What Is The Loss If Purchase From Unregistered Dealer

watch_later 3 years, 6 months ago

Sir kindly tell me if registered dealer purchase services from unregistered person and pay him with RCM what is the loss to him .Even if he purchased it from registered he has to pay GST .

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1 Answer

Pulkit Sharma watch_later 3 years, 6 months ago

As per me below are the disadvantages of purchasing from an unregistered person:

  1. Though you said that one need to pay under RCM, but this has to be paid in case and credit will be available only after payment is made. Suppose you purchased something from an unregistered person, at the time of filing your return you have to make payment of tax whether you have input credit or not. Similarly if you purchase from a registered person who gives credit period of 30 days, you will have extra 10 days to make payment. Not major but this has some impact on working capital management.
  2. Unregistered person cannot take input of taxes he paid on his costs incurred. Thus all those taxes he paid is a cost for him.
    For example, suppose Mr. A is not registered under GST. He purchase material worth 100 plus and paid GST on this, say Rs. 18. Total cost for Mr. A is 118.
    If he was registered for him cost would have been 100 only since he will get input credit of 18 paid as GST.
    Now while selling to you he will include 18 as his cost and indirectly that will be charged to you as cost. And you end up paying tax on this already paid GST.
  3. You have to issue tax invoice and as per provisions you are treated as supplier.
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