Author: abhishek

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How can tax paid be recouped and adjusted in case of return of goods attracting reverse charge

There is no provision in section 34 of the CGST Act or Rule 52 of the CGST Rules, 2017 regarding reversal of tax paid. Equity demands that relief be allowed to the recipient who has paid the tax so that the recipient may apply for refund under section 54 of the CGST Act and not issue credit note or revised invoice for which there is no provision. This relief to claim refund will be subject to credit not being availed by the recipient on the tax so paid.

(ICAI FAQ PUBLICATION 06-09-2017 REVERSE CHARGE : FAQ NO. 29)

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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 REVERSE CHARGE: FAQ NO.28)

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Is reverse charge applicable after supply or on payment of advance

Reverse charge is applicable when there is a supply and the time of supply is
determined by section 12 or 13 of the CGST Act. Reverse charge is applicable at the time of advance even though actual supply is yet to take place. Rule 52 provides for the issuance of a Payment Voucher in cases where tax is to be paid on reverse charge basis.

(ICAI FAQ PUBLICATION 06-09-2017 REVERSE CHARGE: FAQ NO. 27)

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Does tax liability u/s 9(5) come within reverse charge

No, definition of reverse charge given in section 2(98) refers only to section 9(3) and section 9(4). Tax payment by ecommerce operator in case of specified services under section 9(5) would not be a case of reverse charge but a new specie because the e commerce operator facilitates the supply through the digital network and collects payment from recipient and passes it on to supplier.

(ICAI FAQ PUBLICATION 06-09-2017 REVERSE CHARGE: FAQ NO. 26)

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What is the difference between reverse charge u/s 9(3) and u/s 9(4)

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)