When does reverse charge mechanism apply under GST and who must pay tax

Question

I received a supply from an unregistered person and someone told me I have to pay GST myself, so I want to understand when this applies. What I am unsure about is the procedure — where the application goes, what it costs, and how long reverse charge gst matters usually take. A plain explanation of the steps, in order, would help more than a general answer.

MyVakeel Legal Desk · Accepted Answer

The law that applies to reverse charge gst here is Central Goods and Services Tax Act, 2017, Section 9(3), Central Goods and Services Tax Act, 2017, Section 9(4) and Integrated Goods and Services Tax Act, 2017, Section 5. The detail below matters, because Central Goods and Services Tax Act, 2017, Section 9(3) draws the line differently depending on what your documents show.

Under Section 9(3), the government notifies specified categories of goods and services, such as legal services from an advocate, goods transport agency services, and services by a director to a company, where the recipient rather than the supplier is liable to pay GST under reverse charge.

Section 9(4) covers reverse charge on supplies received from unregistered persons in notified categories, historically applicable broadly but now largely restricted to specified promoters receiving construction inputs and services from unregistered suppliers.

A registered person paying tax under reverse charge must self-invoice, pay the tax in cash through the electronic cash ledger, and can simultaneously claim input tax credit of the same amount if the inward supply is used for business, subject to Section 16 conditions.

Failure to discharge reverse charge liability attracts interest under Section 50 and penalty, and the recipient cannot use the supplier's non-registration as a defence since the statutory liability rests squarely on the recipient in notified cases.

Practical steps: 1) Identify whether the supply falls under a notified reverse charge category; 2) Self-invoice and calculate tax at the applicable rate; 3) Deposit tax in cash and report it in GSTR-3B; 4) Claim eligible input tax credit in the same return period.

If the other side has already issued a notice, filed a case or set a deadline, treat the matter as time-sensitive — remedies under Central Goods and Services Tax Act, 2017, Section 9(3) carry limitation periods, and unexplained delay weakens an otherwise strong case. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in tax law.