Relaxations in Reverse Charge under GST

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Relaxation in Reverse Charge under GST for Supplies by an Unregistered Dealer

As per Sub section 4 of Section 9 of the CGST Act, 2017 and Sub section 4 of Section 5 of the IGST Act, 2017 (Levy and collection of GST), GST on the supplies of taxable goods and services by an unregistered dealer to a registered dealer is payable by the recipient under reverse charge mechanism. It has been stated in the sections mentioned above that “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”. It implies that in the cases where the recipient of taxable goods or services or both is a registered dealer and the supplier is unregistered then all the provisions of the Act(s) which applies to the supplier will be applicable to the recipient. That is the recipient will have to:

  1. Prepare the invoice for the supplies of taxable goods and services or both received by him; and
  2. Pay GST on such supplies under Reverse Charge Mechanism.

However the Government has given two relaxations to the above provision which are as follows:

  1. No reverse charge on persons who took registration merely for deduction of TDS on GST: If a Person has been registered under GST under Section 24 of the CGST Act, 2017 only to deduct TDS/TCS under Section 51/52 of the CGST Act, 2017, then such person will not be liable to pay tax or draw invoice under Reverse Charge Mechanism. [Notification No.9/2017-Union Territory Tax (Rate) New Delhi, the 28th June, 2017]
  2. Exemption from Reverse Charge upto Rs 5000 per day: An amount of Rs 5000/- per day has been fixed as exemption will which be given in respect of supplies received from an unregistered person. For supplies above this amount, a monthly consolidated bill can be raised [Notification No.8/2017-Central Tax (Rate) dated 28th June 2017]

Both the notifications are given below

[TO BE PUBLISHED IN PART II, SECTION 3, SUB-SECTION (i) OF THE GAZETTE OF INDIA, EXTRAORDINARY]

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(Department of Revenue)

Notification No.9/2017-Union Territory Tax (Rate)

New Delhi, the 28th June, 2017

G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 8 of the Union Territory Goods and Services Tax Act, 2017 (14 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts intra-State supplies of goods or services or both received by a deductor under section 51 of the Central Goods and Services Tax Act, 2017 (12 of 2017), from any supplier, who is not registered, from the whole of the Union Territory tax leviable thereon under sub-section (4) of section 7 of the said Union Territory Goods and Services Tax Act, subject to the condition that the deductor is not liable to be registered otherwise than under sub-clause (vi) of section 24 of the said Central Goods and Services Tax Act read with section 21 of the said Union Territory Goods and Services Tax Act.

 

  1. This notification shall come into force with effect from the 1st day of July, 2017.

[F.No.354/117/2017-TRU]

(Mohit Tewari)

Under Secretary to the Government of India

 

[TO BE PUBLISHED IN PART II, SECTION 3, SUB-SECTION (i) OF THE GAZETTE OF INDIA, EXTRAORDINARY]

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

(Department of Revenue)

Notification No.8/2017-Central Tax (Rate)

New Delhi, the 28th June, 2017

G.S.R. (E).- In exercise of the powers conferred by sub-section (1) of section 11 of the Central Goods and Services Tax Act, 2017 (12 of 2017), the Central Government, on being satisfied that it is necessary in the public interest so to do, on the recommendations of the Council, hereby exempts intra-State supplies of goods or services or both received by a registered person from any supplier, who is not registered, from the whole of the central tax leviable thereon under sub-section (4) of section 9 of the Central Goods and Services Tax Act, 2017 (12 of 2017):

            Provided that the said 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.

  1. This notification shall come into force with effect from the 1st day of July, 2017.

 

[F.No.354/117/2017-TRU]

(Mohit Tewari)

Under Secretary to the Government of India

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