There are some monetary disadvantages in dealing with unregistered dealers in Goods and services tax as it will be completely opposite for a beneficial deal for all those registered dealers. There is some persistent question regarding the anonymity of unregistered dealers in the GST. Some of the questions are framed here to acknowledge the general queries regarding the transaction with the unregistered dealer.
Q: What is RCM provision and according to this what are the consequences if the purchase is made from unregistered dealers?
A: RCM provisions stands for reverse charge mechanism which is utilized for the tax payment made by the recipient on the purchase of any good or service. RCM also explains that tax is paid by the opposite party and this is implied in the case of unregistered dealer also. The reverse charge already finds its place in service tax provision and has been included in the GST also making necessary for all the dealers to pay taxes based on reverse charge.
Q: In reverse charge mechanism, what will be the duration of supply in a matter of purchasing of goods?
A: The duration of supply in a matter of purchasing of goods in reverse charge mechanism will be earlier in the following:
The date of receipt of goods or
- Date on which payment is made or
- The date immediately following 30 days from the date of issue of invoice
Now take an example that if a taxpayer’s purchase some goods on 25 July and present the bill on 2nd august and for the same the consideration is paid on 28th august than the provision of RCM will deem 25 July as a time of the supply.
Q: What will be the case in services for the time of supply in RCM?
A: In this case, the following scenario will be applicable:
- The date on which payment is made
- The date immediately following 60 days from the date of issue of invoice
Q: What will be the case for GST paid in RCM whether the credit will be allowed or not?
A: As per the GST provisions, each taxpayer can take the input tax credit but in order to avail the credit of tax paid, first he has to pay the taxes to avail the credit on all those purchases in the next month. In the provisions it is clearly mentioned that GST credit cannot be availed on food and beverages, building, passenger vehicle even if the tax is paid on R.C.M basis that means the burden of such tax shall be borne by the taxpayer.
Recommended: GST Refund Procedure Under Goods and Services Tax India
Q: What changes can RCM bring after the implementation of GST?
A: The RCM can significantly increase the number of taxpayer base in India while it also mentioned that purchases made from an unregistered dealer can prove expensive for the registered dealer. This will be attracting reverse charges in case if any dealers make transactions with an unregistered dealer.
Sir, I have availed a composition scheme since 1 April 2019 as my turnover is below 75 Lacs. I Purchase items from local workshops and unregistered suppliers as well as a few registered suppliers also. I resale / supply them to Automobile dealers, Few Govt Dept. ST bus depot etc.
How much tax I would be paying? 1% only or do I require to pay tax on purchase from the unregistered supplier as well? What is the suitable Software for me to handle my business?
Thanks and Regards.
Yes, you need to pay tax on purchases also, Gen GST software is the best one to handle all such issues
dear sir,
I am a unregistered dealer, how can i prepare invoice with GST or without GST.
How you manage your books of Accounts?
Suppose if I purchase furniture, like desks from unregistered dealers, and supplies them to government. And if I make the payment to the supplier during next year. And If I pay GST on purchases from unregistered dealers on RCM basis at 18% of the value of U.R.D. Purchases. Can I Claim input tax credit on RCM paid on unregistered purchases if I make the payment in the next financial year?
One can claim ITC only if paid within 180 days not next financial year
Hi Sir,
I’m a Registered Dealer. and purchased stock wholesale from UN- Registered Dealer (RCM Transaction) and sold to Registered Dealer.(B2B Transaction)
My question is if I sell goods to (B2B) in which invoice RCM to be marked as “Yes” or No”
please explain in brief how to file the return for this transaction and help me with invoicing and filing software
In GSTR-1 B2B transaction, it should be marked with RCM “NO” as the transaction done between you and purchaser is not related to RCM transaction, although you have purchase the goods from unregistered dealer. You can use our Gen GST software for the same for ease of your working
Sir Thanks , for quick response can you please provide a demo for Gen GST software