Section 9(3) of the CGST Act, 2017 provides that the Government may, on the recommendations of the Council, by notification, specify 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 and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
Further section 9(4) of the CGST Act, 2017 provides that the central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on [reverse charge basis] as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
There may arise a situation wherein an assessee has obtained registration under GST for availing certain services on which tax is liable to be paid under Reverse Charge as per section 9(3) but the supply made by such an assessee is exempt under GST.
Example: A hospital avails the services of an advocate for a pending litigation case needs to take registration under GST for paying tax under reverse charge even though the supplies made by hospital are exempt under GST. Now if the hospital makes any purchase from unregistered dealer the provisions of section 9(4) would be triggered and hospital would be liable to pay tax under reverse charge. This would not have been the case if the hospital had not taken registration for the purpose of section 9(3) i.e. availing advocate services. The aforesaid, situation implies that if an assessee obtains registration under section 9(3) the provisions of section 9(4) automatically applies on such assessees. This proves to be a burden on small assessees.
When an assessee is dealing in wholly exempted goods having turnover more than Rs.20 lakhs he is not required to take registration by virtue of section 23 of CGST Act, 2017. However, Section 24 mandates to obtain registration in case the liability arises under reverse charge. This situation requires clarity as provisions of section 24 overrides the provisions of section 22(1) only and not section 23.
It is therefore suggested that there be provided a suitable clarification that in cases where registration is taken only for the purpose of section 9(3) i.e. payment of tax under reverse charge the provisions of section 9(4) will not be triggered.