Major Relief to Small Taxpayer’s in GST – RCM
By: – Manoj Agarwal
Goods and Services Tax – GST
Dated:- 4-7-2017
The Central Governement has issued Exemption Notification No. 8/2017-CT(Rate) dated 28-06-2017 giving relaxation to Registered Persons under GST from major (and draconian) compliance required under section 9(4) of the CGST Act, 2017.
As per Section 9(4), every registered person (including composition dealer u/s (10) is required to pay GST on every inward supply (purchase) of goods or services from any unregistered person. The implication of this provision is that even if a registered person book expense of ₹ 10 say for tea/snaxs in his accounts, he is required to pay tax on the same under reverse charge mechanism. The entire trade & industry has been vehemently protesting against this provision because of enormous compliance burden which had the potential to stop buying goods or procuring services from unregistered persons who may be a very very small
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er but from all such suppliers during the day. That means, if the value of inward supply from unregistered persons in a day is say ₹ 5100, then tax is payable on total ₹ 5100 and not on the excess i.e. ₹ 100.
There may be a situation when such inward supply include both exempted goods/services and taxable goods/services. In such cases, the value of exempted goods or services shall be ignored for calculating the aggregate value of ₹ 5000 per day. Irrespective of Value, no tax under reverse charge is payable for inward supply of any goods or services which is exempted u/s 11.
The author is of the view that the limit of ₹ 5,000 per day is very low and the government should had exempted atleast ₹ 10,000 per day as suggested in the exemption schedule released by it. Though small registered taxpayers would be immensely benefited by this exemption, the same won't be able to provide much relief to the medium & large size assessee's who require to pay much
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Dear Admin,
I have revised the above article covering more issues. Kindly update the same. The chart remains same. Thanks
The Central Government has issued Exemption Notification No. 8/2017-CT(Rate) dated 28-06-2017 giving relaxation to Registered Persons under GST from major (and draconian) compliance required under section 9(4) of the CGST Act, 2017.
As per Section 9(4), every registered person (including composition dealer u/s 10) is required to pay GST on every inward supply (purchase) of goods or services from any unregistered person. The implication of this provision is that even if a registered person book expense of ₹ 10 say for tea/snaxs in his accounts, he is required to pay tax on the same under reverse charge mechanism. The entire trade & industry has been vehemently protesting against this provision because of enormous compliance burden which has the potential to stop buying goods or procuring services from unregistered persons who may be a very very small local v
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ut from all such suppliers during the day. That means, if the value of inward supply from unregistered persons in a day is say ₹ 5100, then tax is payable on total ₹ 5100 and not on the excess i.e. ₹ 100.
Time of supply of goods/services under reverse charge:
The time of supply in case of goods, as per Section 12(3), when the reverse charge tax is payable, is the earlier of receipt of goods or date of payment in the books of recipient. And in case of services, as per Section 13(3), the reverse charge tax is payable on earlier of the date of payment in books of accounts or date immediately following 60 days from the date of issue of invoice. The moot question that arises is that to claim the exemption, whether one has to look at the date of receipt of goods/services, date of invoice, date of entry of invoice in books, or the date of payment. GST sathi is of the view that for the purposes of calculating exemption value of ₹ 5000 in a day, the date on which such
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taxpayers, the limit of ₹ 5,000 per day is very low and the government should had exempted at least ₹ 10,000 per day as suggested in the exemption schedule released by it. Though small registered taxpayers would be immensely benefited by this exemption, the same won't be able to provide any relief to the medium & large size assessee's who require to pay much more than ₹ 5000 for day-to-day expenses to small vendors/suppliers.
Also, similar notification is not required to be issued by any State Government for extending parallel relief from State Tax (SGST). This is because Section 11(4) of SGST Act automatically treats the exemption notification issued by CG under CGST Act as notification for the purposes of SGST. In other words, the notification issued u/s 11(1) by Central Government has the effect of exempting both the Central Tax & the State/UT Tax.
The various scenarios under which the said exemption shall be eligible are shown in the below chart for easy underst
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