Reverse Charge sec 9(3)

Please note if recepient of supply is unregistered, section 9(3) will not be applicable on them.

If supplier is also unregistered, no one has to pay gst.

If supplier is registered, then liability will be of supplier.

Registered supplier has to raise invoice, collect tax and pay, irrespective of status of purchaser. If seller is unregistered there is no way for him to collect tax. In that case the buyer will pay tax RCM way and claim ITC, if he is registered. 

Dear Chandan

Before coming to the final answer, let's look at certain provisions of GST. 

1. Section 9(3) of CGST Act, 2017 - The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such 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 the supply of such goods or services or both.

2. Section 31(3)(f) - a registered person who is liable to pay tax under sub-section (3 ) or sub-section (4 ) of section 9 shall issue an invoice in respect of goods or services or both received by him from the supplier who is not registered on the date of receipt of goods or services or both;

3. Section 31(3)(g) - a registered person who is liable to pay tax under sub-section (3 ) or sub-section (4 ) of section 9 shall issue a payment voucher at the time of making payment to the supplier.

4. Section 24(iii) -  a person who receives a supply of goods/services which are liable for RCM (Sec.9(3)/(4)) must get compulsorily registered under GST and no threshold relief as per Sec.22(1) is available to him. 

Now to your question, 2 situations you have asked:

Case 1

a. In this Case, the supplier is registered, so the recipient need not raise a self invoice as per Sec.31(3)(f).

b. The supplier being a registerd supplier is already liable to issue invoice as per GST laws.

c. As per Sec.24(iii), the unregistered recipient becomes liable to take registered under GST.

d. So, as per Sec.31(3)(g), the recipient has to issue the payment voucher.

Case 2

a. As per Sec.24(iii), the unregistered recipient becomes liable to take registered under GST.

b. The supplier being unregistered, the recipient need to raise a self invoice as per Sec.31(3)(f).

d. As per Sec.31(3)(g), the recipient has to issue the payment voucher.

Regards

Ajay

Mr. Ajay. I know that lot of thinking by great brains is behind forming GST rules. The RCM is definetly a great innovative concept. It brings back to the tax chain the broken links. I am a layman. Pardon my ignorance. I do not understand the stipulation (under case 2) that the rceipient  is liable to get registred compulsarily. Does it mean that one has to get registred first, before buying or availing those goods or services? Is it not a restriction on my fundamental right of buying goods or availing services which are legally allowed. On the other side does it mean that that the unregistred seller has to sell his wares only to registred entities?. Please enlighten

Dear Shankar Sir

I have put the law as I understand it.

1. The stipulation that the recipient must get registered is as per Sec.24(iii) as is applicable not just in Case 2, but also to Case 1 and any case of RCM (Sec.9(3)/(4)).

2. As I understand it, it does not mean you have to get registered BEFORE purchasing/availing goods/service. As per Sec.25(1), every person who is liable to be registered shall apply for registration within thirty days from the date on which he becomes liable to registration.

3. I am note sure if it can be said that your right to buy goods has been affected. Of course, as a buyer, you are burdened with an additional duty to pay the tax directly to the govt which otherwise would have been collected from you by the seller and remitted to the Govt on your behalf. 

4. Also, there is no restriction that an unregistered seller can sell only to a registered seller. In this context,it is to be noted that there are 2 sub-sections w.r.t. RCM as you maybe aware.

a. Sec.9(3) - RCM in case of notified goods/services.

b. Sec.9(4) - RCM in general cases. This Sec.9(4) is applicable only when a REGISTERED buyer purchases taxable goods/services from an UNREGISTERED dealer. So, here the buyer is already registered and there is no question of taking any further registration. However, this provision has been put on hold till 31.03.2018.

The present question put up by Chandan is in respect of Sec.9(3), which are applicable to cases of "specified goods/services", supplied by "specified suppliers" to "specified recipients". Even in the cases liable for RCM under this Sec.9(3), you can observe that mostly the specified recipients are already "registered recipients". But, there are a few cases where unregistered recipients becomes liable. Then again mostly these specified recipients are meant to cover business enitities. So purchases of personal nature are not affected by this provision.

Regards

Ajay

Mr. Ajay many thanks.  so the point is" sec 9/3-notified goods and services ". I will look up what exactly these things are. But Mr. Chandan's query does not mention sec 9/3.

Mr. Ajay, after going through the section, now I understand and agree with the reason behind sec 9/3. The first seller mostly farmers, cannot be expected to be registered . They can't be burdened with the job of collecting taxes and associated responsibilities. But the goods need to be brought to tax net immediately. So the onus lies with the recipient to be registered and rightly so without any threshold limit. Thanks again.

Dear Shanker Sir

The heading of the query is "Reverese Charge u/s 9(3)". So naturally I assumed Chandan was referring to RCM under that sub-section.

Happy to know that you understood what I meant to say.

Thanks and Regards

Ajay