Reverse Charge Mechanism Unregistered recipients under GST

Term Reverse Charge Mechanism Unregistered recipients under GST

 

This post explains about Reverse Charge Mechanism Unregistered recipients under GST.  

Unregistered recipients

Unregistered recipients mean the person who receives taxable supplies without having valid registration under GST Laws.

Reverse Charge Mechanism Unregistered recipients under GST:

Section 9(4) of the CGST Act, 2017 mandates that tax on supply of taxable goods by an unregistered supplier to a registered person will be paid by the registered person under reverse charge mechanism. This provision, however, must be read in conjunction with section 2(105) read with section 7 of the CGST Act, 2017. Section 2 (105) defines supplier as a person supplying the goods or services. Section 7 provides that a supply is a transaction for a consideration by a person in the course or furtherance of business.

Even though the sale of old gold by an individual is for a consideration, it cannot be said to be    in the course or furtherance of his business (as selling old gold jewellery is not the business of the said individual), and hence does not qualify to be a supply per se. Accordingly, the sale of old jewellery by an individual to a jeweller will not attract the provisions of Section 9(4) and jeweller will not be liable to pay tax under reverse charge mechanism on such purchases. However, if an unregistered supplier (who is dealing in such trade) of gold ornaments sells it     to registered supplier, the tax under RCM will apply.

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