Reverse Charge applicability on unregistered supplies for the period July 2017 to Oct 2017
The GST law was initially drafted in such a way that GST shall also be collected on supplies made by unregistered suppliers, hence brought the provision of Reverse Charge Mechanism on supplies received from unregistered suppliers w.e.f 01.07.2017 with an exemption limit of Rs.5000 (vide Notification No. 8/2017-Central Tax (Rate) dated 28.06.2017)
Later for reasons that the Large/Medium taxpayers were reluctant to do business with such unregistered suppliers to avoid compliance of this RCM, cumbersome calculation methodology and huge time required for tax team of taxpayers, the government decided to defer the same till 30.09.2019 vide Notification No. 38/2017-Central Tax (Rate dated 13.10.2017. However, the same was rescinded in January 2019.
Now the question under review is whether this exemption applicability will have prospective or retrospective effect, i.e whether this shall applicable w.e.f 1st July 2017 or 13th October 2017.
Lets analyse Notification No. 38/2017-Central Tax (Rate dated 13.10.2017 which gave exemption for all registered suppliers for complying with this RCM requirement. This notification was issued to amend the principal Notification No. 8/2017-Central Tax (Rate) dated 28.06.2017 by deleting the proviso which provided for Rs.5000 exemption and inserting the blanket exemption.
It is pertinent to note that S.No 2 of the principal notification which provided for the date of applicability of RCM was not amended which still remained to be effective from 1st July 2017. Also, the omission was made without any saving clause by explicitly mentioning that it shall have a prospective amendment from the date of notifying the amendment notification i.e 13th Oct 2017.
It is not necessary that a provision can be given retrospective effect only if the language expressly provide so. Alternatively, a provision can be given retrospective implication even when the language does not expressly provide so. The intention of the government to expressly not mention the retrospective date of applicability may be because of hesitance to refund the assessees who have already paid RCM for this intermittent period (1st July to 12th Oct 2017).
Hence, I am of the view that the exemption applicability of RCM provided in Notification No. 38/2017-Central Tax (Rate dated 13.10.2017 shall be w.e.f from 01.07.2017 and not from 13th October 2017 as the amendment was made to principal Notification No. 8/2017-Central Tax (Rate) dated 28.06.2017 without any prospective effect. Therefore, there shall not be any requirement to pay tax on supplies received from unregistered suppliers from 01.07.2017.
Author Bio
I have read the article written by learned CA Kamala Palaniappan that the RCM charges are not applicable w.e. f. 1-07-2017 as per Notification No. 38/2017 dated 13-10-2017. In my view, it is a wrong assumption. The Notification dated 13-010-2017 deployed the words, ” hereby makes the following amendment” confers the meaning that it comes to effect w.e.f. the date of Notification, that is why there was no mention of prospective or retrospective date of effect. If it considers the views of the learned CA that “The intention of the government to expressly not mention the retrospective date of applicability”, then there will be no effect of the Notification and it cannot be implemented without date of effect. So the effective date of the amendment to the Notification is 13-10-2017. The Revenue authorities have been acting accordingly.