Reverse Charge Mechanism GST

[VishnuPriya R]

Hi All,

As per Section 9(4) of Central Goods and Services Tax Act, 2017, if the services received from an unregistered persons to the tune of Rs.5,000/- and above in a year then the recipient of service is liable to pay Tax under Reverse Charge mechanism.

Is the above provision applicable for any payment above Rs. 5000/-/ For example- consultancy charges paid to professional (Unregistered) for Rs. 15000/-. Is RCM applicable for the same?

Thanks in advance.

[Padmanathan KV]

In which Financial Year has the payment being made?

Notification No 38/2017-Central Tax dtd 13-10-2017 has removed the limit of Rs.5,000/- thus extending the exemption to all payments to unregistered persons from RCM under section 9(4). 

Further, pls note that section 9(4) has been fully substituted by the Central Goods and Services Tax (Amendment) Act, 2018 w.e.f 01-02-2019.

[PRAVEEN SHARMA]

Originally, Section 9(4) of the CGST Act, 2017, mandated that the recipient of goods or services from an unregistered supplier is liable to pay GST under the Reverse Charge Mechanism (RCM) for such supplies. However, the application of this provision has been significantly modified through various amendments and notifications issued by the Government of India.

 

[Shilpi Jain]

Presently this provision has notification issued for the real estate sector. For other services this provision is not applicable and thereby services from unregistered persons not liable in the hands of the recipient.

[VishnuPriya R]

Thank you all for the response. It was indeed useful.

[Ganeshan Kalyani]

I agree with the view of expert.

[Sanath KS]

However as per latest amendment to Notification No 13/2017 specifies only prescribed class of goods and services applicable for RCM such as GTA, Advocate service, etc. So, the general RCM applicability for services from unregistered dealers in respect to Consultancy charges, repairs and maintenance, other expenses is not applicable since its not specified in prescribed class of services for applicability of RCM in amendment notification right? 

AI Summary

Reverse charge mechanism applicability: unregistered-supplier services generally not taxable at recipient unless specified by notification. Reverse charge liability for services from unregistered suppliers is not automatic for all payments: statutory amendment and subsequent notifications restrict recipient liability to classes of goods or services expressly prescribed by notification. General services such as consultancy, repairs, and maintenance from unregistered persons are not covered by reverse charge unless specifically listed in a notification; certain sectors (for example specified transport, legal, and real estate-related notifications) remain within reverse charge scope.