GST UPDATE ON Exemption from reverse charge upto Rs 5000 per day

The Central Government issued notification which provides an exemption to the small transactions with unregistered persons. The notification seeks to exempt intra-State supplies of goods or services or both received by a registered person from any unregistered supplier from the whole of the central tax leviable thereon under section 9(4) of the CGST Act, 2017. The said exemption shall be available only upto the extent where the aggregate value of such supplies of goods or service or both received by a registered person from any or all the suppliers, who is or are not registered upto Rs 5000 in a day. The points to be noted here are:

1) The exemption is available to the extent of Rs. 5000 per day only. Thus if such expenses exceeds the said amount then GST shall be payable under reverse charge on full amount of expenses incurred that day.

2) The exemption is available on supplies made under Section 9(4) only. Thus, all the supplies as specified under section 9(3) shall be chargeable to tax on reverse charge basis from zero itself. Thus if even a penny is spent for availing such supplies then they shall be chargeable to tax on reverse charge basis irrespective of this notification.
Let us now see which supplies fall under section 9(3):

Section 9(3) covers in itself the categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both which shall be notified by the Government subject to some conditions which have been notified by the Government. Following services have been notified:

(a) Taxable services provided or agreed to be provided by any person who is located in a non-taxable territory and received by any person located in the taxable territory other than non-assessee online recipient (OIDAR)
(b) Services provided or agreed to be provided by a goods transport agency (GTA) in respect of transportation of goods by road.
(c) Services provided or agreed to be provided by an individual advocate or firm of advocates by way of legal services, directly or indirectly
(d) Services provided or agreed to be provided by an arbitral tribunal
(e) Sponsorship service
(f) Services provided or agreed to be provided by Government or local authority excluding, -
(1) renting of immovable property, and
(2) services specified below-
(i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than Government;
(ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;
(iii) transport of goods or passengers.
(g) Services provided or agreed to be provided by a director of a company or a body corporate to the said company or the body corporate;
(h) Services provided or agreed to be provided by an insurance agent to any person carrying on insurance business
(i) Services provided or agreed to be provided by a recovery agent to a banking company or a financial institution or a non-banking financial company
(j) Services by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India
(k) Transfer or permitting the use or enjoyment of a copyright covered under clause (a) of sub-section (1) of section 13 of the Copyright Act, 1957 relating to original literary, dramatic, musical or artistic works
(l) Radio taxi or Passenger Transport Services provided through electronic commerce operator

Thus, if the above referred supplies are made even by unregistered person then also it will not be included in computing limit of Rs. 5000/-. For example, even if GTA supply is made by unregistered transporter then also it will not taken into consideration for calculating limit of Rs.5000/-. RCM is applicable in Section 9(3) and not under 9(4).

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GST UPDATE ON Exemption from reverse charge upto Rs 5000 per day

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