Exporter purchasing from URD

Hi Afreen,

Regarding your question on whether Reverse Charge Mechanism (RCM) applies when an exporter purchases machinery worth ₹1.72 lakh from an Unregistered Dealer (URD):

Key Points:

• Supplier: Unregistered Dealer (URD)

• Recipient: Exporter (Registered under GST)

• Goods: Machinery worth ₹1.72 lakh

• Purpose: Export

Is RCM Applicable on Purchase from URD?

• Yes, RCM applies on supply from an unregistered dealer to a registered person under GST as per Notification No. 10/2017 – Central Tax (Rate) dated 28.06.2017.

• The recipient (exporter) is liable to pay GST under reverse charge on the intra-state purchase from an unregistered dealer.

• However, if the purchase is an inter-state supply from an unregistered dealer, RCM is not applicable (since inter-state unregistered suppliers are not allowed, and usually, the supplier should be registered if inter-state).

Additional Points:

• Exporters generally have input tax credit (ITC) and can claim credit of GST paid under RCM if goods are used for business.

• Export of goods/services is zero-rated under GST, so ITC on inward supplies is refundable.

Summary:

Action:

• Exporter should pay GST under RCM on purchase from URD.

• File GST returns accordingly.

• Claim ITC on GST paid if applicable.