Section 9(4): The Only Live Notification Is the Promoter's 80% Shortfall

Section 9 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

Section 9(4) is the most misremembered provision in GST. Businesses still ask about the "₹5,000 a day limit" as if it were current law. It was rescinded in 2019, and so was the section it belonged to — the provision was rewritten from a blanket charge into a narrow, notification-driven one, and only one notification of substance has ever been issued under the new form.

Section 9(4) was substituted by the CGST (Amendment) Act, 2018, notified through Notification No. 02/2019-Central Tax dated 29.01.2019 w.e.f. 01.02.2019. It now empowers Government to notify a class of registered persons who must pay reverse charge on specified categories of goods or services received from unregistered suppliers. The old blanket charge, with its ₹5,000-per-day relief in Notification No. 8/2017-CT(Rate), is gone. The live notification is Notification No. 7/2019-CT(Rate) dated 29.03.2019 w.e.f. 01.04.2019, which names the promoter and three categories: the shortfall below 80% registered procurement (18%), cement, and capital goods.

What section 9(4) used to say, and why it is not the current law

The old text: "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…"

That was a blanket charge on every purchase from every unregistered supplier, and it was unworkable from the start. The Handbook traces the retreat:

• Notification No. 8/2017-CT(Rate) dated 28.06.2017, w.e.f. 13.10.2017 as amended, relieved small expenses — tax was payable only where the aggregate value of supplies received from unregistered suppliers exceeded ₹5,000 in a day.
• Notification No. 38/2017-CT(Rate) dated 13.10.2017 then exempted the applicability of section 9(4) altogether, an exemption further extended to 30.09.2019.
• The exemption was rescinded when section 9(4) was itself substituted by Notification No. 2/2019-Central Tax dated 29.01.2019, w.e.f. 01.02.2019.

So the ₹5,000-a-day relief did not survive as a de minimis. It was a relief from a charge that no longer exists in that form. Any policy still applying a ₹5,000 daily threshold to purchases from unregistered suppliers is applying a rule that has been dead since 1 February 2019.

The substituted text empowers Government, on the Council's recommendation, to specify a class of registered persons who shall, in respect of specified categories of goods or services received from an unregistered supplier, pay on reverse charge — and all the provisions of the Act then apply to that recipient as if he were the person liable to pay.

Two conditions must be satisfied together: the recipient must be within a notified class, and the supply must be within a notified category. A registered person outside the notified class pays nothing under section 9(4), no matter how much it buys from unregistered suppliers.

Notification No. 7/2019-CT(Rate): the promoter's three categories

Issued 29.03.2019, applicable w.e.f. 01.04.2019, with a mirror notification on the IGST side (Notification No. 7/2019-IT(Rate)). The recipient in all three entries is the promoter.

Note the excluded supplies in entry 1. TDR, long-term lease against an upfront amount, and FSI are excluded from entry 1 because they have their own reverse charge entries — 5B and 5C of the services notification. They are not free of tax; they are elsewhere. TDR, FSI and long-term lease in a promoter's hands →

The 80% condition, and what is left out of the calculation

The concessional rates on construction of residential apartments in Notification No. 11/2017-CT(Rate) come with conditions, and this is one of them:

At least 80% of the value of input and input services used in supplying the service must be received from registered suppliers.

Excluded from the computation — and this list decides the arithmetic:

• services by way of grant of development rights;
• long-term lease of land against upfront payment in the form of premium, salami, development charges etc.;
• FSI, including additional FSI;
• electricity, high speed diesel, motor spirit and natural gas.

Where procurement falls short of 80% during the financial year — or the part of it until the completion certificate or first occupation, whichever is earlier — the promoter pays reverse charge on the shortfall at 18% (9% CGST + 9% SGST).

Cement is treated separately and more strictly. The CBIC FAQ states it: the promoter pays 18% on the shortfall on all such inward supplies except cement, on which tax must be paid at the applicable rate, which the FAQ records as 28% (14% CGST + 14% SGST). And after the 01.10.2019 substitution, entry 2 is no longer tied to the shortfall at all — cement purchased from an unregistered person attracts reverse charge in the month in which it is received, whether or not the 80% test is met.

Capital goods are stricter still. The Handbook is explicit: to apply the concessional rates, "each and every purchase of capital goods should be from registered dealers only. In case of purchase of capital goods from unregistered dealer, the entire liability to pay tax would be on the promoter under RCM." There is no 80% cushion for capital goods, and the rate is the applicable rate for those goods under entry 3.

