Reverse Charge on Used Goods Purchased from Government

Taxation on a reverse charge means tax liability rests with the recipient of goods or services, and not with the supplier. GST is levied on

reverse charge basis for certain transactions specifically mentioned by the Government. In a recent notification dated 13th October 2017, the Government has included the purchase of vehicles, seized and confiscated goods, old and used goods, waste and scrap by a registered person from the Central Government, the State Government, Union territory or a local authority under transactions that attract a reverse charge. The notification relating to the inclusion is listed below:

[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]

GOVERNMENT OF INDIA MINISTRY OF FINANCE (Department of Revenue) Notification No. 37 /2017- Integrated Tax (Rate)

New Delhi, the 13th October 2017

G.S.R. (E).- In exercise of the powers conferred by sub-section (3) of section 5 of the Integrated Goods and Services Tax Act, 2017 (13 of 2017), the Central Government, on the recommendations of the Council, the Central Government, on the recommendations of the Council, hereby makes the following amendments in the notification of the Government of India in the Ministry of Finance (Department of Revenue), No.4/2017- Integrated Tax (Rate), dated the 28th June 2017, published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (i), vide number G.S.R. 669 (E), dated the 28th June 2017, namely:- In the said notification,- (i) after S. No. 5 and the entries relating thereto, the following serial number and the entries shall be inserted, namely:

Sl. No.	Tariff item, subheading, heading or Chapter	Description of Goods	Supplier of goods	Recipient of supply
(1)	(2)	(3)	(4)	(5)
6.	Any Chapter	Used vehicles, seized and confiscated goods, old and used goods, waste and scrap	Central Government, State Government, Union territory or a local authority	Any registered person

[F. No. 354/117/2017- TRU (Pt. III)]

(Ruchi Bisht) Under Secretary to Government of India

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Frequently Asked Questions

Common questions about Reverse Charge on Used Goods Taxation in India.

Reverse charge on used goods purchased from the government refers to a taxation mechanism where the tax liability for such transactions rests with the recipient of goods or services, and not with the supplier. Under this mechanism, if a registered person purchases used vehicles, seized and confiscated goods, old and used goods, waste and scrap from the Central Government, State Government, Union territory or a local authority, they will be liable to pay GST on such transactions.

The notification dated 13th October 2017 by the Ministry of Finance (Department of Revenue) introduced this reverse charge mechanism to bring such transactions involving used goods, waste and scrap purchased from government entities under the ambit of GST. This move was likely aimed at streamlining the taxation process and ensuring compliance with GST regulations.

The reverse charge mechanism applies to the purchase of used vehicles, seized and confiscated goods, old and used goods, waste and scrap by a registered person from the Central Government, State Government, Union territory or a local authority.

Under the reverse charge mechanism, the recipient of the goods, i.e., the registered person purchasing used goods, waste or scrap from government entities, is liable to pay the applicable GST on such transactions.

No, the reverse charge mechanism is specifically applicable to the purchase of used vehicles, seized and confiscated goods, old and used goods, waste and scrap by a registered person from government entities like the Central Government, State Government, Union territory or a local authority.

The primary purpose of implementing the reverse charge mechanism is to ensure compliance with GST regulations and streamline the taxation process for transactions involving used goods, waste and scrap purchased from government entities by registered persons.

The reverse charge mechanism is applicable only to registered persons, i.e., businesses or entities registered under GST, and not to individual consumers or unregistered entities.

With the reverse charge mechanism, the registered person purchasing used goods, waste or scrap from government entities will have to account for the applicable GST in their pricing and invoicing, which may lead to an increase in the overall cost of such goods.

While the notification does not mention any specific documentation requirements, it is likely that registered persons will need to maintain proper records and documentation related to such transactions to ensure compliance with GST regulations and reverse charge provisions.

The reverse charge mechanism, as introduced through the notification, is specific to the Integrated Goods and Services Tax (IGST) under GST. However, similar reverse charge provisions may exist or be introduced for other indirect taxes as well, depending on the applicable tax laws and regulations.