rgarding composit supply

[FARIDUDDIN AHMAD]

my client is dealing in trading of wheat. wheats are purchase from agriculturist and sold to registered dealers. the wheats purchased from agricultures are packed in jute bags purchased from unregistered dealers and sold to registered dealers without charging any GST as the wheat is exempted goods in GST. he(my Client) received intimation u/s 61 that your nature of business required packing material but there is no purchase reflected in GSTR 2A it means that packing material are purchased from unregistered dealers which attract tax on reverse charge however no reverse charge has been paid by you during the period 2017 18. kindly advise is there any tax liability payable on jute bags purchased from unregistered dealers used for packing wheat for sale.

[Ganeshan Kalyani]

For the period from 01.07.2017 to 12.10.2017 the GST was payable by a registered person on purchase of goods or Services from a supplier who is not registered under GST. There was an exemption of purchase upto Rs. 5,000/- per day from unregistered suppliers. So on exceeding the said limit the GST was payable by registered buyer under RCM.

[GUNASEKARAN K]

Yes, your client liable to tax under RCM as per Notification No.8/2017-Central Tax(Rate)

Subsequently Section 9(4) - was completely Rescinded / Superseded from 01.02.2019 vide 01/2019-Central Tax (Rate)

However GST payable on reverse charge basis on supplies of goods or services or both received by the registered person from the unregistered person is exempted till an aggregate value of INR 5000 per day from 01.07.2017 to 12.10.2017.

Summarised position of RCM provisions on the basis of the above-mentioned respective notifications as amended time to time, are as under-

Relevant Notification	Relevant Provisions/ Amendments	Remarks
Section 9(4) of CGST/SGST (UTGST) Act, 2017/section 5(4) of IGST Act, 2017	“the 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.”	All the transactions of the supply of taxable goods or services or both from an unregistered person to registered were covered under reverse charge basis.
Notification no. 8/2017-Central Tax (Rate) dated 28th June, 2017	Central tax payable on reverse charge basis on INTRA-STATE supplies of goods or services or both received by the registered person from the unregistered person is exempted till an aggregate value of INR 5000 per day.	01.07.2017 to 12.10.2017- No Reverse Charge Mechanism upto Rs. 5000 per day.
Notification no. 38/2017-Central Tax (Rate) dated 13 October, 2017	Entire central tax payable on reverse charge basis on Intra-state supplies of goods or services or both received by the registered person from an unregistered person is exempted (i.e. exemption upto INR 5000 replaced and the entire transaction was exempted) till 31 March, 2018.	As the proviso was omitted and notification was effective since 13.10.2017, therefore 13.10.2017 to 31.03.2018- No Reverse Charge Mechanism is applicable u/s 9(4). 01.07.2017 to 12.10.2017- No Reverse Charge Mechanism upto Rs. 5000 per day
Notification no. 10/2018-Central Tax (Rate) dated 23 March, 2018	The above exemption was extended till 30 June, 2018	13.10.2017 to 30.06.2018- No Reverse Charge Mechanism is applicable u/s 9(4).
Notification no. 12/2018-Central Tax (Rate) dated 29 June, 2018	The above exemption was extended till 30 September, 2018.	13.10.2017 to 30.09.2018- No Reverse Charge Mechanism is applicable u/s 9(4).
Notification no. 22/2018-Central Tax (Rate) dated 6th August, 2018	The above exemption was extended till 30 September, 2019.	13.10.2017 to 30.09.2019- No Reverse Charge Mechanism is applicable u/s 9(4).
Notification no. 01/2019-Central Tax (Rate) dated 29th January, 2019	The above exemption (Notification No. 8/2017) stands rescinded w.e.f. 01.02.2019.	Reverse Charge Mechanism is applicable u/s 9(4). But new provision of CGST (Amendment) Act 2018 shall apply

[KASTURI SETHI]

A comprehensive reply by Sh. Gunasekaran K Ji. Keeping track and compilation of all the notifications and amendments till date is highly appreciable. This will save time of the readers/querists. I agree with both experts.

[Ganeshan Kalyani]

Thanks Sri Gunasekaran Sir.

[Padmanathan KV]

I agree with the views of the experts.

Something to consider in this situation is to examine whether ITC can be availed even now on RCM paid on supplies received from unregistered persons. you can find both views on this forum on the same and you may take a call depending upon the amount of demand involved, risk appetite of client etc.

[Shilpi Jain]

It is also possible to challenge this levy. Since the provisions were substituted and thereby a view can be taken that the RCM liability was not existing from 01-07-2017.

But this will have to be settled in Tribunal or Courts.

Considering the amount involved you can take a call.

Also, were the supplies of this client completely exempt? Then why did he take a registration under GST?

AI Summary

Reverse charge on purchases from unregistered suppliers may apply; exemption periods and notifications determine liability and remedies.
Whether purchases of jute bags from unregistered suppliers used to pack wheat attract liability under the Reverse Charge Mechanism. Registered buyers were liable to pay tax on taxable supplies received from unregistered suppliers, subject to an initial exemption capped per day (01.07.2017-12.10.2017), followed by a broader exemption from 13.10.2017 extended through 2019, and eventual rescission of that exemption effective 01.02.2019. Liability depends on precise transaction dates, exemption applicability, taxability of supplies, and whether RCM was discharged, with potential issues about input tax credit and challenging demands.