Tax in India

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)

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)

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)

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)

As regards the recipient who pays tax on reverse charge basis, tax so paid would be available as credit subject to section 17. As regards the supplier whose tax is paid by the recipient, value of such supply will be treated as ‘exempt supply’ while applying section 17(2) of the CGST Act, 2017 on all the credits availed.

(ICAI FAQ PUBLICATION 06-09-2017 REVERSE CHARGE : FAQ NO.24)

Yes, if the contract provides that the price charged does not include tax.

(ICAI FAQ PUBLICATION REVERSE CHARGE : FAQ NO.23)

Contractually if tax is not included in the price payable towards the supply, then tax payable on reverse charge basis cannot be reduced from the value of supply that is paid to the supplier. And if included, then due effect to this understanding must flow by making the deduction from the payment.

(ICAI FAQ PUBLICATION 06-09-2017 REVERSE CHARGE: FAQ NO. 22)

Yes, as long as the tax is on the subject of levy, Government is free to collect this tax from any person – either the supplier or the recipient or anyone else. Even a third party can be called upon to deposit the tax provided there is some nexus such as collection of payment for the supply between two other persons.

(ICAI FAQ PUBLICATION 06-09-2017 REVERSE CHARGE: FAQ NO. 21)

In terms of Section 7 of the IGST Act, 2017, import of goods or services or both shall be treated to be a supply in the course of inter-state trade or commerce. Accordingly, tax under the provisions of IGST Act shall apply on import of goods or services or both.

(ICAI FAQ PUBLICATION 06-09-2017 LEVY AND COLLECTION:  FAQ NO. 20)