Double Taxation Under GST

Reverse Charge u/s 9(4) of CGST Act, 2017

“The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.”

As per Section 9(4) of CGST Act, 2017 if taxable person procures goods or services from unregistered person then recipient is subject to pay tax under reverse charge which is subject to double taxation.

For eg:

A company purchases mineral water bottle from an unregistered person, then company has already paid all taxes on MRP basis on the said water bottle and further it is liable to pay tax under RCM as per section 9(4) /5(4) of Reverse Charge for which even credit is not allowed U/s 17(5) of CGST Act, 2017.

Issue:

(i) Practically procurement of goods from unregistered suppliers could not be avoided wherein the limit of Rs.5,000 per day is very less.

(ii) Recipient is required to identify the HSN Code and rate of taxable goods or services and in few cases compensation cess is also liable to be paid e.g Mineral water bottle.

(iii) Tax has already being paid on such transaction leading to cascading & compliance of taxation.

Suggestion : It is suggested that :

(i) Reverse charge compliances U/s 9(4) be deferred for the MSE Sector having turnover of less than Rs. 2 Crore in a year / not subject to audit under U/s 35 of CGST Act, 2017

(ii) Reverse charge mechanism U/s 9(4) be liable to paid at a uniform rate say @ 18% only instead of HSN Code wise as credit of the same is available to the assessee and per day limit be enhanced to 10,000 for next one year till July, 2018.

(iii) Credit U/s 9(4) be available in all cases even for goods or services on which credit U/s17(5) is restricted one as it leads to cascading of taxes on which unregistered supplier has already paid the taxes at the time of procurement of goods from his immediate registered supplier.

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DISCLAIMER:

The information cited in this article has been drawn from “Suggestions on GST Implementation Issues By ICAI on 28th September, 2017″. While every effort has been made to keep, the information cited in this article error free, team GST Cornor does not take the responsibility for any typographical or clerical error which may have crept in while compiling the information provided in this article.

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