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Reverse charge under gst (few cases)

Nisha Yadav (Accounts exe) (455 Points)

19 June 2017

We all know that reverse charge GST will be apllicable when a registred supplier purchae goods or services from unregistered supplier. But what about in following case ?

When a registered person pays rent to owner who is not registered ?
When a registered person buys stationery for office purpose from unregistered person?
when a registered person hire a labour

is RCM applicable in these cases?

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26 Replies

CS Nisha Nishit (Practicing Company Secretary) (326 Points)
Replied 19 June 2017

From my point of view,

RCM will be applicable on the goods or services recieved from unregistered supplier, in the course of furtherance of business.

When a registered person pays rent to owner who is not registered ? Yes if it is a commerical property used for furthernace of business.
When a registered person buys stationery for office purpose from unregistered person? Yes
when a registered person hire a labour ? Yes

Nisha Yadav (Accounts exe) (455 Points)
Replied 19 June 2017

Thanks

but what if in case no 1 .. I have a office in my mother house and paying rent to my mother?

1 Like

CA Saloni (Manager-Accounts & GST Consultant) (5124 Points)
Replied 19 June 2017

Madam,

In second case, RCM is applicable.

In third case, if you hire labour from an agency and it is registered, then RCM not applicable

rocky (accountant) (947 Points)
Replied 19 June 2017

1)“Reverse charge’’ means the liability to pay tax by the recipient of supply of goods or services

GOODS MEANS GOODS WHICH YOU PURCHASE AND SALE.

STATIONARY ITEMS ARE NOT GOODS , IF YOU DONT RESALE THAT.

SO NO RCM APPLICABLE.

2)RCM IS NOT APPLICABLE ON RENT

Nisha Yadav (Accounts exe) (455 Points)
Replied 19 June 2017

Dear Rocky kindly read RCM law Carefully

PRABIR PAUL (*****Accountant***** Never insult to any person for any kind of lack of knowledge or misread.) (1443 Points)
Replied 19 June 2017

I think section 9(4) of CGST ACT will be very hardship for all person if it is true that reverse charge is applicable all type of expenses.... As it liable to pay reverse charge on all type of expenses..

During the year some company declare fake expenses to reduce profit... Now that will be very hardship.....

Here Point no. 3 about labour I think not applicable because labour may consider wages and wages may consider as salary..

So I think here reverse charge is not applicable on salary...

But if labour has been given by an unregistor supplier then reverse charge applicable...

PRABIR PAUL (*****Accountant***** Never insult to any person for any kind of lack of knowledge or misread.) (1443 Points)
Replied 19 June 2017

Maximum people saying that reverse charge is applicable on all type of expenses if purchase it from unregistered dealer but I don't believe it....

Why and How a person pay reverse charge on conveyance expenses, Milk, Tea or any other small type of expenses?

I think here Mr. Rocky is correct only the topic of "Goods' as same imagination I have....

If a product is not your ITEM(PURCHASE AND SALE) then you don't need to pay reverse charge.....

But ITC available on all cases....

Nisha Yadav (Accounts exe) (455 Points)
Replied 19 June 2017

A registered person would be required to pay GST on all supplies received by it from un registered person.

And supplies inculde :

Sale, Transfer, Barter, Exchange, Licence, rental

So i don think it is only for goods

need further advice from expert

2 Like

CS Nisha Nishit (Practicing Company Secretary) (326 Points)
Replied 19 June 2017

I have a office in my mother house and paying rent to my mother?

GST would be applicable on RCM basis as it is a taxable supplies.

Explaination :As per section 9(4), supply of taxable goods or services or both from unregistered supplier to registered supplier, on RC basis, recipent will be liable to pay tax in relation to such supply.

if you hire labour from an agency and it is registered, then RCM not applicable

If you just hire a labour, and has employer and employee relation, GST is not applicable as it is neither a services or goods as per Sch III

3 Like

Nisha Yadav (Accounts exe) (455 Points)
Replied 19 June 2017

Thanks Ms. Nisha for your reply.

RCM concept is not easy to apply. Now we have to pay RCM GST on indirect exp like . Stationery, Conveyance, Rent

Please God help us :(

1 Like

CS Nisha Nishit (Practicing Company Secretary) (326 Points)
Replied 19 June 2017

GST regime will be self compliant system.

In this scenario, almost all the registered dealer will prefer to get their supplies whether it be goods or services from registered persons. Therefore, the supplies of unregistered suppliers will be effected.

Indirectly it is making all unregistered suppliers to get themselves registered under GST to avail the benefits and to retained their registered customers.

1 Like

harsh gupta (harsh) (22 Points)
Replied 20 June 2017

I think Nisha Yadav is right
because reciever is a ultimate consumer of such goods on which supplier required to pay gst but he is not registered under gst then RCM will be applicable.
So reciever would be require to pay GST either he is doing trading or not.

rocky (accountant) (947 Points)
Replied 20 June 2017

dear nisha yadav, cs nisha , saloni ji
i am confused about this topic, but still i believe that RCM on business expenses is not possible
lets understand this with an example -
i am buying red label tea for my office from an un registered kirana shop for rs 100, i will have to pay RCM as you said (suppose @ 28%) 28 rs
in other case, if i buy it from big bazaar, i will get is for rs 100, but no RCM
in this way small dealers will sell their goods costlier.
Modi ji is always in favour of small traders, so this condition is not possible

PRABIR PAUL (*****Accountant***** Never insult to any person for any kind of lack of knowledge or misread.) (1443 Points)
Replied 20 June 2017

Section 9(4) of CGST ACT 2017 I think it's

Incomplete Provision.........

Very Hardship......

Very Unfair......

Very Illogical....

Because this section didn't prescribed about expenses only it said that we have to pay reverse charge if purchase from unregistered dealer..............

I think department shall be look into this matter......

Please forward this forum to Govt...