Do I pay GST under reverse charge when I buy from an unregistered seller?

Your accountant has just posted a bill from a small trader. The trader has no GST number and charged no GST. A colleague says, "Buy from an unregistered person and you must pay the GST yourself." Another says that rule is dead. Who is right?

Both are partly right. The rule your colleague describes was real, but only until 31 January 2019. Today the answer depends on who you are, what you bought, and whether the Government has notified that combination. This article walks through it so you can check your own purchase.

The short answer

Buying from an unregistered seller does not, by itself, make you pay GST under reverse charge. That blanket rule was removed with effect from 1 February 2019. What remains is a narrow power in section 9(4) of the Central Goods and Services Tax Act, 2017 (the CGST Act). Reverse charge applies to your purchase only if:

you are a registered person who falls in a class the Government has notified;
what you bought is a category the Government has specified; and
the seller is unregistered.

If any of the three is missing, section 9(4) does not apply to you. A different reverse charge entry under section 9(3) might still apply, which we cover below.

What "reverse charge" means

Normally the seller collects GST and pays it to the Government. Under reverse charge the buyer pays it. The CGST Act defines "reverse charge" as "the liability to pay tax by the recipient of supply of goods or services or both instead of the supplier" under section 9(3) or section 9(4) (section 2(98), CGST Act, 2017).

So there are two doors into reverse charge:

Section 9(3) lets the Government list categories of goods or services where the buyer pays, whoever the seller is. Examples are goods transport and legal services. These are a separate topic.
Section 9(4) is about the seller being unregistered. This is the door this article covers.

What section 9(4) said, and what it says now

Until 31 January 2019, the old section 9(4) made the buyer pay tax on every supply of taxable goods or services from an unregistered supplier to a registered person. That is the rule your colleague remembers. ICSI's educational note of 15 February 2019 sets the old and new text side by side and describes the old position as: every registered person had to pay GST under reverse charge on supplies from unregistered persons.

The CGST (Amendment) Act, 2018 replaced section 9(4) with effect from 1 February 2019 (Act 31 of 2018, section 4, brought into force on that date by Notification No. 02/2019-Central Tax). The section now reads:

"The Government may, on the recommendations of the Council, by notification, specify a class of registered persons who shall, in respect of supply of specified categories of goods or services or both received from an unregistered supplier, pay the tax on reverse charge basis as the recipient of such supply..." (section 9(4), CGST Act, 2017).

Three things to notice.

It is a power, not a rule. Nothing happens until the Government issues a notification.
It names a class of registered persons, not all of them.
It names specified categories of goods or services, not everything.

The Integrated Goods and Services Tax Act, 2017 has a matching section 5(4) for inter-State supplies. It was replaced in the same way with effect from 1 February 2019 (Notification No. 1/2019-Integrated Tax).

ICSI's note adds that Notification No. 01/2019-Central Tax (Rate) dated 29 January 2019 rescinded the earlier Notification No. 8/2017-Central Tax (Rate), which had given the old blanket rule its working details.

Which buyers and goods are actually notified?

This is where you must be careful, because the answer lives in notifications, not in the Act.

ICSI's note of 22 March 2019 on the GST Council's 33rd and 34th meetings on real estate describes one use of the amended power. Builders who choose the lower rate for affordable and other houses, without input tax credit, are required to buy a minimum share of their inputs and input services from registered persons. On the shortfall they pay tax under reverse charge. ICSI also records reverse charge on cement bought from an unregistered person. The notification that carried this into law is Notification No. 07/2019-Central Tax (Rate) dated 29 March 2019, which appears in the CBIC notification index.

So, on that summary, the best-known live use of section 9(4) is for real estate promoters, on purchases of specified inputs from unregistered sellers.

Two honest limits:

We have not read the full text of Notification No. 07/2019, only its index entry and ICSI's 2019 summary of the Council decision. We give no percentages here because we could not verify them. Rates and conditions may have been revised since. Check the notification on the CBIC website and read the current text before you rely on it.
We found no 2024 to 2026 notification that widens the list of buyers under section 9(4). Check the CBIC notifications page for anything newer.

If you are not a promoter of a real estate project, then unless some other notification names you, section 9(4) does not make you pay tax on your purchases from unregistered sellers.

Do not mix this up with section 9(3)

Many "unregistered seller" cases people worry about are really section 9(3) cases. There, the Government lists the category of supply and the buyer pays regardless of who the seller is, or it limits the rule to unregistered sellers in that category. Two examples:

Renting of commercial immovable property (not a residential dwelling) by an unregistered person to a registered person. ICSI's February 2025 newsletter records that the Council regularised past RCM payments on such rent for composition-scheme taxpayers for 10 October 2024 to 15 January 2025.
Imported services from outside India, which are a separate topic.

These are not section 9(4). They belong to section 9(3) and the notifications under it. Whether you owe tax on rent paid to an individual landlord is a section 9(3) question. Do not answer it by reading section 9(4).

A quick check for your own purchase

Ask these questions in order.

