Forward Charge Under GST: How the Supplier Collects and Pays Tax
This article explains the forward charge, the ordinary method of GST collection in which the supplier charges the tax and pays it to the Government, and shows how it differs from reverse charge and how it links to registration, invoicing, time of supply, payment, e-invoicing and input tax credit.
It matters to practitioners because a defect at the supplier's end, such as a wrong rate, wrong place of supply or late reporting, affects the supplier's liability and also the recipient's credit.
Where the Liability Arises
Section 9(1) of the CGST Act, 2017 levies central tax on taxable intra-State supplies, on the value determined under Section 15, at the notified rates. Section 5(1) of the IGST Act levies integrated tax on inter-State supplies. Unless the law shifts the liability, the supplier is the person liable to pay the tax.
The shift occurs only in two situations:
Section 9(3), which covers notified categories of supplies on the recommendation of the GST Council; andSection 9(4), which covers specified supplies from unregistered suppliers.
Sections 5(3) and 5(4) of the IGST Act contain the matching provisions. Forward charge is therefore the default, and reverse charge applies only where the statute specifically provides for it.
In Union of India & Anr. v. Mohit Minerals Pvt. Ltd. through Director, (2022) 10 SCC 700, which dealt with reverse charge on ocean freight, the Supreme Court considered the basis on which liability is moved to the recipient. The case is a reminder that the statutory basis for any such shift has to be identified before tax is charged or paid on that footing.