In the present scenario, the reverse charge mechanism is applicable in service tax for services like Insurance Agent, Manpower Supply, Goods Transport Agency, etc. Unlike Service Tax, there is no concept of partial reverse charge. The recipient has to pay 100% tax on the supply
• Must be registered under Value Added Tax (VAT).
• Account for Tax on the value of the Concerned Goods or Concerned Services
• Keep proper records.
• Invoice and other documents should be maintained to substantiate the tax payment and input tax claim
• Remit VAT and claim input if eligible
• All supporting documents shall explicitly indicate that the transaction is on reverse charge basis.
Practical Illustration
Suppose, a VAT registered establishment in UAE imports goods worth AED. 10,000 from UK. Here, the establishment in UAE, being a registered importer, is required to pay VAT @ 5% on AED 10,000 that is AED 500 to the tax authority and can claim input tax on the same.
