Reverse charge
What Reverse charge means, where you will meet it and what it means for your business.
DefinitionReverse charge is the GST rule under which the buyer, not the seller, must pay the tax on certain purchases, such as services from a lawyer, a goods transport agency or an overseas supplier.
Normally the seller collects GST and deposits it. Under reverse charge the liability flips to the registered buyer for notified categories: legal services from an advocate, goods transport agency services, sponsorship, services of a director to their company, and any service imported from outside India, including software subscriptions and overseas contractors. The buyer pays the tax in cash through GSTR-3B, cannot use input credit to settle it, and can then claim that same amount as credit in the following return if the purchase is for business. You meet it the first time you pay a foreign SaaS invoice or hire a lawyer after registering for GST. What it means for you: track these purchases separately, because missed reverse charge is one of the most common findings in a GST audit, and interest at 18% runs from the original due date.