Reverse Levy on Supplies from Unregistered Persons under GST
Reverse levy – Exempt Self-Help Groups and Micro Enterprises
Section 9 sub-section (4) of the Central Goods and Services Act, 2017 provides for reverse charge on the registered dealer for any supplies sourced from an unregistered dealer. Section 5 sub-section (4) of the Integrated Goods and Services Act, 2017 likewise make a provision for reverse charge. The two sections in the respective Acts are worded as under:
Section 9 sub-section (4) of the CGST, 2017
“S. 9 (4) 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.”
Section 5 sub-section (4) of the IGST, 2017
“S. 5 (4) The integrated 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.” These sections do not provide for any exceptions so that any supply of goods or services from an unregistered dealer will be subject to levy of GST in the hands of a sourcing registered dealer. Even though there is rationale in keeping such provision in the Act but not much thought is given to the adverse impact of such provision on certain sections of the economy
Self help employment groups (SHGs)
The Government of India acknowledges that creating self employment opportunities is one way of attacking poverty and solving the problems of unemployment. There are over 24 crore people below the poverty line in the country ( 2004 Statistics number). The Government of India promote Self Help Groups and other voluntary organizations who employ their aptitude and skill for the good of the rural women, disabled persons, difficult area groups like hilly, desert and sparsely populated areas, BPL groups, scheduled tribe and scheduled caste groups. SHG are formed under the Swarna Jayanti Swarojgar Yojana (SGSY) of the Government of India to provide sustainable income to the poorest of the poor people living in rural & urban areas of the country. Such self help groups from various parts of India come to urban towns to sell their goods. The reverse charge provision would be self defeating the purpose of the Swarna Jayanti Swarojgar Yojana (SGSY) of the Government of India and would discourage a registered dealer from making purchases from such self-help groups and that therefore any sale made by them should be exempted from the purview of these sections to help promote this section of the economy.
Micro enterprise
The Government of India has Micro-credit programme to fund micro enterprises. The programme works through NGOs/SHGs for promotion of self employment by means of setting up of micro enterprise. More particularly Micro-credit programmes are run primarily by SIDBI in the field of Industry, Service and Business (ISB). Thus all those enterprises that are promoted as a means of self employment must not be made to suffer on account of ill-effects of these reverse charge provisions introduced by the Government. Since these directly conflict with the purpose under the two schemes viz., Swarna Jayanti Swarojgar Yojana (SGSY) and Micro-credit programme it is desirable to bring out a suitable advance rule notification enabling such and like institutions to enjoy immunity from the reverse charge provisions. Recommended Articles –
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