We are purchasing from GST unregistered person.
Is there any liability of payment of GST under the reverse charge mechanism?
Please provide the date from which GST is not required to be paid under RCM on purhcases from unregistered persons.
Reverse Charge Mechanism (RCM) liability on purchase from an unregistered person.
With the implementation of GST w.e.f. 1.7.2017, A registered person was made liable to pay tax on RCM (Reverse Charge Mechanism) on each purchase of goods or services from an unregistered person. But this provision goes through various changes which can be explained as follows:-
- W.e.f. 1st July 2017 to 12th October 2017
During the period 01.07.2017 to 12.10.2017, A registered person was liable to pay tax on RCM (Reverse Charge Mechanism) on purchases of goods or services from unregistered persons. But if the total value of such purchases (aggregate from all unregistered persons) in a day is Rs. 5000 or less, then there is no requirement for payment of GST on RCM basis. But if a registered person purchases goods/services from the unregistered person for Rs. 6000/- then RCM was applicable on the whole value of Rs. 6000/-
- W.e.f. 13th October 2017 to 31st January 2019
The Central Government vide Notification No. 38/2017 – Central Tax (Rate) dated 13th October, 2017, has amended Notification No. 8/2017 – Central Tax (Rate) dated 28th June, 2017 by omitting proviso under Paragraph 1 which deals with the exemption limit of Rs. 5000 per day available to the registered person on intra-State procurement of goods or services from any or all unregistered suppliers. Now, the exemption shall be available to all the registered persons without any limit in case of supply procured from an unregistered supplier. Inter-State supplies received from the unregistered supplier is also exempt under the corresponding notification issued under IGST Act. Therefore, any registered person procuring taxable goods/services from unregistered suppliers, shall not be required to pay CGST under reverse charge mechanism. This exemption was first brought in only upto 31.3.2018 but later extended upto 30.09.2019 vide notification numbers 10/2018 dt. 23.03.2018 , 12/2018 dt. 29.06.2018 & 22/2018 dt. 06.08.2018.
- W.e.f. 1st February 2019 till date(April -2023)
W.e.f. 01.02.2019, CGST (Amendment) Act,2018, amended RCM Provisions on purchases from unregistered persons to specify that RCM provisions on purchases from unregistered persons are now applicable only on the class of persons to be notified in the future. Hence temporary exemption provided by notification 38/2017, from RCM Provisions on such purchases was made permanent through the amendment.
Vide notification no. 07/2019 dt. 29.03.2019, Promoters purchasing cement and capital goods from unregistered persons in Real Estate Projects are brought under RCM.