RCM on Builders on Purchase of Cement From Unregistered Dealers


RCM on Builders on Purchase of Cement From Unregistered Dealers

The CBIC vide Notification No. 24/2019- (CT Rate) dated September 30, 2019 has amended Notification No. 07/2019 – (CT Rate) dated the March 29, 2019 by amending the entry related to cement on which GST is leviable under Reverse Charge Mechanism.

The impact analysis of that entry is shared in below mentioned article.

POSITION BEFORE 01.10.2019

Builder has to pay the GST under reverse charge mechanism (RCM) if he opts to pay the tax @ 1% or 5%, and his total cement purchase during the year from GST registered dealers falls short of 80% of total cement purchases.

Therefore, no liability under RCM on purchase of cement from unregistered dealers is arisen in the following situations :-

(a) If the builder pay the tax @ 12% or

(b) Builder pay the tax @ 1% or 5%, and total cement purchase during the year from GST registered dealers doesn?t fall short of 80% of total cement purchases.

POSITION ON OR AFTER 01.10.2019

Now, the builder has to pay tax under RCM on all unregistered purchase of cement irrespective of rate of GST he charges and irrespective of percentage of registered cement purchase.

Therefore, now builders has to pay the GST under RCM on unregistered cement purchase even if he is paying the GST @ 12% or the registered purchase doesn?t fall short of 80% of total purchase.

In other words, all builders have to pay the tax under RCM on all unregistered purchase of cement.

Point to be noted

The aforesaid rule is applicable only for cement. For other unregistered purchases, the RCM liability shall be arisen only when the builder pay the tax @ 1% or 5%, and purchases from GST registered dealers during the year falls short of 80% of total purchases.

RCM on Builders on Purchase of Cement From Unregistered Dealers

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  1. It appears that RCM was applicable in terms of Notfn 3/2019-CTR to cement supplies from unregistered dealer even when purchase value from registered suppliers did not fall short of 80% of purchases .