Ashish Kumar Madnawat

A big Relief to Dealers who are not registered under GST regime. Section 9(4) which is said to be a draconian section in GST has created a fuss all over the industry.

As per Section 9(4) of CGST act 2017 any Supply of goods or service from an Unregistered supplier to a Registered supplier will cast liablity to Pay GST to the Government in the form of RCM I.e Reverse charge mechanism.

Moreover, As per Section 12 of CGST Act 2017 , Time of Supply of goods in case of RCM shall be the earliest of :

  • Date of Receipt of Goods
  • Date of Payment
  • 30 days from the date of issue of invoice
  • Date of entry in books of account in case the above are not possible to ascertain.

However , As per Section 13 of CGST act 2017 , time of Supply of service in case of RCM shall be earliest of the following :

  • Date of Payment
  • 60 days from the date of issue of invoice
  • Date of entry in books of accounts if the above are not possible to ascertain.

The Service Receiver i.e Registered Person under GST is require to issue taxable invoice on its own i.e Self invoicing under section 31(3)(f) of CGST act 2017.Self invoicing is required in order to avail Input tax credit on the Tax paid to government. As Possession of Invoice is a basic element in order to claim ITC of Tax paid against any supply.

Not only the compliance of raising the invoice (Self invoicing) would increase, working capital would also get block which is the key requirement of Every business.There will not be any cost as such to the Registered dealer because the Tax paid in the current month can be availed in the following month.

It was found to be a negative provision  and has created a lot of fuss-

1. Registered dealer would purchase goods or services from registered Dealers instead of Unregistered dealers as the former would be prejudice to there intrest. Less compliance and zero cost.

2. This was also a setback to the URD’s whose turnover limit doesn’t exceed 20 Lakhs thereby not legally required to get registration. In order to run there business they will have to get themselves registered under GST voluntarily otherwise no registered Dealer would dealt with them in any way.

The Government has made its intentions clear and has decided to exempt supplies worth Rs 5000/- per day from any Unregistered dealer which means Supplies above 5000 would require Registered Person to comply with the provisions as specified under GST law. For the supplies above 5000, A monthly consolidated bill can be issued.

Setting an exemption limit in this regard is a welcome move from the government.

Views expressed are personal.

Name of author : Ashish Kumar Madnawat

Author Bio

Qualification: Student - CA/CS/CMA
Company: TAX BEEPS
Location: Greater Noida, Uttar Pradesh, IN
Member Since: 29 Jun 2017 | Total Posts: 2

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50 responses to “Reverse charge mechanism under Section 9(4) of CGST Act 2017”

  1. Pulkit Vats says:

    Dear Sir,
    Please tell,
    I have purchase Rs.8500/- from unregistered person and tax under RCM of RS.85000/- @5%.

    WHEN I MAKE RCM INVOICE IN FAVOUR OF CASH OR UNREGISTERED PERSON NAME

  2. aftab ali says:

    I am a Govt. department manufacturing uniforms for Army. Factory have GSTIN. at the time of court cases factory engage Adovcate and paid him fees. So factory should pay GST under RCM for those advocate fees.

  3. Deepak says:

    Hi

    Iam Giving Consultancy to one of the company now they are asking me to give GST invoice, now when I read section 9/4 there is clearly written Goods & Service is both return chargeable for unregistered vendor, please help me its correct or not because they asking me to give HSN code for my servises.

    Regards
    Deepak

  4. Hima says:

    I M tenant in a building. My owner did not register for GST. So I have to pay GST under reverse charge mechansim. So as deferment is now enforced, there is no need for me to pay?

    • bhuvan-article assistant says:

      gst on rent is applicable only when the rent amount exceeds 2000000. firstly you have to ask that rent is exceeded 20L.residential property is exempt from tax. only commercial property is taxable.

  5. Mukesh Kumar Jain says:

    I am the proprietor of my firm and engaged in the business of Dyes & Chemical and also have the GSTIN. Turnover of the firm 3-4 Crore. Now my question is that I am getting a rent of Rs 780000/- per year for my commercial property from a registered dealer of GSTIN. Will I liable to charge GST on this rent or the tenant will pay RCM on this rent.

    • TPr. M.GANESAN says:

      yes, aggregate turnover limit for registration under GST act is Rs.2000000/- and (1000000 for the eastern states), in your case you have already registered for a business vertical, if you are running the said business as individual capacity (proprietor) you are liable to include the service turnover (shop rent) also since the aggregate turnover is determined on PAN basis.

  6. B.DHARMARAJU says:

    In our Organaiton , we give advance amount to employees for local purchases and Petty Expenses. will RCM attract on this petty expenses.
    These may be reimbuesement but not for his personal travel , food etc, purely petty exp related to our company.

    pls reply.

    • TPr. M.GANESAN says:

      My opinion is If the inward supply or services are supported with registered persons invoice the said transaction shall not liable to pay reverse tax by the firm since only the monetary transactions have been happened (advance and repayment ), the purchases by the employees are not in furtherance with business at his own.

  7. JITENDER KUMAR says:

    Dear Sir

    Our vehicle repair unregistered dealer from inter state , RCM (Inter state aplicabele ?)

    If Inter state vehicle repair in invoice SGST +CGST Charged how treat (input credit SGST+CGST from Inter state repair parts)

    • TPr. M.GANESAN says:

      you have received a interstate service on repairing of your vehicle which is using for business activities my opinion is though it is a service you have to obtain IGST invoice and claim ITC, since it is a compo service and the benefit of the service is fulfilled only on the run of the vehicle
      See sub section 4 of section 5 of IGST act.

  8. nani says:

    sir
    i am purchased the commodity invoice value the 125000/- but they are the including the transport charges500/- but how to show up the gstr-1

  9. deepanshu bansal says:

    My uncle have rented their property to Muthoot Finance ltd. Muthoot always deduct TDS on rent @ 10% which is shown in 26AS but from 1 July 2017 Muthoot starts deducting GST @ 12% but my uncle annual service is upto only 6,00,000 so my question is

    1. How to claim back the deducted GST ?

    2. My uncle need to register under GST?

    3. Why they are deducting the GST onbehalf of my uncle without any notice?

    • FCA Manish J. Agrawal says:

      Mr. Deepanshu… Probably in the Lease Agreement Your Uncle Admitted to Bear the Service Tax/Indirect Taxes Cost whatever emerge on Rent. The Same Clause in Rent Agreement is Being Mis-Utilised by Muthoot Finanace Limited.
      Let me Clear you few things about GST:-
      1. No One can Compel the Other to take Registration if he/she is Below Thresold Limit of 20 Lacs, or otherwise Not Require to Pay Tax(as like in case of Casual Taxable Person/Reverse Charge Mechanism etc.)
      2. No One Can deduct Tax of RCM from unregistered Person, because if he pays RCM Tax he will get Credit of the Same in subsequent Month. He will not be in Loss on Account of TAx element … Only Loss is Working Capital Blockage for a 1 month.
      3. Moreover, Muthoot Should Not Deduct Tax on tax i.e. I.T. TDS on G.S.T. Element i.e. 10% of 18%
      Hope you are much clear Now About Things

  10. Nitesh GS says:

    Hello
    I am paying 35000 rent per month as commercial rent ..the owner is URD. If I have to do self invoicing for reverse charge mechanism, how should I charge that. Is it CGST, IGST or SGST.

    The tenancy is in Bangalore and the owner is in Mumbai

    • kunal prasad says:

      here we will see place of supply and the place of supplier you pay rent for the permises located in bangalore even though owner is in mumbai hence you will charge cgst and sgst

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