Purchase of goods from an unregistered vendor (reverse charge)
Persons whose aggregate turnover in a financial year doesn't exceed 40 lakh rupees aren't required to be registered with the GST authorities. Such persons are called unregistered vendors. Any purchases from unregistered vendors don't attract GST. However, there are some notified services under GST, on supply of such services GST is applicable under reverse charge mechanism, that is, the purchasers are required to pay GST tax to the Government.
Purchase process for unregistered vendor has been explained in this document.
Create a purchase invoice
- Choose the
icon, enter Purchase Invoice, and then choose the related link. - Select Vendor on Purchase Invoice header, GST vendor type should be Unregistered.
- Select Item Code for goods, G/L Account for Service purchase, Fixed Asset for Fixed Asset purchase and Charge (Item) for Item Charge on Purchase Invoice line. GST Group Code, HSN/SAC Code, and GST Credit value should be selected as Availment if the tax input credit is available or else Non-Availment should be selected on the Item or G/L Account.
- GST Credit option can be changed on invoice line.
For example, invoice is issued for INR 10,000 on which 18% GST (9% CGST and 9% SGST/UTGST in case of Intra-State or Intra-Union Territory transaction or 18% IGST in case of Inter-State transaction), has to be charged.
GST calculation appears in the Fact Box as following:
Component Amount GST Base Amount 10,000 CGST 900 SGST 900 IGST 1800 GL Entries for Intra-State purchase of goods and services from an unregistered vendor where input tax credit is available (reverse charge) are as following:
Particulars Amount Service Account 10000 SGST/UTGST Receivable (Interim) Account 900 CGST Receivable (Interim) Account 900 SGST/UTGST Payable (Interim) Account -900 CGST Payable (Interim) Account -900 Vendor Account -10000 GL Entries for Intra-State purchase of goods and services from an unregistered vendor where input tax credit isn't available (reverse charge) are as following:
Particulars Amount Purchase or Services Account 11800 SGST/UTGST Payable Account -900 CGST Payable Account -900 Vendor Account -10000 GL Entries for purchase of goods and services from an unregistered vendor with reverse charge exempt are as following:
Particulars Amount Purchase or Services Account 10000 Vendor Account -10000 GL Entries for Intra-State purchase of fixed asset from an unregistered vendor where input tax credit is available (reverse charge) are as following:
Particulars Amount Fixed Asset Increases during the Year 10000 SGST Receivable Account (Interim) 900 CGST Receivable Account (Interim) 900 SGST Payable Account (Interim) -900 CGST Payable Account (Interim) -900 Vendor 10000 GL Entries for Intra-State purchase of fixed asset from an unregistered vendor where input tax credit isn't available (reverse charge) are as following:
Particulars Amount Fixed Asset Increases during the Year 11800 SGST Payable Account (Interim) -900 CGST Payable Account (Interim) -900 Vendor 10000 GL Entries for Item Charge in case of Intra-State purchase of fixed asset from an unregistered vendor where input tax credit is available (reverse charge) are as following:
Particulars Amount Purchase Account 10000 SGST Receivable Account (Interim) 900 CGST Receivable Account (Interim) 900 SGST Payable Account (Interim) -900 CGST Payable Account (Interim) -900 Vendor 10000 GL Entries for Item Charge in case of Intra-State purchase of fixed asset from an unregistered vendor where input tax credit isn't available (reverse charge) are as following:
Particulars Amount Purchase Account 10000 SGST Payable Account (Interim) -900 CGST Payable Account (Interim) -900 Vendor 10000