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Rcm - tricky

Shivani (Learner) (1881 Points)

13 July 2018

Dear Friends

X (registered) of Punjab buys taxable goods from Y of Delhi (unregistered).

What will be the consquences in this case?

As per section 5(4) of IGST Act, X is supposed to pay IGST on reverse charge.

As per section 24 of CGST Act, Y is supposed to get himself registered within 30 days of making this interstate sale.

As per section 32(1) of CGST Act, Y cant issue tax invoice and collect IGST from X at the time of sale. So he will issue a simple invoice.

As per section 31(3)(a) of CGST Act, once Y gets registered he may issue a revised invoice to X.

Now my question is that X has already paid IGST under reverse charge.

Can Y issue a revised invoice and collect IGST from X again?

Regards

shivani

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19 Replies

Pankaj Rawat (GST Practitioner) (55047 Points)
Replied 13 July 2018

Payment of tax u/s 5(4)/9(4) is exempt from tax as of now. Hence, the query is not relevant in the present scenario

Otherwise also, it needs to be understood that an unregistered person cannot make interstate supply. Hence, he is bound to be registered. And in this scenario, i think even if tax under RCM had been paid, the same should be reversed in the next return and claim of ITC based on the revised invoice should be taken

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Shivani (Learner) (1881 Points)
Replied 14 July 2018

Dear Pankaj

its totally wrong that an unregistered person cannot make an interstate supply.

also just because reverse charge under section 5(4) has been held in abeyance doesnt mean we shouldnt be prepared to deal with it if an when it does come into picture again.

My query remains open.

I request members to please throw some light on what needs to be done in such a situation.

regards

shivani

CA Shivam Arora (Chartered Accountant) (2414 Points)
Replied 14 July 2018

The purpose of adding section 5(4) is unknown to all. I guess it is an error on the part of the lawmakers . It has been kept in abeyance and I think it will be removed in the next GST council meeting.

CA Naveen Chand (Chartered Accountant) (12729 Points)
Replied 14 July 2018

first, rcm is deferred till 30-09-2018 so no need to pay gst tax under rcm

CA Naveen Chand (Chartered Accountant) (12729 Points)
Replied 14 July 2018

and why revised invoice after registration

No , not at all

and X has to pay tax under RCM if applicable ,(CURRENTLY DEFERRED) and take credit in same month of RCM paid

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Pankaj Rawat (GST Practitioner) (55047 Points)
Replied 14 July 2018

DEAR SHIVANI

AS PER SECTION 24(1) CGST ACT THE URD CANNOT SELL INTERSTATE (GOODS), OR HAS TO TAKE REGISTRATION COMPULSORY

AND

I HAVE ALREADY REPLIED YOU BY SUPPOSING THAT IN FUTURE THE 9(4) SUSPENSION WILL BE WITHDRAWN , I THINK YOU HAVE NOT GONE THROUGH THE SAME

Pankaj Rawat (GST Practitioner) (55047 Points)
Replied 14 July 2018

NAVEEN JI

AS PER CLAUSE 3(a) OF SECTION 31 CGST ACT, a registered person may within one month from the date of issuance of registration certificate can issue a revised invocie againt the invocie already issued during the period beginnig with the effective date of registration till the date of issuance of certifcate

so my point is simple THE Receipient will reverse the RCM DEPOITED (SELF INVOCIE) in next month return AND claim the ITC on revised invocie issue by URD(NOW REGISTERED) & same will also going to be reflected in GSTR2A of receipient

2 Like

CA Naveen Chand (Chartered Accountant) (12729 Points)
Replied 14 July 2018

ya agreed !!

Shivani (Learner) (1881 Points)
Replied 15 July 2018

Dear Shivam

What problem do you see with section 5(4)?

Both of us agreed in one earlier query of mine on this forum that an unregistered person can make an interstate taxable suppply albeit he must take registration after that.

So if Y has made interstate supply in my example above to X, then X can simply deposit tax under RCM under section 5(4) of IGST Act.

Later Y after taking registration can issue revised invoice to X only showing the taxable value of goods supplied and NOT tax since tax has already been paid by Y under RCM.

Where do you see the fault with it?

Regards

Shivani

CA Shivam Arora (Chartered Accountant) (2414 Points)
Replied 15 July 2018

Yes he can make inter-state supply and after getting registered he will issue revised invoice ! But why will he issue revised invoice to the tune of taxable amount only, when the date of liability mentioned in registration certificate is the day he made his 1st inter-state supply.

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Rhytham Vijay (Student) (18 Points)
Replied 16 July 2018

Reverse charge is not applicable until 30 September U/s 9(4) of cgst/sgst, U/s 5(4) of IGST and U/s 7(4) of utgst
it is highly unlikely that it will be implemented before ELECTION. Even though if implemented, there is no provision so in such type of case revenue neutral rule will prevail.
or after impelementation coucil will give clarification regarding same..

Shivani (Learner) (1881 Points)
Replied 16 July 2018

Dear Shivam

The date of liabiity mentioned in the registration certificate is the date when a person is liable to get himself registered which in our case is when this unregistered person made an inter-state supply to a registered person.

However tax is liable to paid by the recipient under section 5(4) of the IGST Act.

The criteria of getting registered is when you make an interstate taxable supply and not who is paying tax.

Please revert if differ.

regards

shivani

CA Shivam Arora (Chartered Accountant) (2414 Points)
Replied 16 July 2018

Date of liabilty decides the effective date of registration. For example-

Inter-state supply made on 16/7/18

Application for registration made on 17/7/18

Registration certificate granted on 22/7/18

Date of liability mentioned in the certificate-16/7/18(Info filled while making application)

Thus effective date of registration is 16/7/18.

Person liable to pay tax on all outward supply made on or after 16/7/18.

Thus he will issue revised tax invoice and discharge the tax liabilty for the supply made on 16/7/18.

Now if we go as per your view that tax is to be discharged by the recepient u/s 5(4), then there will be double taxation on the same transaction.

I have tried to figure out the purpose of section 5(4) and i think it is for supply of goods/service from foreign country to India where it does not amount to import of goods/service respectively. This is the sole purpose of section 5(4) according to me.

Shivani (Learner) (1881 Points)
Replied 17 July 2018

ya i also thought about the double taxable aspect.

but the law mentions "revised invoice" and not "revised tax invoice" and it is not compulsory for him to issue revised invoice either as the word used is may and not shall.

ball in ur court.

waiting