there is a supply. Supply ‘agreed to be made’ is regarded as a supply only in case of supply under section 7(1)(a) and 7(1)(c). Even though actual supply is yet to take place, in the case of supplies covered by these two provisions, tax would be payable on award of contract or issue of PO because this itself amounts to supply. However, Table 4 of GSTR-2 requires reference to be made to invoice in respect of supplies liable to reverse charge but Rule 52 does not provide for issuance of invoice earlier than the time of payment. As such the absence of machinery provisions to pay tax at the time of contract / PO, it appears that the liability fails.

(ICAI FAQ PUBLICATION 06-09-2017 : Levy and collection of tax- FAQ NO. 28)

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