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No RCM on Procurements Made From Unregistered Person till March 31, 2018 (Explanation with Example)

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 procurement of goods or services from any or all unregistered suppliers. Now, exemption shall be available to all the registered persons till March 31, 2018 without any limit in case of supply procured from unregistered supplier.Therefore, any registered person procuring taxable goods/ services from unregistered suppliers, shall not be required to pay CGST under reverse charge mechanism U/s 9(4) of CGST Act, 2017 till March 31, 2018 with effect from 13th Oct, 2017.   In case of goods, where tax is payable on reverse charge basis, the time of supply shall be the earliest of the following:                                                                                                                         • Date of Receipt of Goods                                                                                                       • Date of payment to unregistered supplier                                                                             -• immediately following 30 days from the date of issue of invoice or any other document       Example: if good was received prior to 13th Oct, 2017 then liability to pay reverse charges u/s 9(4) arises.                                                                                                                         In case of services, where tax is payable on reverse charge basis, the time of supply shall be the earliest of the following:                                                                                                 - Date of payment to unregistered supplier                                                                              • immediately following 60 days from the date of issue of invoice or any other document     Example: if service was obtained in the month of September for which invoice was issued on 10th Sep, 2017 and payment to an unregistered supplier is not made till 13th Oct, 2017 then there would not be any reverse charge liability on such transactions.                             Similar notification is issued under the IGST Act vide Notification No. 32/2017 – Integrated tax (Rate) dated 13th October, 2017 and under the UTGST Act vide Notification No. 38/2017 – Union Territory tax (Rate) dated 13th October, 2017.