Reverse Charge Mechanism Not Applicable on Purchases from Unregistered Intra-State Suppliers: AAR [Read Order]
The Authority observed that amended Section 9(4) excludes the applicant from RCM liability as long as its operations remain confined to trading activities
The bench of the Authority for Advance Ruling (AAR), Chennai, Tamil Nadu has ruled that the purchases of M-sand, P-sand, Blue Metals, Boulders, and Hollow Bricks from unregistered suppliers within the state is not liable to tax under the Reverse Charge Mechanism (RCM) as per Section 9(3) or 9(4) of the Central Goods and Services Tax Act, 2017.
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The appeal was filed by M/s. Amman Blue Metals, a proprietary concern under the supervision of Mrs. Kasinathan Rupa, Vellore, Tamil Nadu. The applicant is engaged in the wholesale and retail trading of M-sand, P-sand, Blue Metals, Boulders, Hollow Bricks, and related products, purchased from unregistered suppliers within the state.
The appellant sought an advance ruling on whether such purchases attract liability under RCM as per Sections 9(3) or 9(4) of the CGST Act, 2017, and whether the amended provisions or notifications exclude them from such liability.
Appearing for the appellant, Vishal Kothari, argued that the goods in question are not included in the categories as per Notification No. 04/2017 - Central Tax (Rate) dated June 28, 2017 under Section 9(3) of the CGST Act, 2017. It was further clarified that the applicant is solely engaged in trading and not in construction.
It was submitted that post the amendment to Section 9(4) via the CGST (Amendment) Act, 2018, and issuance of Notification No. 07/2019 - Central Tax (Rate) dated March 29, 2019 exempts them from payment of tax on reverse charge as the goods are received from intra-state.
The Central GST authorities did not proceed with written submissions. The State GST jurisdictional officer confirmed that there were no ongoing or related proceedings against the applicant. Therefore,, the bench proceeded to decide based on the records and oral submissions.
The bench of C. Thiyagarajan, CGST Member and B. Suseel Kumar, SGST Member held that the listed goods do not include M-sand, P-sand, Blue Metals, Boulders, or Hollow Bricks, and hence fall outside the purview of RCM under that Section 9(3) according to Notification No. 04/2017.
The tribunal observed that the RCM obligation under this provision applies only to registered “promoters” in the construction sector Section 9(4) of the Act as per Notification No. 07/2019.
As the appellant is not engaged in any other activity, therefore it cannot be categorized as a promoter and therefore falls outside the scope of the said notification.
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