RCM ON SUPPLY FROM UNREGISTERED PERSON: From 01st Feb 2019.







Recently, Government vide notification no. 01/2019 -Central Tax (Rate) dated 29-Jan-2019, the Notification no. 8/2017 -Central Tax (Rate) has been rescinded; which has misconstrued by the trade and apprehended that RCM on supplies from unregistered persons applicable w.e.f  01-Feb-2019. In this regard, a analysis has been done to elucidate the position.



  • In terms of Section 9(4) of CGST Act, 2017 all supply of taxable goods or services or both by an unregistered supplier were liable to RCM unconditionally.
  • However, vide notification No. 8/2017 -Central Tax (Rate) such supply to the extent of Rs. 5000/- per day were exempted till 12.10.2017. Thus, till 12.10.2017 taxable supply from unregistered persons above Rs. 5000/- were taxable on RCM basis.
  • Vide notification No. 38/2017 -Central Tax (Rate) dated 13.10.2017 condition of Rs. 5000/- per day was withdrawn and all kind of taxable supply from unregistered supplier were brought under exemption. This exemption was initially made effective till 31.03.2018 and subsequently extended upto 30.06.2018 (Notification No. 10/2018 – Central Tax (Rate) dated 23.03.2018), 30.09.2018 (Notification No. 12/2018-Central Tax (Rate) dated. 29-June-2018) and lastly upto 30.09.2019 (Notification No. 22/2018-Central Tax (Rate) dtd. 06-Aug-2018).
  • On 29.08.2018 Section 9(4) CGST Act, 2017 has been substituted vide The Central Goods and Services Tax (Amendment) Act, 2018 to make supply from unregistered supplier taxable on RCM basis by issuance of notification only on the recommendations of the GST Council.
  • Thus, with effect from 29.08.2018 supply from unregistered supplier remained taxable no longer and Notification no. 8/2017 -Central Tax (Rate) became redundant automatically.
  • However, the Government failed to recognize the redundancy of notification w.e.f. 29.08.2018 till 29.01.2019 when it issued notification no. 01/2019 -Central Tax (Rate) to rescind Notification no. 8/2017 -Central Tax (Rate).
  • In nutshell, rescission of notification 08/2017 has not made any effect on taxability of supply from unregistered supplier in the hands of recipient on RCM basis.



In Other Words Amendments which is applicable From 01.02.2019 is as Under


As per the The GST Amendment Act applicable from 1st February. As a businessman, Finance Persons it is important to understand these changes and how they will effect to you.

By making this amendment act applicable
  • The govt has set the ball rolling for applicability of RCM
  • There is also a change on how GST set off will apply

Changes/Applicability of RCM

Old section 9(4) said that registered taxpayers must pay GST and do full compliance for making purchases from an unregistered dealer.

New section 9(4) says that 'specified class' registered taxpayers must pay GST and do full compliance for 'specified purchases' made from unregistered dealers.

Even though 9(4) is effective starting 1st Feb 2019, the government has not yet notified the 'specified class' of taxpayers or 'specified purchases'. Once that notification is released, such taxpayers will have to comply with RCM. This is likely to be clarified in the next GST Council meeting. As always, we will keep you up-to-date on it.

GST set off Rules as Amended

As per the existing set off the following rules are applcable -

Payment for
First set off from
Then set off from
SGSTSGSTIGST
CGSTCGSTIGST
IGSTIGSTCGST and SGST

As per rules effective 1st February 2019, the following rules will apply for any tax payments made -

Payment for
First set off from
Then set off from
SGSTIGSTSGST
CGSTIGSTCGST
IGSTIGSTCGST and SGST