The reverse charge mechanism, now a part of the Goods and Services Tax (GST) regime, has led to considerable debate on its need and its effectiveness. It is instructive to note that the reverse charge as a mechanism has existed in service tax since a long time and several services were added to the list of services attracting reverse charge every year during the Union Budget. Similarly, the VAT legislation in many states had provisions dealing with purchases by registered dealers from unregistered dealers. In that sense, the reverse charge provisions in GST are not exactly a tax innovation, but some key aspects pose challenges for business. At a broad level, the onus of charging, collecting and depositing GST on all supplies of goods and services lies with the supplier. However, in a few cases, it is mandatory for the recipient of the supply to deposit the tax with the government. The supplies covered by the reverse charge mechanism in GST are broadly categorised as general services, specific services and specified goods. General services such as services by a goods transport agency (GTA), legal services, director of a company, services by insurance agents to insurance companies, services by recovery agent to a bank or NBFC, etc, are under reverse charge. In addition, specific services such as sponsorship services, services provided by government arbitral tribunal, services by artistes, authors, etc, are also now covered when these are provided to specified persons. Further, supply of goods such as cashew nuts, tendu leaves, tobacco leaves and silk yarn to registered persons would also attract reverse charge. There are a few issues that businesses are facing, which need redressal as these can significantly impact GST and in meeting some of its objectives. The first issue is that of a reverse charge being made applicable on purchases from unregistered dealers by registered dealers. This provisions appears to emanate from the government's desire to cover the entire value-chain in GST and not have any segments that are not covered. Several suppliers of taxable goods and services may not have rightly obtained registration as they are below the threshold limit of Rs 20 lakh. However, the moment such a supplier supplies taxable goods or services to a registered person, the recipient is required to pay the GST applicable to such goods or services in terms of Section 9(4) of the CGST Act. This means that the threshold exemption is essentially meant only for supplies of goods and services from one unregistered person to another unregistered person, which appears to be an unintended consequence. Further, the language used in Section 9(3) and 9(4) indicates that the recipient of goods and services is not only required to pay the tax but would also be treated \u201cas if he is the person liable for paying the tax\u201d and \u201call provisions of the CGST Act shall apply\u201d accordingly. This means that the recipient is required to ascertain the classification and rate applicable to the goods supplied as this is normally done by the supplier. Further, if the classification indicates that the goods or services are exempt or nil rated, then the recipient need not pay tax under reverse charge. Similarly, if the recipient is of the view that the applicable rate of tax is 12%, he would pay reverse charge at 12%.The classification done by the recipient may be challenged by the tax authorities later as it is mentioned that all the provisions of the CGST Act would apply as if the recipient is the service provider. Another issue that comes up in the context of reverse charge is the ability of the recipient to take credit of the tax paid by him on behalf of the service provider. In case of a forward charge transaction (where the supplier collects the tax from the recipient and deposits the same with the Government), the recipient is permitted to take a credit of the tax paid only after the supplier has deposited the tax with the government. In case of dealings with smaller vendors, some buyers may have doubts on whether the supplier would be diligent in depositing the tax and the failure of the vendor in depositing the tax would lead to a denial of credit in the hands of the buyer despite the buyer paying the tax to the supplier. This may lead to a situation where registered dealers may not insist that small vendors dealing with them should be registered. In such a situation, some buyers may prefer paying GST on a reverse charge basis as it gives them complete control on the payment of the tax and the consequent credit. This may be contrary to the stated objective of encouraging more small vendors to register and may actually end up compelling more registered businesses to prefer paying a reverse charge despite the increased compliances. Overall, therefore while the objective of reverse charge is to ensure that registered tax payers dealing with unregistered taxpayers pay tax on their behalf, this could lead to a several unintended consequences making it a mixed bag.