51. With reference to GST, consider the following statement(s) about Reverse charge Mechanism
1. It is the mechanism where the supplier of goods/services is liable to pay tax instead of the recipient.
2. It may be applicable for both services as well as goods.
3. The purpose of this charge is to increase tax compliance and tax revenues
Which of the above statement(s) is/are correct?
51. With reference to GST, consider the following statement(s) about Reverse charge Mechanism
1. It is the mechanism where the supplier of goods/services is liable to pay tax instead of the recipient.
2. It may be applicable for both services as well as goods.
3. The purpose of this charge is to increase tax compliance and tax revenues
Which of the above statement(s) is/are correct?
The correct option is C Only 2 and 3
The statement 1 holds true for Forward charge and not reverse charge. Reverse charge means the liability to pay tax is by the recipient of goods/services instead of the supplier. Reverse charge, where the recipient is liable to pay tax, is common to many countries like Canada where it is applicable on imports of services and intangible properties. Normally, the supplier pays the tax on supply. In certain cases, the receiver becomes liable to pay the tax, i.e., the chargeability gets reversed which is why it is called reverse charge.
The concept of reverse charge mechanism is already present in service tax. In GST regime, reverse charge may be applicable for both services as well as goods. In India, this is a partly new concept introduced under GST. The purpose of this charge is to increase tax compliance and tax revenues. Earlier, the government was unable to collect service tax from various unorganized sectors like goods transport. Compliances and tax collections will therefore be increased through reverse charge mechanism.
The statement 1 holds true for Forward charge and not reverse charge. Reverse charge means the liability to pay tax is by the recipient of goods/services instead of the supplier. Reverse charge, where the recipient is liable to pay tax, is common to many countries like Canada where it is applicable on imports of services and intangible properties. Normally, the supplier pays the tax on supply. In certain cases, the receiver becomes liable to pay the tax, i.e., the chargeability gets reversed which is why it is called reverse charge.
The concept of reverse charge mechanism is already present in service tax. In GST regime, reverse charge may be applicable for both services as well as goods. In India, this is a partly new concept introduced under GST. The purpose of this charge is to increase tax compliance and tax revenues. Earlier, the government was unable to collect service tax from various unorganized sectors like goods transport. Compliances and tax collections will therefore be increased through reverse charge mechanism.
