Registered to unregistered, Goods and Services Tax - GST

[Rachana Ambiger]

Hi,

I file GST of a client who pays tax under QRMP, he has a vendor, a trust, who is unregistered, I am unable to understand how to file this entry, because every return form asks for the GSTIN of the vendor

Posts / Replies

[Ganeshan Kalyani]

Sir, a vendor's information GSTIN wise is not required to be furnished in either GSTR-1 or GSTR-3B. So your client having trust as a vendor need to only furnish the ITC details in his GSTR-3B as a single figure.

[YAGAY andSUN]

When filing GST returns under the Quarterly Return Monthly Payment (QRMP) scheme, there are certain fields that require the GSTIN of the vendor for transactions, such as purchase or procurement of goods and services. However, when you have a vendor who is unregistered, this creates an issue because an unregistered supplier does not have a GSTIN, and the return forms typically require a GSTIN to be entered.

Here's a step-by-step breakdown of how to handle this situation in the GST return, especially under the QRMP scheme:

1. Understanding QRMP Scheme Requirements:

Under the QRMP scheme, you are required to file:

• GSTR-3B (for payment of tax) and
• GSTR-1 (for outward supply details), with GSTR-1 being filed quarterly.

In the GSTR-1 form (which is where you report sales), you need to provide details of both outward and inward supplies. Specifically, in the GSTR-3B form, when you report purchases and input tax credit (ITC), you generally need to provide the GSTIN of the supplier.

2. Vendor is Unregistered:

If your client is purchasing goods or services from an unregistered vendor (such as a trust or an individual who doesn't have a GSTIN), you face the issue of reporting the purchase because the GST return form asks for the GSTIN of the vendor.

3. How to Report Purchases from Unregistered Vendors:

Here’s how you can handle this situation in the GST return:

A. Report under "Reverse Charge Mechanism (RCM)" (if applicable):

For purchases from an unregistered vendor, under certain circumstances, the buyer (your client) is liable to pay GST under the Reverse Charge Mechanism (RCM). The buyer needs to:

• Self-assess the tax and
• Pay GST on such purchases under Section 9(4) of the CGST Act (which covers purchases from unregistered vendors).

If RCM is applicable, you would:

• Calculate the GST that is payable on the purchase.
• Report the purchase under the RCM section of GSTR-3B and GSTR-1.

In GSTR-3B, when reporting RCM purchases, you will enter the amount of tax payable under RCM in the appropriate section (under “Input Tax Credit (ITC)”, specifically under “RCM liability”). This allows you to account for the tax even though the vendor doesn’t have a GSTIN.

B. Reporting in GSTR-1:

When filing GSTR-1, under the Inward Supplies section:

• For unregistered vendors, instead of entering the GSTIN, you can leave the GSTIN field blank.
• In GSTR-1, it’s possible to report purchases from an unregistered vendor under the “B2B (Business to Business)” or “B2C (Business to Consumer)” category, even though you don’t have a GSTIN for the vendor.

However, when you report the purchases from unregistered vendors in GSTR-1, make sure:

• You are not claiming ITC from the unregistered vendor unless the transaction is under RCM, and tax has been paid under RCM.
• In case the vendor is unregistered and the RCM doesn’t apply, such purchases don’t need to be reported in GSTR-1 but should be recorded in books of accounts for other purposes.

C. Filing in GSTR-3B:

In GSTR-3B, under “Inward supplies from unregistered persons” (RCM liabilities), you should:

• Report the value of the supply and GST payable.
• The tax liability on these supplies will be reported under reverse charge and the GST paid under RCM can be claimed as input tax credit, if eligible.

4. What If Reverse Charge Does Not Apply?

If RCM does not apply, and the vendor is unregistered, the only option is to account for the purchases in the books of accounts but not report them in GSTR-1 or GSTR-3B for input tax credit (ITC) purposes.

5. Practical Steps:

Here’s a step-by-step process to handle this situation:

• Identify if the RCM is applicable for your unregistered vendor (this will depend on the nature of the supply).
  • If RCM is applicable, report the tax payable under RCM in GSTR-3B.
  • If RCM is not applicable, do not report the purchase in GSTR-1 and GSTR-3B.
• For RCM applicable purchases:
  • Report the GST on purchases under RCM in GSTR-3B.
  • In GSTR-1, leave the GSTIN field blank for the unregistered vendor, and provide the details as required.
• Ensure proper documentation:
  • Maintain proper records of invoices or agreements from the unregistered vendor (trust or individual), clearly stating the transaction details for future reference in case of audits or scrutiny.

6. Additional Notes:

• Trusts that are unregistered under GST still qualify as unregistered suppliers. You can apply the same treatment for reporting purchases from such trusts.
• If the vendor's supplies are exempt, then no GST would be payable, and such transactions might not need to be reported in GSTR-1 or GSTR-3B.

Conclusion:

When dealing with an unregistered vendor (like a trust) under the QRMP scheme, the GSTIN field can be left blank in GSTR-1, as long as the vendor doesn’t have a GSTIN. If the transaction is under RCM, report the liability in GSTR-3B, and you may be able to claim ITC. If RCM doesn’t apply, simply record the transaction in the books, but do not report it in the returns unless required by the nature of the supply.