Reverse Charge Mechanism in GST- Purchase form Unregistered Person section 9(4) - GST Ready Reckoner - GST

Reverse Charge Mechanism in GST- Purchase form Unregistered Person Supply from an unregistered dealer to a registered dealer This scenario covered by section 9(4) of the CGST Act 2017 Act and section 5(4) of the IGST Act 2017 As per the amended provisions of section 9(4) , the Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of 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 such supply of goods or services or both. Notified / specified person: Promotors under Real State Sector has been notified for discharging GST under reverse charge method (RCM) where the goods or services have been procured from unregistered person in certain circumstances. - See Notification No. 07/2019- Central Tax (Rate) dated 29-3-2019 Compulsory Registration under GST for Recipient : All persons who are fall above categories of scenario, required to pay tax under reverse charge have to register for GST, irrespective of the threshold limit even if not engaged in the taxable supply. Payment and Input Tax Credit under RCM: - It should be paid by E-cash ledger, cannot be paid by utilizing e-credit ledger. Output tax does not include tax payable under RCM. Avail the ITC on such services, on which he is liable to pay GST under RCM, only after making payment of that tax in his E-cash ledger, if he is otherwise eligible to avail the ITC. A supplier cannot take ITC of GST paid on goods or services used to make supplies on which recipient is liable to pay tax. Time of Supply when GST on goods or services payable on RCM basis The Time of supply is the point when the supply is liable to charge GST. One of the factors relevant for determining time of supply is the person who is liable to pay tax. In RCM, recipient is liable to pay GST. Thus, time of supply for supplies under RCM is different from the supplies which are under RCM. [ See Chapter ] Case laws M/s. Ahmedraza Abdulwahid Munshi (Nadim Scrap) ( 2021 ( 9 ) TMI 569 - AAR, Gujarat ) - Decision : In case of Purchase Scrap/Used vehicles from Unregistered Dealers Held that 1.Composition Dealer purchasing Scrap/Used vehicles from the following Suppliers, namely: Central Government, State Government, Union territory or a local authority are liable to pay tax on RCM basis. 2. There is no RCM tax liability for purchase of subject goods from unregistered dealers