Ch.

8 Reverse Charge Mechanism

Amount of GST (Rental * Rate of GST) (Fare * Rate of GST)

COMPUTATION OF GST model

(In case of Renting of Motor Vehicle)
Rate
Now there are 2 Taxation Models to calculate GST
likens
(OR)
Model- 1 Model- 2

12% 5%
with without
Full ITC ITC

Inputs GST
a Inputs GST
Cap. Goods Supplier Cap. Goods Supplier
Input Service @ 12%
a Input Service @ 5%

Full ITC shall No ITC shall be Allowed,

Be Allowed But if Input Service is
Renting of Motor Vehicles,
Then, ITC shall be allowed.
Always NCM i.e Always
Supplier shall be liable to pay
GST in this Model NCM or RCM both i.e.
Supplier/Recipient may be
liable to pay GST in this Model
011 Rate 121 Mah (It will depend upon the
combination **)
Rete Sf Me C RCM

Rsle.si 0ken
Man **
Non- NCM (A)(5%) Non-
1 Or Company xxxx Company
RCM (D)(5%)

ITiakehD
off
CopGoods 2K 10000
NCM (B)(5%)
Company NCM (C)(5%)
Company

Inputsenii 51
Renting 2min If
send
Itc CRAI one finale
tother Input MET
1.5K IM s
f
CA Rajkumar 8.23
 Reverse Charge Mechanism Ch.8

Security Lending Service

1
Vision of Mr. Raj: -
Share of X Ltd.-Today = `500
In Near Future = `400

Sudha
3
(Stock Share T/F
2 Share T/F
Broker)
Archana 5 Mr. Raj
(Supplier) (Recipient)
(Lender) (Borrower)

(D-Mat A/c) MARKET Shares Sold Today @ `500

Held- 1Share of Mr. Z
X ltd. of `20/- (Buyer) 4
VIRAJ
5 In Near Future, Price of shares of X Ltd = `` 400

6 Mr. Raj Bought Shares @ `` = 400

7 Status of Shares: -

Gross Profit (500-400) = `` 100

Less: - Lending Fees = `` 20
Less: - Commission = `` 5
Net Gain = `` 75

Supplier Service @ `20 Recipient

Lending
(Lender) GST shall be payable (Borrower)
(Under RCM)

Supplier Service Recipient

Stock Broker
(Stock Broker) Commission received (Borrower)
GST shall be payable
(Under NCM)
Security
Sale/ This transaction is not covered under definition of Goods and Service.
Purchase Hence No GST will attract here.

8.24 CA Rajkumar
Ch.8 Reverse Charge Mechanism

as
Ocean Freight with Respect to import CARGO

MOHIT
Minerals 2022
S C
Target of Govt: -
Ÿ -Decrease Import of goods
St X
by increasing cost, &
Ÿ -Increase Export of Goods
by decreasing Cost

Japan India
Exporter Importer
Import of Goods (Shipping Co.= USA based)
(Mr. X) (Mr. Y)
Freight = `5,00,000

Case-1 = Service of Transportation of Goods and Freight Paid by Mr.Y

Particulars Transportation of Goods

Supplier? Shipping Company (USA)
Recipient? Importer (Mr. Y) (India)
Goods or Service? Service
ABC Test: -
A = Activity Service of transportation of goods by vessel
B = Business Yes
C = Consideration Freight (`5,00,000)
Supply? Yes
Inter-state or Intra-State? Inter State Supply
Taxable Person? Mr. Y (RCM attracts here)
Exemption? No
Status Of GST ?
Amount of GST
NCM / RCM? Mr. Y (Importer) is liable to pay GST

CA Rajkumar 8.25
 Reverse Charge Mechanism Ch.8

Case-2 = What if Freight paid by Exporter (Mr. X) to Shipping Co. (USA): -

Particulars Transportation of Goods

Supplier? Shipping Company (USA)
Recipient? Exporter (Mr. X) (Japan)
Goods or Service? Service
ABC Test: -
A = Activity Service of transportation of goods by vessel
B = Business Yes
C = Consideration Freight (`5,00,000)
Supply? Yes
Inter-state or Intra-State? Inter State Supply
Taxable Person? ??
Exemption?** Yes
Status Of GST ?
Amount of GST

Exemption

1 2
Since both Supplier and Recipient
Located in Non-taxable territory,
So there is a problem in collection of
GST .
Hence, Govt. generally grant exemption
from GST in such cases
But in this case, Govt. want to
discourage import, So GST must be
levied, & for this, Govt. made a
special provision.
The provision is as follows: -
Where both the parties are located
in Non-Taxable Territory,
*But Service is of transportation of
goods through vessel, related to
import.
*Then, it will be liable to GST.

