Once again, the central government has suspended the reverse charging mechanism on the purchase of goods and services by the dealers registered with unregistered dealers for one year. Earlier, suspension was valid until September 30 this year. The central indirect taxes and customs board (CBIC) have said that the suspension of the reverse charge will be valid till September 30, 2019.
Suspension on reverse charge has been extended several times. In further detail, registered dealers will be allowed to purchase goods and services from any unregistered dealers without paying GST under the reverse charge for one year.
In the election year, experts believe that the decision of the Center will not provide some compliance relief to big dealers, but also encourage them to buy goods and services from unregistered firms.
Why extension of suspension on reverse charge is good news for businesses?
Under the general GST payment process, the supplier of goods and services has to pay tax on the supply. However, in the case of reverse charge, the chargeability is reversed, i.e. the receiver becomes liable to pay the tax. This is one of the many provisions of the GST law to curb tax evasion.
Reverse charge applies when a registered dealer buys supplies from an unregistered dealer. Under the reverse charge, the registered dealer becomes liable to pay the taxes on the goods and services received from an unregistered dealer.
In addition, registered dealers have to invoice themselves for all purchases made from unregistered dealers.
Reverse charge provision prevents registered dealers from getting supplies from unregistered dealers. Therefore, the extension of suspension comes as a major relief for millions of registered and unregistered dealers.