The government has further deferred the reverse charge mechanism under goods and services tax to September 30. Under this mechanism, GST is levied on goods or services procured from unregistered dealers by the buyer and deposited with the government.
This is an anti-tax-evasion measure to ensure that transactions by unregistered people don’t escape tax. In a normal transaction, the supplier of goods or service charges the tax and pays to the government, but in this case, the responsibility reverses and falls on the buyer.
The mechanism was to kick in from July 1 this year after it had been deferred earlier. The industry had voiced concern that this would increase their compliance burden.
The Central Board of Indirect Taxes and Customs issued a notification on Friday, postponing the roll-out of the mechanism by three more months.
“This extension was much sought for as industry genuinely wanted some time before adhering to additional compliances envisaged for such procurements,” said Abhishek Jain, tax partner at EY India.The GST Council had earlier in its March 10 meeting suspended the implementation of the reverse charge mechanism till June 30.