But GST will be collected from

Whom ? –
Supplier – Shipping Co ? = No
CRUX: -
Recipient –(Exporter)Mr. X ? = No
IIIrd party-(Importer)Mr. Y? =

8.26 CA Rajkumar
Ch.8 Reverse Charge Mechanism

Section 9(4)

Where Supplier is Unregistered

and Recipient is Registered

But, for now, it is applicable on

“Construction Sector” Bto B
1)

Supplier Cement (Input) Recipient

(Unregistered) (Registered)
RCM attracts (u/s 9(4)) Promotor

2)

Supplier Capital Goods Recipient

(Unregistered) (Registered) t
RCM attracts (u/s 9(4)) Promotor

3)
eecement concretemy

Supplier
(Unregistered)
Ii
Other Inputs / Input Servicesarm Recipient
(Registered)
Up to 20%- No NCM/No RCM Promotor
Above 20%- RCM attracts

Example –
Case-1 Supplier
(Registered)
80% = NCM
0 Recipient

(Registered)
Supplier 20%
(Promotor)
(Unregistered)
[ Up to 20% = No RCM/ No NCM]

Case-2
Supplier 70% = NCM Recipient
(Registered)
(Registered)
Supplier 30%
(Promotor)
(Unregistered)
[ Up to 20% = No RCM/ No NCM]
[ Excess 10% = RCM]

CA Rajkumar 8.27
 Reverse Charge Mechanism Ch.8

Case-3
Supplier 65% = NCM Recipient
(Registered)
(Registered)
Supplier 35%
(Promotor)
(Unregistered)
[ Up to 20% = No RCM/ No NCM]
[ Excess 15% = RCM]

startedd transportation Business

My friend has
ONE
Day TRUCK SE Accident Ho aya and he
hired an advocate to save himself
The case Reads up to tribunal Level therefore he
aFu ot Re to co to win the case and
gm For this he approand me
sources are
My revenue salary as Director
Royalty É
I Invest this money
in Real Estate
IEEE
COFFEE
I gave him Retoer

Apart from money I told him like Ki Aapke

Insurance Agent
KUNDALT ME Do SH Hai recoveryagent

SO I START Worf
hip of PAMCHRATHA loan Agent DSA
BankAgent
Ble Agent
It will potoude Security to you

Shift Business to Renting of vehicles

this you will save your time
By then START Invest in Share market
8.28 CA Rajkumar
Ch.9 Invoice

ET 47 452197342
Ch 9 INVOiCE

Tax INVOICE/Bill of supply/Receipt Voucher: For supply of goods or services

Back Ground: Section: 31 to 34 of CGST ACT, 2017

Section 31 Who, when, how to issue invoice/ bill of supply, Revised Invoice etc
Section 32 Only a registered person can issue Invoice or collect GST
Section 33 Cio
GST will be recovered only as per law. Show off GST as Charged on tax
invoice and on other documents
Section 34 Debit note and credit note CHANGY MANGU
Section 31: who, when and how to issue invoice

Who is Tax invoice:

required Tax invoice is required to be issued by the following persons:
to issue
Ÿ A Registered supplier paying tax under regular scheme shall issue TAX
Invoice /Bill

I
off supply. INVOICE.
Ÿ A Registered Recepient (RCM): Recipient liable to pay GST under reverse
charge need to issue an invoice. Exclusive
Bill of supply:
91 Ef Supplian
Rem ie supply
supply
NOT Registered
CEN
o
Ÿ A Registered supplier making EXEMPTED supplies shall issue a BILL OF
SUPPLY
Ÿ A Registered taxable Person Paying Tax under COMPOSITION SCHEME shall
issue a BILL OF SUPPLY.
Invoice Cum Bill of Supply: Where a registered person is supplying taxable as
well as exempted goods or services or both to an unregistered person, a single
“invoice-cum-bill of supply” may be issued for all such supplies.
Note: Small value invoice /Bill of supply:
Ÿ Where supply is made to an unregistered person [B TO C]

Ÿ having value below `200

Ÿ and Recepient is not willing to take INVOICE.

Then the supplier need not to mandatorily to issue Invoice or Bill of supply,
However supplier needs to issue a consolidated invoice /bill of supply at the end
of the day and will keep that document himself.
Receipt Voucher: A registered Supplier shall,
Ÿ On receipt of advance payment with respect to any supply,

Ÿ issue a receipt voucher evidencing receipt of such payment.

ERP based Bill: No need of signature in case of computer generated documents.

__
CA Rajkumar 9.1
O

Iii

w
 Invoice Ch.9

When In case of supply of goods

(Last date GENERAL PROVISION: Transaction wise
or due date)
(a) Where supply involves Removal of goods: Then the invoice shall be issued
before or at the time of removal of goods and in case where supply does not
O
involve Removal of goods: Then the invoice shall be issued before or at the
time of delivery of goods.
(Eg. sale and lease back transactions)

8É SPECIAL CASE: 1 Period wise

(b) In case of continuous supply of goods:

Where periodic “statements of Then invoice shall be issued on or

account” are given by supplier before each such statement is issued.
Where no such periodic “statements Then invoice shall be issued on or
of account” are given by supplier OR before each payment is received.
payment is made before such
statement

SPECIAL CASE-2 Acceptance wise

(c) In case of sale on approval basis: Invoice shall be issued on
or before acceptance date or 6 Months from the date of
removal (whichever is Earlier)
Analysis
Mr. X Mr. Y
(J & K) Pashmina Shawls (Sale on approval basis) (Delhi)
Supplier [ On 1-1-22] Recipient

[On 1/4/22]
Not a supply

Mr. Y will return goods, Reject Accept

& It will not be treated as supply
(Sale of Goods)
[On 1/4/22]
Neither accept
nor Reject

If Mr. Y doesn't accept or reject the goods within 6

months from 1/1/22, (i.e. upto 1/7/22), then it will
be treated as Deemed Acceptance.

9.2 CA Rajkumar