GST Bills - A Bundle of Pain & Relief, both!

The provision contained in Clause 9(4) of CGST Bill, 2017, which provides for payment of Goods and Services Tax on reverse charge basis by registered person in respect of procurement of goods / service from unregistered person may increase compliance costs for the registered person as they will have to keep track of even small procurements of goods / services, will have to first pay GST on reverse charge basis on such procurements and then to avail Input Tax Credit of such GST paid. Failure to pay such tax on reverse charge basis may lead to litigation.

The Value Added Tax, by its very nature, makes provision for payment of tax by registered person in respect of goods / services procured from unregistered persons.

For example, If a registered person purchases goods of assessable value of Rs. 100/- involving GST of Rs. 18/- on it from a registered person, and sells the said goods for Rs. 150/- attracting GST of Rs. 27/-, he can pay Rs. 18/- from Input Tax Credit Account and balance Rs. 9/- in cash through Challan.

On the other hand, if the same registered person purchases goods of Rs. 100/- from unregistered person and sells the said goods for Rs. 150/- attracting GST of Rs. 27/-, he would be required to pay this entire amount of Rs. 27/- in cash through Challan. In either case, total tax of Rs. 27/- is paid in cash to the Government Account.

Thus, it appears that the object of levying tax on procurement of goods / services from unregistered persons is inbuilt in GST scheme even without Clause 9(4) of CGST Bill, 2017, and the procedure contained in the said clause will only increase compliance costs of the registered persons.

(The views expressed herein above are personal)

Rameshchandra Kabra 31/03/2017