Reverse charge under Section 9(4) – supplies received by a registered person from unregistered persons

Reverse charge under Section 9(4): Under Section 9(4), it has been provided that all supplies received by a registered person from unregistered persons will be liable to reverse charge and the recipient will be liable to pay tax in such cases.

Notification no. 8/2017-Central Tax dated 28th June 2017 provides that intra state supplies received by an unregistered person from registered taxpayers will be exempted subject to the amount of Rs. 5000 per day w.e.f. 01.07.2017. This means that only when the aggregate value of taxable supplies exceeds Rs. 5000 in a day from unregistered persons, tax will be payable under reverse charge mechanism. However, if such supplies are below Rs. 5,000 in a day, they will be considered as exempted. However, this exemption was not applicable in case of inter-State supplies. This means that on receipt of inter-State supplies from unregistered dealers, no threshold limit will be applicable. This means that complete amount of IGST arising on receipt of inter-state supplies should be payable on reverse charge basis. This provision had its validity only upto 12th October 2017.

On 13th October 2017, the Government released Notification no. 38/2017-Central Tax (Rate) and 32/2017-Integrated Tax (Rate). As per the said notifications, any intra /inter State supplies received by a registered person from unregistered persons will be exempted irrespective of the aggregate value in a day. The limit of Rs. 5,000 has been withdrawn from 13th October 2017. However, this does not alter the position till 12th October 2017 and the said limit of Rs. 5,000 will continue to be applicable till this date. As per the recommendations of the GST Council, this suspension of the provisions of reverse charge in case of inward supply from unregistered person will be valid only upto 31st March 2018. So, all supplies after 13th October 2018 should be shown as exempted supplies.

Vide Notification no. 10/2018-Central tax (Rate) and Notification no. 11/2018-Integrated Tax (Rate) dated 23rd March 2018, reverse charge under Section 9(4) has been deferred till 30th June 2018. This means that all such supplies will be treated as exempt in nature till 30th June 2018.

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