What is a reverse charge mechanism? - Tax Corner

31 Oct 2021

What is a reverse charge mechanism?

Reverse Charge Mechanism is the process of payment of GST by the receiver instead of the supplier. In this case, the liability of tax payment is transferred to the recipient/receiver instead of the supplier.

Usually, the supplier of goods or services pays the tax on supply. In a reverse charge, the receiver becomes liable to pay the tax, i.e., the chargeability gets reversed.


RCM or Reverse Charge Mechanism under GST is a mechanism where the supplier & the recipient change their roles in paying the GST.

In the normal system, the recipient pays the GST to the Supplier who then pays it to the Government but under Reverse Charge, the recipient pays the GST directly to the Government & not via the Supplier.

This Mechanism is applicable to certain situations, goods & services specified by the Government

 

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