TaxTMI 
TaxTMI 
Ours is a Private Limited Company and we are registered dealer under GST. We have made payment to a labour contractor for repairs work done in our factory. Payment is in excess of Rs. 20 Lakhs in 1 financial year. He is an individual and is an unregistered dealer under GST. We want to know what impact it will have on us with respect to GST.
GST liability in case payment to Unregistered Service Provider exceeds Rs. 20 Lakhs
01 Feb 2023 
4 Replies 
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Reverse charge inapplicable where unregistered service provider supplies labour; supplier remains liable for GST and penalties.
Under the post-13-10-2017 regime the service recipient is not liable to pay GST under the reverse charge mechanism for payments to an unregistered individual contractor; the supplier is obliged to register and pay GST under forward charge. The contract should state that prices are tax-inclusive and bar later reimbursement, and the recipient should obtain written communication urging supplier registration because the supplier remains exposed to tax, interest and penalty for non-compliance. (AI Summary)
Under the post-13-10-2017 regime the service recipient is not liable to pay GST under the reverse charge mechanism for payments to an unregistered individual contractor; the supplier is obliged to register and pay GST under forward charge. The contract should state that prices are tax-inclusive and bar later reimbursement, and the recipient should obtain written communication urging supplier registration because the supplier remains exposed to tax, interest and penalty for non-compliance. (AI Summary)