Reverse Charge Mechanism May Take a U-Turn

GST is touted as the biggest taxation reform since Independence and currently, traders are facing problems due to the provision of ‘reverse charge’ system under GST. Currently, this compliance has been postponed by the government but the traders feel that if the compliance has not removed permanently then the GST will not be easy.

According to the proposed GST law, there is a different provision of reverse charge mechanism under subsection 4 section of CGST law and subsection 4 of section 5 of IGST law. When the registered trader purchases good and services from unregistered dealers worth more than Rs 5000 in a day, in such circumstances registered dealer will be responsible to deposit GST. Later they will be eligible to claim for input tax credit.

Provision of reverse charge compliance will create difficulties for both small as well as large business enterprises. Small traders who are not registered under GST will face issues in such a way, as registered dealers will not purchase goods from them.

However, Large traders will face difficulties if they purchase goods and services from the unregistered dealer then they will be responsible to deposit GST. This provision will enhance the burden on large businessmen and their cost will also get increased. However, they will be eligible to claim for input tax credit.

The process of GST will be complicated due to the provision of ‘reverse charge’ system. Small business enterprises got affected a lot in the starting months due to the implementation of indirect taxation system in the country from 1st July. Traders face the problem with the provision of reverse charge system under GST and also enhance burden on them. That’s why the GST Council had decided to postponed ‘reverse charge’ system till 31st March 2018 on 6th October Meeting

Official experts said that the council will further discuss on this matter. However, the traders are fearing that what if the provision comes again after the march.