Introduction:
The GST Act came in force from 1st July, 2017. There were many interpretation issues with respect to the definitions, glossary and terms use in the law. Since, such definitions were adopted from various legacy laws in India prior to GST; such as Service Tax, State VAT, Central Excise Act, Luxury Tax, Entertainment Tax, etc. it was difficult to make applicable one definition for different sectors. Hence, some modifications from existing definitions were made. Therefore, it was important to established a nexus of the terms used in the GST definitions. The definition discussed here is”Reverse Charge”.
So what do you mean by “Reverse Charge”?
Section 2(98) of CGST Act, 2017 –“reverse charge” means the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such goods or services or both under sub-section (3) or sub-section (4) of section 9, or under sub-section (3) or subsection (4) of section 5 of the Integrated Goods and Services Tax Act;
Conclusion:
Reverse Charge means the liability to pay tax is on the recipient of supply of goods or services instead of the supplier of such goods or services in respect of notified categories of supply. This means that the GST will have to be paid directly by the receiver to the government instead of the supplier.