APPLICABILITY OF REVERSE CHARGE MECHANISM TO UNREGISTERED PERSON
By: – DR.MARIAPPAN GOVINDARAJAN
Goods and Services Tax – GST
Dated:- 18-6-2018
Levy of tax
Section 9 of the Central Good and Services Tax Act, 2017 ('Act' for short) provides for the levy of goods and services tax ('tax' for short). Section 9(1) provides that there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person.
Reverse charge mechanism
Section 2(98) of the Act defines the expression 'reverse charge' as the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier of such
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ply of such goods or services or both.
Section 5(4) of Integrated Goods and Services Tax Act, 2017 provides that the integrated 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.
Section 9(4) of CGST Act and section 5(4) of IGST Act clearly provides that the central tax, as the case may be, the integrated 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 the recipient who is a registered person shall be paid such person on reverse charge basis as the recipient. From the above said provisions it can be inferred that if any supply of goods or services provide d by a unregistered
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an unregistered person and received the supply of goods or services or both from an unregistered person is not required to collect tax. Once an unregistered person, as a recipient, is not required to pay service tax under reverse charge mechanism he is also not required to register under the Act.
Advance Ruling
In re 'Joint Plant Committee' – 2018 (4) TMI 809 – AUTHORITY FOR ADVANCE RULING , WEST BENGAL the applicant is a nonprofit organization set up by the Central Government. The applicant declares that it has not been registered under any of the repealed acts and wants a ruling on whether it is required to be registered under CGST/WBGST Act. The functions of the applicant include management and operation of the Steel Development Fund and other funds accumulated under the Iron & Steel (Control) Order, 1956, study and analysis of and maintenance of comprehensive data base on market situation in the Iron & Steel Sector including fluctuation in market price, production, availability
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