The compliance rhythm the notification prescribes

The promoter must:

• maintain a project-wise account of inward supplies from registered and unregistered suppliers;
• compute the tax on the shortfall at the end of the financial year;
• submit it in the prescribed form electronically on the common portal by the end of the quarter following the financial year; and
• add the liability on the shortfall to output tax liability in a month not later than June following the end of the financial year.

That is an annual reconciliation with a hard outer date. A promoter that discovers the shortfall during a departmental audit two years later is not merely late in payment — it has missed a filing the notification separately requires.

The wider conditions are mandatory, not optional. The FAQ answers the question directly: for the 5%/1% rates, the conditions of payment through the cash ledger, RCM subject to the 80% limit, non-availment of ITC, reversal of credit, maintenance of project-wise accounts and reporting of ITC not availed in the corresponding GSTR-3B are all mandatory against clauses (i) to (id) of Sl. No. 3 of Notification No. 11/2017-CTR.

The three illustrations, worked

The notification's own Annexure III illustrations (via Notification No. 3/2019-CT(R)) are the clearest statement of how the arithmetic runs. In each, the percentages exclude the four excluded categories.

Illustration 1 — 80% met, but cement from an unregistered supplier. Sand 10% (Y), cement 15% (N), steel 20% (Y), bricks 15% (Y), flooring tiles 10% (Y), paints 5% (Y), architect/design 10% (Y), aluminium windows and ply 15% (Y). Registered procurement is 80%, so there is no shortfall — but because cement came from an unregistered supplier, the promoter must pay GST on the cement at the applicable rate on reverse charge.

Illustration 2 — 80% met including cement. Only paints (5%) and aluminium windows/ply (15%) are unregistered; cement is registered. Registered procurement is 80%. No reverse charge is payable on inputs.

Illustration 3 — a genuine shortfall. Sand 10% (N), cement 15% (N), steel 15% (Y), bricks 10% (Y), tiles 10% (Y), paints 5% (Y), architect 10% (Y), aluminium windows 15% (N), ply and commercial wood 10% (N). Registered procurement is only 50% — a 30% shortfall. The promoter pays GST on the cement at the applicable rate first, and then, on the remaining 15% shortfall, at 18% (9 + 9) under RCM.

Read illustration 3 carefully. The cement (15%) is settled at its own rate and comes out of the 30% shortfall, leaving 15% to be taxed at 18%. Cement is not double-counted.

Key takeaways

• Section 9(4) was rewritten w.e.f. 01.02.2019 — it now requires both a notified class of recipient and a notified category of supply.
• The ₹5,000-per-day relief was rescinded when the charge itself was recast; it is not a live de minimis.
• The one substantial notification, 7/2019-CT(Rate) w.e.f. 01.04.2019, names the promoter and three categories.
• Shortfall below 80% registered procurement → 18%; cement → applicable rate, and since 01.10.2019 any unregistered cement purchase is caught in the month of receipt; capital goods → every purchase must be from a registered supplier.
• TDR, long-term lease, FSI, electricity, HSD, motor spirit and natural gas are excluded from the 80% computation.
• The shortfall must be computed annually, filed by the end of the following quarter, and added to output tax by June.
• Cement is settled at its own rate first, and the balance shortfall then bears 18%.

Read next

• RCM Entries 5B and 5C: TDR, FSI and Long-Term Lease in a Promoter's Hands
• ITC on Reverse Charge Tax: Conditions, Timing and the ISD Route
• RCM Entries 5A, 5AA and 5AB: Renting of Immovable Property

Disclaimer: Positions stated as on 5 September 2026, based on section 9(4) of the CGST Act, 2017 as substituted by the CGST (Amendment) Act, 2018 notified through Notification No. 02/2019-Central Tax, Notification No. 7/2019-Central Tax (Rate) dated 29 March 2019 as amended by Notification No. 24/2019-Central Tax (Rate), Sl. No. 3 of Notification No. 11/2017-Central Tax (Rate), Annexure III to Notification No. 3/2019-Central Tax (Rate) and the CBIC FAQs on the real estate sector (F. No. 354/32/2019-TRU dated 7 May 2019), as reproduced in the ICAI Handbook on Reverse Charge under GST (2nd edition, February 2025).