The Central Government has issued Exemption Notification No. 8/2017-CT(Rate) dated 28-06-2017 giving relaxation to Registered Persons under GST from major (and draconian) compliance required under section 9(4) of the CGST Act, 2017.

As per Section 9(4), every registered person (including composition dealer u/s 10) is required to pay GST on every inward supply (purchase) of goods or services from any unregistered person. The implication of this provision is that even if a registered person book expense of Rs. 10 say for tea/snaxs in his accounts, he is required to pay tax on the same under reverse charge mechanism. The entire trade & industry has been vehemently protesting against this provision because of enormous compliance burden which has the potential to stop buying goods or procuring services from unregistered persons who may be a very small local vendor!!

To overcome this difficulty, the above notification issued u/s 11(1) exempts intra-State supplies of goods or services or both received by a registered person from any supplier, who is not registered, from the whole of the Central Tax leviable thereon under sub-section (4) of section 9 of the Central Goods and Services Tax Act, 2017. It must be noted that exemption from payment of central tax under section 9 (4) is not available in case where the aggregate value of such supplies of goods or service or both received by a registered person from any or all the suppliers, who is or are not registered, exceed Rs. 5,000 in a day. The said exemption notification is effective from 1st July, 2017.

In simple words, if the total value of inward supply of goods or services or both in a single day from one or more unregistered persons exceed Rs. 5000, then the registered person has to pay tax on total value under reverse charge. It is pertinent to note that the limit is not per supplier but from all such suppliers during the day. That means, if the value of inward supply from unregistered persons in a day is say Rs. 5100, then tax is payable on total Rs. 5100 and not on the excess i.e. Rs. 100.

It must be noted that the above condition of INR 5000 has been omitted, vide notification no. 38/2017 – Central Tax (Rate) dated 13th October, 2017, and such omission was made effective till 31st March, 2018. The said omission has been extended from 31st March, 2018 till 30th September, 2018, vide notification no. 12/2018-Central tax (Rate) dated 29th June, 2018.

The government has further extended the above referred omission till 30th September, 2019 through notification no. 22/2018-Central Tax (Rate) dated 6th August, 2018.

Thus till 30th September, 2019 the entire value of intra-state supplies of goods or services or both received by a registered person from any unregistered supplier shall be exempt from the whole of the central tax leviable under section 9 (4) of the Central Goods and Service Tax Act, 2017.

(Republished With Amendments)

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June 2021