All about Section 9(4) of CGST Act, 2017 (RCM)

Section 9(4) of CGST Act, 2017

As we all know Liability to Pay tax by a Recipient under Reverse Charge Mechanism is governed by Sections 9(3) and Section 9(4) of the Central Goods and Service Tax Act, 2017. At the very beginning Section 9(4) of The Central Goods and Services Tax Act, 2017 was :

“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.”

On 28^th of June, 2017 through Notification no. 8/2017- Central Tax (Rate) the government exempted the tax payable on RCM under this section. On its 1^st proviso the exemption limit was constricted to Rs. 5,000/- of aggregate value of supplies from any or all the suppliers within a day.

On 1^st July, 2017 Notification No. 8/2017- Central Tax (Rate) came into force.

On 13^th October, 2017 through Notification No. 38/2017 Central Tax (Rate) the 1^st proviso of Notification No. 08/2017 Central Tax (Rate) was omitted. The exemption was made applicable for all registered person up to 31^st March, 2018.

On 23^rd March, 2018 Notification No. 38/2017 Central Tax (Rate) was amended through notification No. 10/2018 Central Tax (Rate). The exemption period was extended upto 30^th June, 2018.

On 29^th June, 2018 Notification no. 12/2018 Central Tax (Rate) was passed amending Notification No. 10/2018 Central Tax (Rate). The period of exemption was further extended upto 30^th September, 2018.

On 06^th August, 2018 the period of exemption as declared through Notification no. 12/2018 Central Tax (Rate) was further extended to 30^th September, 2019.

On 29^th August, 2018 The Central Goods And Services Tax (Amendment) Act, 2018 (No. 31 Of 2018) was passed where the amendment of the Section was made through substitution of the whole as –

“The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, 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 such supply of goods or services or both.”.

On 29^th January, 2019 Notification No. 08/2017 Central Tax (Rate) was rescinded, but the things done or omitted to be done before such rescission was kept unaltered.

Again Notification No. 2/2019 Central Tax was also issued on that date for bringing amendment as per The Central Goods And Services Tax (Amendment) Act, 2018 (No. 31 Of 2018) in force from 1^st February.

On 1^st February, 2019 The Central Goods And Services Tax (Amendment) Act, 2018 (No. 31 Of 2018) and Notification No. 8/2017 Central Tax (Rate) got rescinded.

On 29^th March, 2019 through Notification No. 07/2019 Central Tax (Rate) the Government notified that Section 9(4) will be applicable for “Promoters” only for the supplies namely –

1. Supply of such goods and services or both [other than services by way of grant of development rights, long term lease of land (against upfront payment in the form of premium, salami, development charges etc.) or FSI (including additional FSI)] which constitute the shortfall from the minimum value of goods or services or both required to be purchased by a promoter for construction of project, in a financial year (or part of the financial year till the date of issuance of completion certificate or first occupation, whichever is earlier) as prescribed in notification No. 11/ 2017- Central Tax (Rate), dated 28th June, 2017, at items (i), (ia), (ib), (ic) and (id) against serial number 3 in the Table, published in Gazette of India vide G.S.R. No. 690, dated 28th June, 2017, as amended.

2. Cement falling in chapter heading 2523 in the first schedule to the Customs Tariff Act, 1975 (51 of 1975) which constitute the shortfall from the minimum value of goods or services or both required to be purchased by a promoter for construction of project, in a financial year (or part of the financial year till the date of issuance of completion certificate or first occupation, whichever is earlier) as prescribed in notification No. 11/ 2017- Central Tax (Rate), dated 28th June, 2017, at items (i), (ia), (ib), (ic) and (id) against serial number 3 in the Table, published in Gazette of India vide G.S.R. No. 690, dated 28th June, 2017, as amended.

3. Capital goods falling under any chapter in the first schedule to the Customs Tariff Act, 1975 (51 of 1975) supplied to a promoter for construction of a project on which tax is payable or paid at the rate prescribed for items (i), (ia), (ib), (ic) and (id) against serial number 3 in the Table, in notification No. 11/ 2017- Central Tax (Rate), dated 28th June, 2017, published in Gazette of India vide G.S.R. No. 690, dated 28th June, 2017, as amended.

Thus in the present scenario Section 9(4) is only applicable for the “Promoters” who are engaged in Supply of the above mentioned services, without any exemption limit.