Guides · GST
Reverse charge mechanism under GST
Reverse charge flips the usual rule. Normally the supplier collects GST and pays it to the government; under the reverse charge mechanism, the recipient of the supply pays the tax directly instead.
How reverse charge works
In a normal supply, the seller adds GST to the invoice, collects it, and pays it over. Under reverse charge, the liability moves to the buyer: the buyer accounts for the tax on that purchase and pays it to the government, rather than paying it to the supplier.
The buyer can usually claim the tax paid under reverse charge as input tax credit, subject to the normal conditions, so it is not always an extra cost — but it is an extra step to record.
When reverse charge applies
Reverse charge applies to specific categories of goods and services the law notifies, and in certain cases to supplies received from an unregistered person. Because the buyer becomes the one who accounts for the tax, the exact list and conditions are worth confirming for your kind of supply.
Where reverse charge applies to a purchase from an unregistered supplier, the buyer typically has to raise a self-invoice, because there is no tax invoice from the supplier to rely on.
How Lekha records reverse-charge purchases
Lekha captures supplier documents and records each bill with its tax fields, so a purchase where reverse charge applies is recorded against the supplier with the source document kept for the payable.
Lekha records what your documents say and tracks the money on both sides — what you owe and what you are owed. It records and tracks; it does not replace your accountant.
Questions
- What is the reverse charge mechanism?
- It is a GST rule where the buyer, not the supplier, pays the tax to the government on certain notified supplies and some supplies from unregistered persons.
- Can I claim credit for tax paid under reverse charge?
- Usually yes, subject to the normal input tax credit conditions. The tax you pay under reverse charge can generally be claimed as credit against your output tax.
- Do I need a self-invoice under reverse charge?
- Where reverse charge applies to a supply from an unregistered supplier, the recipient typically raises a self-invoice, since there is no supplier tax invoice to rely on.
This guide is general information, not legal or tax advice. Confirm the current rules and your own circumstances for any specific case.