GST law uses the terms supplier and recipient throughout, but the compliance burden is not always on the same person. In most supplies, the supplier charges and pays tax. In reverse charge supplies, the recipient pays tax. Understanding who is responsible in each transaction is essential for invoicing, return filing and credit.
Definitions
Supplier
Section 2(105) of the CGST Act defines supplier in relation to any goods or services as the person supplying the goods or services. It includes an agent acting as such on behalf of the supplier in relation to the goods or services supplied.
The supplier may be:
- A manufacturer
- A trader
- A service provider
- An importer
- A distributor
- An agent
A supplier is the person who makes the outward supply and issues the tax invoice or bill of supply under Section 31.
Recipient
Section 2(93) defines recipient of supply of goods or services as:
- Where a consideration is payable for the supply, the person who is liable to pay that consideration.
- Where no consideration is payable, the person to whom the goods are delivered or made available, or to whom the service is rendered.
- For import of services, the recipient is the person liable to pay consideration to the foreign supplier.
Forward Charge vs Reverse Charge
Forward Charge
Under Section 9(1) of the CGST Act and Section 5(1) of the IGST Act, the tax is payable by the supplier on all intra-state and inter-state supplies of goods or services. The supplier must:
- Charge GST on the tax invoice.
- Collect the tax amount from the recipient.
- Report the outward supply in GSTR-1.
- Pay the output tax in GSTR-3B after utilising eligible ITC.
- Maintain records of supplies.
Reverse Charge
Under Section 9(3), Section 9(4) and Section 9(5) of the CGST Act and corresponding IGST provisions, the recipient is liable to pay tax on specified supplies or specified categories of persons.
In reverse charge:
- The supplier does not charge GST on the invoice.
- The recipient self-invoices the inward supply and pays GST in cash or credit, subject to restrictions.
- The recipient must report the reverse charge supply in GSTR-3B.
- Input tax credit may be available on reverse charge tax paid, subject to Section 16.
Supplies notified under reverse charge include legal services by an advocate, services by a director, goods transport agency services in certain cases, services supplied by a foreign supplier, etc.
Special Obligations
E-Commerce Operators
Under Section 9(5), for certain services supplied through an e-commerce operator, the e-commerce operator is liable to pay tax as if it is the supplier. The actual supplier and operator must comply with notification requirements.
TDS and TCS
- Government departments and notified persons must deduct TDS under Section 51 on supplies above specified limits.
- E-commerce operators must collect TCS under Section 52 on net value of taxable supplies.
Input Service Distributor
An ISD is a distinct person from the supplier but is responsible for distributing credit to branches. It files GSTR-6 and issues ISD invoices under Section 20.
Distinct Persons
Where a business has registrations in multiple States, those establishments are distinct persons. Transactions between them are taxable supplies. The supplying distinct person is the supplier and the receiving distinct person is the recipient, even though they belong to the same legal entity.
Practical Impact on Compliance
The supplier bears the primary obligation to determine taxability, charge correct tax, issue proper invoices and pay output tax. The recipient bears the obligation to verify invoices, claim only eligible ITC, pay reverse charge tax where applicable, and report inward supplies.
If a supplier defaults in depositing tax, the recipient may lose ITC unless the supplier has uploaded the invoice and paid the tax. This creates a practical compliance burden on recipients to verify GSTR-2B and follow up with suppliers.
How Anuj Desai & Associates Can Help
We help clients identify whether they are supplier or recipient in each transaction, manage reverse charge compliance, reconcile GSTR-2B with purchase registers, maintain proper documentation and avoid ITC loss.
Contact Anuj Desai & Associates
Email: office@anujdesaiassociates.com
Phone: 9619456656
Website: https://anujdesaiassociates.com
LinkedIn: linkedin.com/in/ca-anuj-desai-122547230