Reverse Charge Mechanism under GST in India – A Guide with Example

What is Reverse Charge Mechanism under GST?

In normal situations, the GST tax is paid by the supplier of goods and services, which is ultimately borne by the end consumer.

In Reverse Charge mechanism, the tax is paid by the receiver of goods, instead of the supplier, i.e. the tax liability gets reversed.

See the GST Reverse Charge with the example below.

Arun is a supplier who supplies goods to Vikas. In the normal system, Arun will be liable to pay the tax to the government on the supply made. Vikas will only have to pay the cost of goods to Arun, which may also include the tax amount (As Arun is liable to charge tax from its customers). Read More