Is the seller really unregistered? Check the GSTIN on the GST portal. A seller who is registered only for deducting tax at source (section 51) is treated as "not registered" for the self-invoice rule in section 31(3)(f), as the Explanation to that section says. Do not assume that "has a GSTIN" always means "registered and charging GST".
Are you in a notified class under section 9(4)? For most companies buying office supplies, software or services, the answer is no.
Is what you bought a specified category? Match it with the notification wording, not with the general description of the goods.
If 2 and 3 are yes, reverse charge applies. Move to the steps below.
If either is no, test section 9(3). Is your purchase in a category listed there, such as goods transport, legal services or commercial rent from an unregistered landlord? That is a separate check.

If section 9(4) does apply: the steps

You become the person liable to pay the tax (section 9(4), CGST Act). Then:

Time of supply. For goods under reverse charge, the time of supply is the earliest of the date of receipt of goods, the date of payment, or the day after thirty days from the supplier's invoice (section 12(3), CGST Act). For services, it is the earlier of the payment date or the day after sixty days from the supplier's invoice, or the date you issue your own invoice where the recipient must issue it (section 13(3), CGST Act).
Issue your own invoice. A registered person liable under section 9(3) or 9(4) must issue an invoice for the goods or services received from the unregistered supplier (section 31(3)(f), CGST Act). Rule 47A of the CGST Rules, 2017 gives thirty days from the date of receipt of the supply.
Issue a payment voucher when you pay the seller (section 31(3)(g), CGST Act). Rule 52 lists what it must contain: the supplier's name and address, a serial number, date, description, amount paid, rate of tax and tax payable.
Pay the tax. Check on the GST portal which ledger you may use to pay a reverse charge liability before you file.
Report it in your monthly GST return. Where it goes in GSTR-3B is covered in our separate article on reverse charge in GSTR-3B.
Claim input tax credit if you are eligible. The self-invoice is a valid document for credit under rule 36(1)(b) of the CGST Rules, 2017, "subject to the payment of tax". Section 16 conditions still apply. CBIC Circular No. 211/5/2024-GST of 26 June 2024, as summarised by ICSI, says that for reverse charge purchases from unregistered persons the relevant financial year for the section 16(4) time limit is the year in which the recipient issues the invoice, subject to payment of tax and other conditions.

What not to do

Do not pay reverse charge on every unregistered purchase out of caution. Check the notification first, so you pay only where a notification makes you liable.
Do not ignore it when you are covered. If section 9(4) applies and you skip it, the tax remains payable by you as the recipient.
Do not use the pre-2019 rule. Old articles and old software settings may still say "all unregistered purchases". They are out of date.
Do not skip the self-invoice and payment voucher. Without them your credit claim has no document behind it.
Do not rely on the seller's word that "I am below the limit, so no GST". That may be true for the seller, but it says nothing about whether a section 9(3) or 9(4) rule applies to you.

What to do now

Next step: list your last quarter's purchases from sellers without GSTIN and mark each as goods or services (section 9(4), CGST Act, 2017).
Then: compare each line with the notifications under section 9(3) and section 9(4) on the CBIC website, and for real estate promoters, Notification No. 07/2019-Central Tax (Rate) (section 9(4), CGST Act, 2017).
Deadline: if reverse charge applies, issue your invoice within thirty days of receiving the supply (rule 47A, CGST Rules, 2017), and note that the tax is for the period in which the time of supply falls (sections 12(3) and 13(3), CGST Act, 2017).
Consequence of missing it: the tax remains payable by you as the recipient, and you cannot claim credit on a tax you have not paid (rule 36(1)(b), CGST Rules, 2017).

Have a CA review your facts before you act or file.

FAQs

Is every purchase from an unregistered seller under reverse charge?
No. That was the position until 31 January 2019. From 1 February 2019, section 9(4) CGST applies only to a class of registered persons notified by the Government, for specified categories of goods or services.

I run a private limited company that buys services from freelancers with no GSTIN. Do I pay GST?
Not under section 9(4) unless you are in a notified class. Check whether the service sits in a section 9(3) category, for example legal services or goods transport. If it does not, you pay no reverse charge on that purchase.

Is renting an office from an individual landlord covered by section 9(4)?
No. It is a section 9(3) matter. The Council's 55th meeting recommended reverse charge on commercial property rent from unregistered landlords, and the details are in the notification under section 9(3). Read that notification and your lease, not section 9(4).

What about real estate promoters buying cement?
ICSI's 2019 summary of the 34th Council meeting records a minimum share of purchases from registered persons for certain builders, reverse charge on the shortfall, and reverse charge on cement bought from an unregistered person. The rates and conditions are in Notification No. 07/2019-Central Tax (Rate) and later changes, which we have not read in full. Check the current text on the CBIC website.

Can I claim credit on tax I pay under reverse charge?
Generally yes, if you are otherwise eligible and have paid the tax. Rule 36(1)(b) allows the self-invoice as a credit document "subject to the payment of tax", and section 16 conditions apply.

Which Act applies to inter-State purchases from an unregistered seller?
Section 5(4) of the IGST Act, 2017 mirrors section 9(4), and is similarly restricted to a notified class of registered persons since 1 February 2019.

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