Guidelines for Reporting Purchases from Unregistered Dealers under GST (CGST Act Section 94)

Guidelines for Reporting Purchases from Unregistered Dealers under GST (CGST Act Section 94)

Introduction to GST and the Threshold Limit

In India, the Goods and Services Tax (GST) has been introduced to harmonize the tax structure for all goods and services. One of the key provisions under the GST framework is the threshold limit, which categorizes businesses based on their turnover and the need to register and report under the GST regime. Specifically, the threshold limit under the GST regime is India is designed to exempt small businesses from the obligation to register and file returns if certain conditions are met. This article will help you understand how the purchase of goods or services from unregistered dealers is handled under GST rules, with a focus on the CGST Act Section 94.

The Threshold Limit and Its Implications

Under the Goods and Services Tax (GST) regime in India, there is a threshold limit that determines when a business must register and start compliance under the GST laws. For purchases from unregistered dealers, the threshold limit is set at Rs. 5000 per day. If your business's total purchases from unregistered dealers do not exceed Rs. 5000 in a single day, you are exempted from the requirement to show these purchases in your GSTR-3B return. These transactions are considered exempt from GST, and therefore, do not need to be reported under your GSTR-3B return.

Exempt Inward Supply under Section 94 of CGST Act

Section 94 of the Central Goods and Services Tax (CGST) Act defines certain transactions as exempt inward supply. This means that if the value of goods or services purchased from unregistered dealers does not exceed Rs. 5000 per day, these purchases are exempted from GST under the GSTR-3B return. Typically, exemptions like these apply to goods and services that would otherwise be taxable but are specifically exempted under the GST regime.

For GSTR-3B returns, exemptions are generally required to be reported separately. However, if the purchases from unregistered dealers are below the Rs. 5000 threshold, they may not need to be reported as they fall below the mandatory reporting limit. This makes these transactions 'exempt' in the context of reporting under GSTR-3B.

Documentation and Compliance

While it's advisable to keep proper documentation for all transactions, especially those that could be subject to audits, purchases of Rs. 5000 or less from unregistered dealers are not required to be reported in your GSTR-3B. However, maintaining proper records is crucial for your own accounting and compliance purposes. It is recommended that you consult a tax professional or a GST consultant for specific advice tailored to your business situation to ensure full compliance with the GST rules.

Column 5 of GSTR-3B: Values of Exempt and Non-GST Inward Supplies

The GSTR-3B return is a monthly tax return required by every registered GST taxpayer in India. One of the columns in this return, Column 5, is specifically meant for reporting the values of exempt, nil-rated, and non-GST inward supplies. According to Section 94 of the CGST Act, if the value of purchases from unregistered dealers does not exceed Rs. 5000 per day, these purchases are exempt from GST and therefore are not included in the GSTR-3B return. Column 5 includes a list of services that are either not taxable, exempted, or nil-rated, etc. Therefore, purchases made from unregistered dealers, as per Section 94 of the CGST Act, are not recorded in the GSTR-3B return. This ensures that businesses under the specified threshold do not have to report such transactions.

Conclusion

If your business purchases from unregistered dealers do not exceed Rs. 5000 in a single day, you typically do not need to report these purchases in your GSTR-3B. However, it is essential to keep proper records for your own accounting and compliance purposes. Always consult with a tax professional or a GST consultant for specific advice that can help you navigate the GST regime effectively. Understanding the threshold limits and exemptions under the GST rules helps in simplifying compliance and maintaining accurate records.