Exemption from payment of GST on supplies received from unregistered persons- Date of effect thereof

Section 9(4) of the CGST Act, 2017 requires payment of Central Tax in respect of 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. The statutory provision of Section 9(4) of the CGST Act, 2017 is reproduced below:-

Section 9(4):- 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.

2. The Central Government vide Notification No. 8/2017-CT (Rate), dated 28.06.2017 has granted exemption from payment of tax in respect of intra-state supply of goods or services or both received by a registered persons from unregistered persons with the condition that said exemption shall not be applicable where the aggregate value of such supply of goods or services or both received by a registered persons from any or all the suppliers, who is or are not registered, exceeds five thousand in a day. These provisions were made effective from 1.07.2017.

Later on various representations were received by the Government  from the trade with regard to facing difficulty in giving effect to the aforesaid provision. The Central Government  extended the exemption granted by Notification No. 8/2017-CT (rate), dated 28.06.2017 till the 31.03.2018 and provisions restricting the exemption on supplies exceeding five thousand in a day has been omitted vide Notification No. 38/2017-CT (rate), dated 13.10.2017.

3. CONFUSION ON DATE ON WHICH SUCH EXEMPTION OR SUPPLY WILL TAKE PLACE

Section 9 of the CGST Act, 2017 levies a tax on all intra-state supply of goods or services or both. Obviously the term supply is the relevant for the purpose of levy and payment of tax. For ascertaining the point of time at which registered person is required to make payment of GST, we have to examine the time of supply of goods or services or both. Especially in the instant case, supplies received by the registered person form the unregistered person(s) is or are to be discussed.

We will examine the time of supply of goods in respect of supply made by unregistered person where tax is paid or liable to be paid on reverse charge basis. Section 12(3) of CGST Act, 2017 made specific provisions which are reproduced below:

Section 12(3):- In case of supplies in respect of which tax is paid or liable to be paid on reverse charge basis, the time of supply shall be the earliest of the following dates, namely:—

(a) the date of the receipt of goods; or

(b) the date of payment as entered in the books of account of the recipient or the date on which the payment is debited in his bank account, whichever is earlier; or

(c) the date immediately following thirty days from the date of issue of invoice or any other document, by whatever name called, in lieu thereof by the supplier:

Provided that where it is not possible to determine the time of supply under clause (a) or clause (b) or clause (c), the time of supply shall be the date of entry in the books of account of the recipient of supply.

From the  perusal of the above statutory provisions it can be seen that the time of supply shall be the earliest of the following dates namely

  • The date of the receipt of goods – This is the date on which goods were received by the registered persons from the unregistered persons;
  • A residuary provision has also been made with regard to a situation where it is not possible to determine the time of supply under clause (a), (b) & (c) stated above, the time of supply shall be the date of entry in books of accounts of the recipient of supply.

CONCLUSION: At times, advances are also given to the suppliers of the goods and entered in the books of account of the recipient or debited in the books of account of the registered persons. In such situation the time of supply will be before the date of receipt of goods by the registered persons.

In some circle of the trade, it is in the air that exemption granted vide Notification No. 38/2017-C.T (rate), dated 13.10.2017 will take effect from 01.10.2017. In fact it is not so. In view of the discussions made above all supplies of goods or services or both made by the unregistered persons to the registered persons shall be chargeable to tax on the basis of time of supply determined under the provisions discussed above.

Author: R C Verma is the Author of this article and is an Advocate by profession. He is retired from the department of Central Excise & Customs. The Author can be reached at advrcverma@gmail.com/Mobile:09810525780 

Disclaimer:

The entire contents of this article is solely for information purpose and have been prepared on the basis of relevant provisions and as per the information existing at the time of the preparation.. It doesn’t constitute professional advice or a formal recommendation. The author has undertook utmost care to disseminate the true and correct view and doesn’t accept liability for any errors or omissions. You are kindly requested to verify & confirm the updates from the genuine sources before acting on any of the information’s provided herein above

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