Person supplying only Exempt Goods- liable to pay GST under RCM?

As per the Goods and Services Tax (GST) Act, every person who supplies goods or services is liable to pay GST. However, there are certain exemptions to this rule. One such exemption is for persons supplying only exempt goods. In this article, we will discuss what exempt goods are and how a person supplying only exempt goods is liable to pay GST under RCM.

What are Exempt Goods?

Exempt goods are those goods which are not liable to GST. According to the GST Act, exempt goods include:

Agricultural produce
Milk and milk products
Fruits and vegetables
Meat and poultry products
Sugar and salt
Newspapers and books
Handloom and handicraft items

There are many other products that are also exempt from GST. The complete list of exempt goods can be found in the GST Act.

How is a Person Supplying Only Exempt Goods Liable to Pay GST?

Even though exempt goods are not liable to GST, a person supplying only exempt goods is still liable to pay GST under the Reverse Charge Mechanism (RCM).

RCM is a mechanism where the recipient of the goods or services is liable to pay GST instead of the supplier. In the case of a person supplying only exempt goods, the recipient of the goods will be liable to pay GST under RCM.

Let's understand this with an example. Suppose Mr. A is a farmer who supplies only agricultural produce which is exempt from GST. Mr. B, a trader, buys agricultural produce worth Rs. 50,000 from Mr. A. As per the RCM, Mr. B will be liable to pay GST on the purchase of agricultural produce from Mr. A. The rate of GST applicable will be the rate applicable to the goods being supplied by Mr. A.

This is because when the supplier supplies only exempt goods, he is not required to obtain registration under GST. Hence, he cannot collect GST on the goods he supplies. Therefore, the recipient of the goods is required to pay GST under RCM.

Conclusion

Person supplying only exempt goods are still liable to pay GST under RCM. This is because the recipient of the goods is required to pay GST in such cases. It is important for both suppliers and recipients of goods to understand the applicability of GST on their transactions to avoid any legal issues.