GST Basics #8: Reverse Charge in Practice — Sections 9(3) and 9(4)

Reverse charge turns the normal rule upside down: the buyer pays the tax instead of the seller. Two sub-sections create it, two notifications list what it covers, and the practical consequences catch people out.

Basics #7 introduced Section 9, the charging section, where the default is forward charge — the supplier adds GST to the invoice, collects it and pays it to the Government. Sections 9(3) and 9(4) create the exception. Under reverse charge the recipient pays the tax directly, and the Act then treats that recipient as if it were the supplier for every other purpose.

Section 9(3) is the main route: the Government notifies categories of supply on which the recipient pays, and the working list for services is Notification No. 13/2017-Central Tax (Rate) dated 28 June 2017. Its entries include transport of goods by road by a goods transport agency; representational services before a court or tribunal by an advocate or firm of advocates to a business entity; services of an arbitral tribunal; sponsorship; most services supplied by Government or a local authority to a business entity; services by a director to the company; by an insurance agent to an insurer; by a recovery agent to a bank, financial institution or NBFC; and copyright transferred by an author, composer, photographer or artist to a publisher, music company or producer. The list has been amended many times, so read the current version.

Goods have a much shorter list — Notification No. 4/2017-Central Tax (Rate) of the same date: cashew nuts not shelled or peeled, bidi wrapper (tendu) leaves and tobacco leaves supplied by an agriculturist, silk yarn from a person who manufactures it out of raw silk or cocoons, and lottery supplied by a State Government or local authority.

Section 9(4) is narrower than its reputation. Since the 2019 amendment the Government must notify both the goods or services and the class of registered persons liable. Unless a specific notification catches you, buying from an unregistered supplier does not attract reverse charge.

Four practical consequences matter more than the lists. Registration: Section 24 makes it compulsory for anyone liable under reverse charge whatever your turnover, so the Basics #6 thresholds do not help. Cash: Section 49(4) restricts the electronic credit ledger to output tax, so a reverse-charge liability must be paid in cash even if you are sitting on credit. Paperwork: where the supplier is unregistered, Section 31(3)(f) requires you to raise an invoice to yourself and Section 31(3)(g) a payment voucher. Timing: under Sections 12(3) and 13(3) the time of supply runs from the earlier of payment or a fixed number of days after the supplier's invoice, so liability can arise before you pay anyone.

What this means for you: tax paid under reverse charge is normally available as input tax credit under Section 16 if used for business, so the real cost is cash flow and compliance, not tax. The trap is not knowing you were liable. If you hire a transporter, engage an advocate, pay a director or pay a government fee, check whether the category is notified.

The notifications are at https://cbic-gst.gov.in/hindi/pdf/central-tax-rate/Notification13-CGST.pdf for services and https://cbic-gst.gov.in/hindi/pdf/central-tax-rate/Notification-for-reverse-charge-CGST.pdf for goods.

Next in this series: Section 10, the composition scheme.

Topics:reverse charge GSTRCM section 9(3)section 9(4) GSTnotification 13/2017 central tax rateGTA reverse chargeadvocate services GSTself invoice RCMsection 49(4) cash paymentGST basics ChennaiTamil Nadu GST guide

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