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Suspension of reverse charge - side effect


OCTOBER 20, 2017

By V Ravindran  & R Alwan, Advocates, Chennai

SECTION 9 covers levy and collection of GST. As per Sec.9(1) of CGST, 2017, GST is levied on "supply of goods or services or both" in the manner specified. Section 9(2) enables levy of GST on Petroleum products on and from a date to be recommended by GST Council.

Sub-section 9 (3) and 9 (4) of CGST Act, and the notifications issued under these sub-sections provide as under:-

Extract of provisions of Sec.

Notification(s) issued under CGST

Categories covered

9(3) 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.

- No. 13/2017 - Dated: 28-6-2017 - CGST Rate, ++ as amended by Notfn.No. 33/2017 CTR

- Goods Transport Agency (GTA);

- An individual advocate including a senior advocate or firm of advocates.

- An arbitral tribunal.

- Services provided by any person by way of sponsorship to any body corporate or partnership firm.

- Central Government, State Government, Union territory or local authority;

- A director of a company or a body corporate

- Services supplied by an insurance agent to any person carrying on insurance business.

- Services supplied by a recovery agent to a banking company or a financial institution or a non-banking financial company.

- Author or music composer, photographer, artist, or the like

- Supply of services by the members of Overseeing Committee to Reserve Bank of India ++

9(4) The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient 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.

--No. 8/2017 - Dated: 28-6-2017 - CGST Rate

@@ Amendment brought through Notification No. 38/2017 CGST Rate dt. 13.10.2017

Supplies of goods or services or both received by a registered person from any supplier , who is not registered.

--Exemption shall not be applicable where the aggregate value of such supplies of goods or service or both received by a registered person from any or all the suppliers, who is or are not registered, exceeds five thousand rupees in a day.

@@ proviso (viz. the above proviso --) stands removed, till 31.03.2018.

Questions have been raised as to whether the supplies from unregistered persons, particularly those under the 10 categories listed under Notification No. 13/2017 CTR [covered under Sec.9(3)] would also be exempt from GST at the hands of registered receiver because of the amendment brought through Notification No. 38/2017 CGST Rate dated 13.10.2017.

Some clarifications in the websites appeared to the effect that since the levy of GST on supplies of goods/services or both under RCM under Section 9(4) of CGST cases alone stand exempted upto 31.03.2018, the said exemption under Notification No. 8/2017 - dated 28-6-2017 (as amended), would not cover the categories of supplied specified under Sec. 9(3) and consequently there would be no exemption from GST for the recipients of services under 10 categories notified under Notification No.13/2017 CTR (As amended by No. 33/2017 CTR dated 13.10.2017).

A careful study of the above provisions of sub-sections 9(3) and 9(4) reveals the following:-

-  The provisions 9(3) is to empower Govt. to notify receivers of supply as person liable to pay GST under RCM, and the provision 9(4) stipulates that "supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient ";

-  Exercising sub- section 9(3), Govt. specified categories of supply of goods or services or both the tax on which shall be paid on reverse charge basis by recipients,

-  Sub-section 9(4) itself fastened GST liability under RCM, on any registered person, who receives supplies from supplier who is not registered. By exercising its general power of exemption under Sec. 11(1), the government exempted supplies not exceeding in value of Rs.5000/- per day (till amendment on 13.10.2017, when this ceiling was removed).

With the removal of the cap under Notification No.8/2017 CGST, the only criteria to avail the GST exemption under Notification No. 8/2017 CTR is that the registered person should receive the supply from a non-registered supplier. There is a distinct possibility that all those suppliers of goods or services or both, covered under Section 9 (3) could also remain unregistered.

In view of the above, in the absence of specific restriction / bar under Notification No. 8/2017 CTR, (as amended by Notification No. 38/2017 CTR), any registered person, when he receives supplies of goods or services from unregistered persons (including the supply of services from the 10 categories, who are covered / specified under sub-section 9(3) read with Notification No. 13/2017 CTR), can claim the benefit of GST exemption under Notification No.8/2017 CTR as amended.

If the intention of the Govt. was not to allow the exemption under Notification No. 8/2017 CTR to those categories specified under Notification No. 13/2017 CTR, then there is a need to include a proviso to that effect under Notification No. 8/2017 CTR.

Notification No.8/2017 CTR might have been meant for allowing exemptions to select species originally, but after the amendment through Notification No. 38/2017, the exemption route under Notification No. 8/2017 is no more exclusive, but available to all who receive from unregistered persons. Plain words of Notification No. 8/2017, after its amendment, unequivocally allows exemption to supplies from all suppliers who are not registered which could include categories specified under section 9(3).

Same thing would apply to SGST/UTGST.

The moot point is whether the above effect was int ended or not ?

(The views expressed are strictly personal.)

(DISCLAIMER : The views expressed are strictly of the author and doesn't necessarily subscribe to the same. Pvt. Ltd. is not responsible or liable for any loss or damage caused to anyone due to any interpretation, error, omission in the articles being hosted on the site)


Sub: Specific Provsion

I personally feel, Notification does not give edibility for RCM suspension on purchases from specified categories of services under 9(3). Notification 8/2017 is for section 9(4). Section 9(3) is specific provision which overrides general provision 9(4).

Posted by Siva Rama
Sub: No side effect on RCM

Supplies notified for RCM payment under Section 9(3) may not get the extension of time upto 31.3.2018 that is meant for supplies covered under Section 9(4)of CGSTA for RCM payment. Reason is that Govt exempted services notified under Section 9(3) for RCM payment from obtaining registration in terms of Notfn No.5/2017-CT dt 19.6.2017. It seems exempted entities cannot be equated with unregistered entities covered under Section 9(4).

Posted by rrkothapally rrkothapally
Sub: Suspension of reverse charge - side effect - Point to Ponder

If the point discussed is valid, the same is applicable even to the services that are notified under Sec 9(3) and that do not exceed Rs.5000 from the date of issue of Notification No. 08/2017 - CT(R), it self. Why from the date of issue of Notification No.38/2017 - CT(R) only.Is it not correct.

Posted by prakash ch