Reversechargeoninvoices
Normally you collect the tax and pay it over. Under reverse charge your customer does — and the invoice has to say so on its face.
5 minute read · Updated
Short answer
Reverse charge means the recipient of a supply is liable to pay the GST directly to the government instead of paying it to the supplier. It applies to specified categories of supply and to certain supplies from unregistered persons. When it applies, the supplier does not collect tax on the invoice, and the invoice must state that tax is payable on a reverse-charge basis. A tax invoice has to declare its reverse-charge position either way — stating “No” is part of the required particulars, not an optional extra.
The normal case, and the reversed one
| Forward charge | Reverse charge | |
|---|---|---|
| Who collects the tax | You, on the invoice | Nobody — you don't charge it |
| Who pays the government | You | Your customer |
| Invoice shows tax | Yes, itemised | No tax charged |
| Invoice must state | Reverse charge: No | Reverse charge: Yes |
The declaration is a required particular of a tax invoice. An invoice that simply omits the field has not answered a question the reader needs answered, which is why the safest habit is to state it explicitly in the notes on every invoice you raise.
When it applies
Reverse charge is not something you elect into. It applies where the law says it applies, in two broad situations:
- Notified categories of supply — a specific list of goods and services where the liability is placed on the recipient, updated by notification.
- Certain supplies from unregistered persons to registered ones, in the circumstances the rules specify.
The notified list changes, and whether a given supply is on it is a question of classification rather than of judgement. If you think reverse charge might apply to something you supply or receive, that is a question for your accountant before you raise the invoice, not after.
What it means practically
If you are the supplier under reverse charge, you raise a tax invoice showing the taxable value with no tax added, and you state that tax is payable on a reverse-charge basis. You are not out of pocket; you simply never handled the tax.
If you are the recipient, you pay the tax directly and, subject to the ordinary conditions, may be able to claim it as credit. The obligation sits with you regardless of what the supplier's invoice says, which is the part that catches people — a supplier's omission does not transfer the liability back to them.
The reference
GST invoice format
The fields a GST tax invoice must carry under Rule 46, when to split the rate into CGST and SGST instead of IGST, and how long you have to issue one.
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Questions people ask
It means the recipient, not the supplier, is liable to pay the GST directly to the government. The supplier raises the invoice without charging tax and states on it that tax is payable on a reverse-charge basis. It applies only where the law places the liability that way — it is not something either party can choose.
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