GST reverse charge suspension extended by 1 year: Why it is a good news for businesses

The Union government has once again extended the suspension of reverse charge mechanism on the purchase of goods and services by registered dealers from unregistered dealers by one year. Earlier, the suspension was valid till September 30 this year. Central Board of Indirect Taxes and Customs (CBIC) has said that the suspension of the reverse charge would be valid till September 30, 2019 now. 

The suspension on the reverse charge has been extended several times in past. The further extension would allow registered dealers to purchase goods and services from any unregistered dealers without paying the GST under reverse charge till one year. 

In the year of elections, experts believe that the decision of the Centre will not just give some compliance relief to large dealers but also encourage them to buy goods and services from unregistered firms. 

Why is the extension of suspension on Reverse Charge good news for businesses?

Under the normal GST payment process, the supplier of goods and services has to pay the tax on supply. The chargeability is, however, reversed in case of the Reverse Charge, i.e. the receiver becomes liable to pay tax. This is one among the many provisions of GST law to prevent tax evasion.

The reverse charge is applicable when a registered dealer buys supplies from an unregistered dealer. Under Reverse Charge, the registered dealer becomes liable to pay the tax on received goods and services from an unregistered dealer. 

Moreover, the registered dealer has to do self-invoicing for all the purchases made from the unregistered dealers. 

The Reverse Charge provision deters registered dealers from getting supplies from unregistered dealers. The extension of the suspension, hence, comes as a huge relief for lakhs of registered as well as unregistered dealers. 

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The industry has been demanding time before adhering to additional complainces.