Page 16 - Ch3_RCM

6 Legal Provision:-

Ü As per section 9(3) of CGST Act, if service of renting of immovable property is provided by Central
Government [excluding the Ministry of Railways (Indian Railways)], State Government, Union
territory or local Authority to any registered person located in the taxable territory, then GST is
payable under reverse charge by recipient.
Ü If recipient is unregistered, then the supplier of service will pay under forward charge.

Discussion & Conclusion:-
Ü In this case, this service is provided by the government to an unregistered business entity.
Ü Thus, the supplier i.e. the Government is liable to pay GST under forward charge.

04. Section 9(4):- RCM in case of supply of specified categories of goods &/
or services by an unregistered supplier to specified class of registered persons
CCP 03.04.18.00

M/s Goyal Ganga, the promoter and builder registered under GST, started a new project “Royal
House”. Total cost of project is 300 crores, for which the promoter availed the following input and
input services during the financial year 20XX-XY:-

Particulars Amount (₹ in Lakhs)
Input other than cement purchased from ABC Pvt. Ltd. (registered supplier) 2.52

Input purchased from Mr. Anil (an unregistered supplier) 1.2
Input services received from M/s Subhash & Co. (an unregistered supplier) 0.48
Total Inward Supply 4.2
All the amounts given above are exclusive of GST, wherever applicable.

i) Determine the amount of GST payable and the person liable to pay GST, assuming that all the
transactions are intra-state and are taxable at the rate of 18% (CGST 9% & SGST 9%).
ii) If in above case, M/s Goyal Ganga purchases cement from unregistered supplier, then mention the

person who is liable to pay GST.
Answer:
Legal Provision:-
Ü As per section 9(4) of CGST Act, 2017 read with relevant notification, if promoter makes purchases
from unregistered person, where the value of inputs and input services purchased by promoter

from registered supplier is less than 80% (i.e. purchases exceeding 20% from unregistered
supplier), then promoter is liable to pay GST under reverse charge on all such inward supplies (to the
extent of shortfall to make it 80% of the inward supplies from registered supplier).

Ü In case of purchase of Cement by promoter from an unregistered person, promoter is liable to pay tax
under reverse charge. In this case, the condition of 80% (as mentioned above) does not apply and
promoter is liable to GST on such entire purchases of cement.
Discussion & Conclusion:-

1 Ü In the given case, the total inward supplies of input or input services of M/s Goyal Ganga was ₹ 4.2
lakhs, out of which inward supply of ₹ 2.52 lakhs is from registered supplier which amounts to
60% of total purchases of financial year.
Ü Therefore, there is a shortfall of 20% (i.e. 80%-60%) which amounts to ₹ 84,000 (i.e. 3,36,000-

2,52,000).

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