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: 1

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

  1. 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.

  2. 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)

  3. 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

  4. 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

  5. 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

  6. Manish Agarwal says:

    if a delear registered in GST and exclusively deals in exempted goods (i.e.Food grains,pulses) & pay freight,rent,unloading charges then is RCM applicable.

  7. Anita Kapoor says:

    i am paying rent for my shop. 16000/ per month. am i liable to pay UNDER RCM.

    • Neeraj Kumar says:

      Yes You Liable to Pay Rcm and Take Itc

    • FCA Manish J. Agrawal says:

      Ofcourse Yes, Anitaji…!! You will get Credit for the Same under RCM but as following:-
      1. Make a RCM Invoice atleast by Month end, Pay RCM Tax (if Possible Midnight of Every Last Day of the Month) to avail & utilise the Same in the Same Month’s Return, because It will always be claimed in the Subsequent Month from the Month of Payment.
      2. Upload the Same in GSTR-1 as the Invoice is raised on yourself.
      3. Mark the Entry Is RCM Applicable >YES
      4. You have to Pay the RCM Liability in Cash(over the Counter)/Bank Mode… Otherwise it will Not reflect in your electronic cash Ledger
      5. Since it is a Shop rent, obvious it has been ‘use’ in business, therefore Availment & Utilisation is Possible
      6. Last but Not The Least, if you have Tax-Audit turnover in Last Financial Year, Don’t forget to deduct the TDS u/s 194I onrent being Paid to landlord.
      Hope you are clear in each aspect
      FCA Manish J. Agrawal RAIGARH

  8. vanitha says:

    in case of monthly rent paid exceeding 10000 via cheque by registered dealer to an unregistered dealer .Is reverse charge mechanism applicable?

  9. Dipesh says:

    Commission given to unregistered agent RCM applicable???

  10. Harsh says:

    Hello Sir,
    I am a Soyabean/Raw Cotton merchant..& purchased Soyabean/Raw Cotton from farmers through Mandi auction.. Am I liable to pay tax under reverse charge basis (Since farmers are unregistered person)

  11. ARJUN KUMAR says:

    dear sir, i just want know that which expenses chargeable under RCM(9(4)) for further profit & loss adjustment purpose .

    PLEASE SHARE WITH ME LIST OF EXPENSES ..?

  12. Rohan Kolse says:

    Is limit of Rs 5000 for Payment or Invoice. Can i make payment of Rs 4000 daily for 2 days for my purchase from URD of one bill of Rs 8000?

  13. P Khan says:

    Kindly explain on limit of rs 5000. I mean if i buy goods from two unregistered dealer of rs 4000 each then what should I have to do as per section 9(4)

    • Narinder Handa says:

      Rs. 5000/- limit for purchases from unregistered dealers is in Total amount of purchases/expenses per day, whether from one or two dealers, if exceeds reverse charge GST has to be paid on full amount.

  14. MADAN MOHAN SONI says:

    We are a transport contractor, we used to hire market vehicles from unregistered dealer.
    Against our Invoices, consignee/consignor deposit GST on reversal tax.
    Point is:- Will we have to deposit GST on services received from unregistered dealer.
    Incase, we deposit GST, Against our Invoice, what amount of GST will deposit by our client. (consignee or consignor)

    • Narinder Handa says:

      Transporters are exempt from Gst compliances.
      Consignee will deposit 5% as a reverse charge on your invoice. You can not charge any gst. and there is no input credit to the consignee on 5% paid as reverse charge it is his cost.
      any further question welcome

      • Ranjith says:

        Hi sir am an transporter bi had 20 own vehicle am giving my vehicle for MNC company for hireing materials from one place to another I had registered under GST asking…my annual pay is upton75 laks I had an big confusion is if am invoicing I had to put 5% or 18% tax to company ….ie is suppos if do business for 1lak my total amount is one lak five thousand or one lak eighteen thousand …

  15. M K Maheshwari says:

    The limit of Rs.5000 is for supply received with any unregistered person or more in a day. It mean if consolidated supply is more than 5000 from two or more suppliers then it will attract RCM even if purchase from one unregistered dealer is less than Rs.5000

  16. VK says:

    the above notification is issued under CGST Act Now question is no notification is issued under SGST Act. . what will happen when we purchase goods from SGST Act.

    only need clarification on SGST about Rs.5000/- exemption .
    for e.g if we purchase tea , on that gst is 5% so we have to pay only 2.5% to State or 0%

  17. Meenal aggarwal says:

    the above notification is issued under CGST Act Now question is no notification is issued under SGST Act. . what will happen when we purchase goods from SGST Act

  18. Joshi says:

    GOVERNMENT OF INDIA
    MINISTRY OF FINANCE
    (Department of Revenue)
    Notification No.8/2017-Central Tax (Rate)
    New Delhi, the 28th June, 2017
    G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 11 of the
    Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being
    satisfied that it is necessary in the public interest so to do, on the recommendations of the
    Council, hereby 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 (12 of 2017):
    Provided that the said exemption shall not be applicable 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, exceeds five thousand rupees in a day.
    2. This notification shall come into force with effect from the 1st day of July, 2017.

  19. pratik sethi says:

    hello sir.. i m a grain merchant.. purchase grains from farmers through Mandi auction.. M I liable to pay tax under reverse charge basis( bcoz farmers are unregistered person)

  20. Vimal Shah says:

    Dear Mr. Ashish,

    What is the source of this information

    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.

  21. Udit says:

    I’m a trader of goods. I am taking the delivery of goods from my supplier and Directly sells to my consumer primises. The transporter is paid by me for his cartage and labour of both loading and unloading. For this service the transporter can not generate any invoice on me Or any recipet of cartage paid by me. So for his services I’m liable to pay under RCM or not and how much. If so, how can I get credit on it.

  22. nirakh says:

    Cenvat on RCM paid on car hire was not available. Is it available on implimentation of GST?

  23. Padmakumar V A says:

    Thanks for the article. Can you please make it clear where we can see the Rs.5000/- threshold communicated by CBEC in their website.

  24. KAMAL JAIN says:

    Dear Mr. Ashish,

    What is the source of this information

    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.

  25. ashutosh holani says:

    does this have any validity with any circular

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