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The Reverse Charge Mechanism (RCM) under GST Regime is two-fold.

Case1: Specified Supplies- Sec 9(3) of CGST Act

Case 2: Supplies from Unregistered Persons- Sec 9(4) of CGST Act

Case1:  Specified Supplies- Sec 9(3) of CGST Act

Sec 9(3) authorizes the Government to notify the specific supplies of Goods and/or Services to be covered under Reverse Charge Mechanism (RCM) whereupon it is not the Supplier of Goods/Services who will be liable to pay GST, but instead it will be the Recipient of Goods/Services who will be liable to pay. Such Recipient of such notified Goods/Services is compulsorily required to take registration in GST as per the provisions of clause (iii) of Sec.24 of the CGST Act.

The Government exercising its above authority u/s 9(3) of the Act has already issued two notifications to specify the Goods/Services covered under RCM.   

a. Notification No. 4/2017- Central Tax (Rate) dated 28.06.2017 comprising of FIVE items of Supply of Goods.
To see full Notification visit at

b. Notification No. 13/2017- Central Tax (Rate) dated 28.06.2017 comprising of NINE items of Supply of Services.
To see full Notification visit at

Thus on these FOURTEEN items of Supply of Goods/Services, GST liability is to be paid and discharged by the Recipient of these Goods/Services under RCM u/s 9(3) of the Act.

Therefore every Recipient as specified in above Notification(s) pertaining to FOURTEEN items is mandatory required to get Registration u/s 24 of the Act irrespective of the fact whether his Output Supply is taxable or not, likewise whether or not his aggregate turnover of outward supply exceed 20 Lahgs or not.

Here the Recipient of such specified Goods/Services who are otherwise not liable for Registration may plan their procurements in such a way so as to avoid liability under RCM, to the extent possible. For instance, one can plan to procure his inward supplies where the liability to pay freight to any Goods Transport Agency (GTA) is assigned on the part of Supplier only such that no payment is made to any GTA by the purchaser and thus he may avoid GST on such freight under RCM and resultant requirement of Registration u/s 24 of the Act.

Case 2:  Supplies from Unregistered Persons- Sec 9(4) of CGST Act

While case 1 under section 9(3) deals with specified items of Supply (at present FOURTEEN items as per two Notifications supra) and clause (iii) of sec 24 correspondingly mandates compulsory Registration for the Recipient of these Specified Supplies, Case 2 incorporates another scenario of RCM u/s 9 (4) of the Act which comes into picture only when the Recipient of Goods/Services is a Registered person. Thus section 9(3) and 9(4) operates in a little different domain, whereas Sec 9(3) mandates Specified Supplies and correspondingly sec 24 mandates compulsory registration, sec 9(4) is dependent on the Registration of the Recipient and applies only if the Recipient is already registered under GST.

Sec 9 (4) provides that in case of all the supplies of all the Goods and/or Services (as contrasted with specified supplies in case 1) by a Registered Person from any person who is not Registered under GST, the liability of GST on all such inward supplies by the Registered person shall be paid and discharged by such Registered Person in the capacity of the Recipient of Goods/Services.

Thus as a general principle every Registered person should try to procure all his inward supplies of Goods as well as Services from registered persons only to avoid the compliance of RCM u/s 9(4) of the Act. However with each registered person there are bound to be certain petty supplies from unregistered suppliers which are unavoidable. To take care of such unavoidable petty supplies and to save such petty supplies from the rigor of RCM u/s 9(4), a Notification No. 8/2017-Central Tax (Rate) dated 28.06.2017 has been issued u/s 11 of the CGST Act, whereby intra-state supplies of Goods/ Services has been exempted from RCM under sec 9(4) provided that the aggregate value of such supplies from all such unregistered  suppliers doesn't exceed an outer limit of Rs. 5000 per day. To see full Notification visit at

After going through the provisions of sec 9(4) of the Act, one may wonder that the exemption limit of Rs.20 lakhs from registration under GST is merely eyewash as in any case the levy of GST doesn't spare any supply. It only shifts the liability from the Supplier to the Recipient if turnover is below 20 Lakhs and otherwise if it is above 20 Lakhs the liability is already there on the Supplier to pay GST. For instance, If a Registered Supplier takes a Factory Premises or Office Premises on Rent from a local individual who is not liable to be registered under GST as his aggregate turnover doesn't exceed Rs.20 lacs, though that individual landlord will not pay any GST, but the Recipient being a Registered Supplier, shall pay GST on such rental outflow under RCM as per sec 9(4) of the Act. Thus, Government doesn't lose a single penny of tax, on account of exemption limit.

Smart Move, someone has to pay.

Input Tax Credit (ITC) of GST paid on inward supplies of Goods/Services under RCM covered u/s 9(3)-Specified Inward Supplies as well as u/s 9(3)- Supplies from Unregistered Suppliers.

The GST paid under RCM as per sec 9(3)-Specified Supplies as well as sec 9(4)-Supplies from Unregistered Persons, both, shall qualify to be credited as ITC under sec. 16 of the Act. Here a question arises that these inward supplies will dominantly be without any Tax Invoice except in some cases of specified supplies u/s 9(3) where the supplier might have registration; then for such supplies without inward Tax Invoice, as to how the requirement of having a Tax Invoice will be fulfilled to avail ITC as per section 16(2) of the Act. The answer lies in clause (f) of sec 31 (1) which authorizes the Registered Person – the Recipient himself, to issue a Tax Invoice on self (consolidated daily self invoice) in respect of Goods /Services received by him as covered under sec 9(3) as well u/s 9(4), wherever required. Thus the absence of Inward Tax Invoice is no hurdle in availing ITC of input tax paid under RCM- whether u/s 9(3) or 9(4) of the Act.  

Further in case of regular supply (not covered under RCM) if the Recipient fails to pay the value of supply to the Supplier within 180 days from the date of Inward Invoice, the ITC originally availed is added to output tax liability along with interest thereon. However in case of inward supplies covered under RCM u/s 9(3) and/or sec 9(4), there is no such compulsion to pay the value of supply within 180 days and no liability of payment of ITC arises after non-payment beyond 180 days.

One may logically argue that this discrimination between Regular Inward Supply and RCM Inward Supply is arbitrary. While non-payment of value  of RCM Supply does not burden the Recipient to pay the ITC availed then why such kind of liability arise while not paying the Regular Supply within 180 days, and particularly when input tax has been paid to the inward Supplier. This kind of unreasonable discrimination directs towards foreseeable litigation in writ courts.   

Forward or Reverse - Pay Tax on each Rupee of Supply- Pay your Supplier in Time.


Published by

CA Vipin Garg
(Lead Advisor VGNC)
Category GST   Report

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