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The reverse charge mechanism is a provision which is to provide a level playing field between the tax compliant and the non compliant. Also between service providers outside India and those inside.

The present section 9(3) related to specified categories of goods and services where GST is payable by registered recipient. The services could be exempted or taxable. Only on the taxable services would RCM apply as the recipient replaces the specified providers in and out of India.

Similarly section 9 (4) looks at those who are not registered (other than those to whom 9(3)) applies to the registered.  Suppliers who are not registered could be as under:

  • those who are in grey market (non billing, not paying tax)
  • those who are unaware of GST liability (uneducated/ unorganized, tiny)
  • not registered due to their activity being exempt and
  • importantly those whose aggregate value of supplies is less than Rs. 20 lakhs.

There is huge amount of business restructuring going on based on this liability and many organization hiving off the activity which attracts GST to avoid having to comply with GST and expose their other activities to GST administration. Some experts have felt that there maybe an alternative thought process.

Since the person paying under RCM is liable as if he is the person liable can we summarize as under:

  1. Exempt supplies no RCM on registered person.
  2. Suppliers under Rs. 20 lakhs limit not liable for RCM
  3. Others liable.

If so could the practical way out for registered be to take a declaration of exempt supplies or being under the threshold along with the PAN from the supplier?

If this is possible it would allow for some mitigation of the difficulties for the SME, educational institutions, hospitals etc.  

SSI  and other trade associations could seek clarity if what has been advanced is valid in law from ministry.


Published by

Madhukar N Hiregange
(Chartered Accountant)
Category GST   Report

16 Likes   23 Shares   30354 Views


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