1. Introduction: Within the intricate framework of GST legislation, the Reverse Charge Mechanism (RCM) stipulated under Section 9(3) plays a pivotal role in governing the tax liability on certain supplies. This analysis delves into the nuanced application of RCM, particularly when procuring supplies from vendors whose turnover falls below the GST registration threshold.

    Understanding the Legal Framework: Section 9(1) of the CGST Act levies a tax on all intra-State supplies of goods or services, irrespective of the turnover, except for specified exceptions. The crucial distinction arises in Section 9(3), which shifts the liability to pay tax from the supplier to the recipient for specific categories of supplies. It is essential to note that this provision doesn’t create a new levy but designates who bears the liability to pay the existing tax.

    Analysis of RCM Applicability: Consider a scenario where a registered business receives a service covered by Notification No. 13/2017-Central Tax from a vendor whose turnover is less than 20 lakhs. The question at hand is whether RCM is applicable in such cases.

    1. Levy and Collection Distinction:

      • Section 9(1) establishes the levy on all supplies, decoupled from any turnover threshold.
      • Section 9(3) does not introduce a new levy but shifts the liability to pay tax.
    2. Taxable Person Definition:

      • Taxable person is defined as a person registered or liable to be registered.
      • Liability to register arises based on turnover crossing the threshold or falling under Section 24.
    3. Recipient’s Liability under RCM:

      • Section 9(3) explicitly states that the provisions of the Act apply as if the recipient is the person liable to pay tax.

    Legal Position Comparisons: Drawing a parallel with the Central Excise Law, where the levy was on ‘manufacture’ but collection occurred at the time of ‘removal,’ clarifies the argument. Similarly, in GST, there is a levy on all supplies, and payment obligation arises based on the recipient’s status as a taxable person.

    Conclusion: The analysis leads to the conclusion that a registered recipient is liable to pay RCM on supplies covered by Section 9(3) irrespective of the supplier’s turnover. The levy exists on all supplies, and RCM merely designates the recipient as the payer. This interpretation aligns with the GST framework and maintains consistency with the erstwhile service tax provisions.