Composition Dealer - Purchase from Unregistered Dealers

[Arunagiri Guhaneswaran]

My client was exempt from VAT, being an arm of the Government.

However GST was applicable and this was decided after various clarifications and finally registered as a Composition Dealer on 15th December 2017 and filed quarterly returns for Dec 2017(15.12.2017 to 31.12.17, being the period of registration) and Jan,Feb,March 2018. However they have made purchase from composition dealers and unregistered dealers also.

April May June 2017 - Exempt

July 17 to 14th Dec 2017 - Not registered

GSTR 9C is not applicable since their turnover did not cross ₹ 2 crores.

The question is:

While filing GSTR 9A, whether we have to pay GST on purchase made from unregistered dealers?

What will be the taxation effect on Turnover from July 2017 to Dec 14th 2017? since they have not registered for that period.

AGN

[KASTURI SETHI]

Regarding the purchase from unregistered dealer you are to pay applicable GST along with interest @ 18% under RCM.

From July, 17 to 14.12.17 you are to pay GST along with interest as regular GST registered person.

Regarding the purchase from composition dealer, both will neither charge GST from customers nor will take ITC.

The Composition dealer cannot supply inter-State.

Being a Govt. concern, no mala fide intent or suppression is involved. So neither higher rate of interest nor penalty is imposable.Penalty is also not imposable on the ground that there was a interpretational dispute. There are case laws in this aspect in favour of Govt. Anyhow, in order to avoid higher rate of interest and penalty and litigation. Pl. deposit Govt. dues with simple interest @ 18% before issuance of notice from the department. The Department treats both concerns Govt. and Private at par as tax comes from the pocket of common man.

[Arunagiri Guhaneswaran]

Thank You Sir for your detailed reply

There is a confusion that Reverse Charge is postponed till Sep 2019, hence not payable for purchase from unregistered dealers

Kindly clarify

Thanks Again

AGN

[KASTURI SETHI]

Postponement up to 30.9.19 is not applicable to you as composition dealer. Here is a FAQ dated 16.8.17 available on CBEC site.It is requirement of law as well as Govt.'s intent that Composition dealer must buy from registered dealer so that tax must be paid by that registered person ( composition dealer) and ITC be not be taken. Benefits of both worlds cannot be allowed to composition dealer.

Q18. A person opting to pay tax under the composition scheme receives inputs/input services from an unregistered person. Will the composition dealer have to pay GST under reverse charge? If yes, in what manner?

Ans. Yes. Tax will have to be paid on supplies received from unregistered persons by the composition dealer under reverse charge at normal rates and not composition rates. The tax can be paid by the 18th day of the month succeeding the quarter in which such supplies were received. The information relating to such supplies should be shown by the composition dealer in Table 4 of Form GSTR 4. In respect of other notified supplies in which GST is chargeable on reverse charge basis, the composition dealer will have to pay tax at normal rates

AI Summary

Reverse charge: Composition dealers must pay GST on purchases from unregistered suppliers and disclose it in returns. A composition dealer must pay GST under reverse charge on supplies received from unregistered persons at normal rates (not composition rates), pay that tax by the 18th day of the month succeeding the quarter in which supplies were received, and disclose such supplies in Table 4 of Form GSTR 4; purchases from composition dealers do not attract GST or ITC, composition dealers cannot supply inter state, and liabilities arising while unregistered must be regularised with simple interest, with penalty ordinarily not attracted where an interpretational dispute exists.