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RCM ON URD PURCHASE

Allauddin patel (Accountant ) (111 Points)

08 April 2019

Is RCM applicable now on urd purchase of cotton?

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Mayur Iyer (246 Points)
Replied 09 April 2019

As per Sec 9(4) of CGST Act, if a registered person purchases goods/services from an unregistered dealer (URD) then the registered taxpayer is liable to pay GST on reverse charge basis( only for certain goods/services & registered persons). All the provisions of the Act will apply to such recipient as if he were the person liable for paying the tax in relation to the supply of goods or services.

This provision will apply if the below conditions are met:

There should be a supply of goods or services

The supply should be in respect of taxable goods/services

Supply must be by an unregistered person.

Supply must be to a registered person

Supply must be an intra-state supply as compulsory registration is required for inter-state sales

Purchasing from Unregistered Suppliers

Earlier, Purchases upto Rs. 5,000 per day from unregistered suppliers did not attract GST. In other words, there was a reverse charge on buying from unregistered dealers if you are dealing with unregistered suppliers and making payments above Rs. 5,000. This requirement has been cancelled from 1st Feb 2019 onwards.

Example:

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CA Aravind Penugonda (Chartered Accountant) (311 Points)
Replied 09 April 2019

No. RCM on URD purchases is temporarily suspended.

Currently, it is applicable on few goods/ services which are not yet notified by the Government.

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Mayur Iyer (246 Points)
Replied 09 April 2019

yes suspended till 30.9.19 .isnt it?

CA Aravind Penugonda (Chartered Accountant) (311 Points)
Replied 09 April 2019

Post CGST Amendment Act, 2018 effective from 1 Feb, 2019, section 9(4) reads as under:

"The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply of goods or services or both, 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 such supply of goods or services or both."

Hence, post amendment, RCM on URD procurements is applicable only on few goods/ services/ both, as may be notified by CG. However, till date, such goods/ services/ both are not yet notified. Thus, RCM on URD procurements is currently inactive.