Purchase of Goods from an Unregistered Vendor (Reverse Charge)

Persons whose aggregate turnover in a financial year does not exceed forty lakh rupees are not required to be registered with the GST authorities. Such persons are called unregistered vendors. Any purchases from unregistered vendors do not attract GST. However, there are some notified services under GST, on supply of such services GST is applicable under reverse charge mechanism i.e. 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

1. Choose the icon, enter Purchase Invoice, and then choose the related link.
2. Select Vendor on Purchase Invoice header, GST vendor type should be Unregistered.
3. 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.
4. GST Credit option can be changed on invoice line.

For example, invoice will be 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 will appear 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), will be 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 is not available (reverse charge), will be 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, will be 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), will be 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 is not available (reverse charge), will be 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), will be 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 is not available (reverse charge),will be as following:

  Particulars	Amount
  Purchase Account	10000
  SGST Payable Account (Interim)	-900
  CGST Payable Account (Interim)	-900
  Vendor	10000

See Also

Purchase from SEZ Vendor

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