Reverse Charge is a situation where instead of the seller billing the tax (GST) in his bill, the buyer buys the product without GST but then the buyer himself pays the GST portion. Suppose Mr. X is an unregistered dealer. He sells product A to Mr. Y who is a registered dealer with a billing of Rs.100/-. Here, Mr. Y will pay Mr. X Rs. 100/- to settle his bill. However, Mr. Y will pay Rs.18/- @ 18% as GST which should actually have been paid by Mr. X. This situation is called Reverse Charge Mechanism (RCM). This Rs.18/- can be taken as credit by Mr. Y as ITC (Input Tax Credit).
Written on Aug. 24, 2017, 8:53 p.m.