CGST Act: Supply by Unregistered person to registered person

The CGST Act regulates the goods and services tax in India. Under the Act, the supply of goods or services from an unregistered person to a registered person is subject to certain conditions. In this article, we will explore the provisions of the CGST Act that apply to such supplies.

Conditions for Supply by Unregistered Person to Registered Person

As per the CGST Act, an unregistered person can supply goods or services to a registered person, provided the following conditions are met:

1. The value of the goods or services supplied does not exceed Rs. 5,000 per day.

2. The recipient of the goods or services is registered under the GST Act.

If the value of the goods or services supplied exceeds Rs. 5,000 per day, the unregistered person is required to obtain registration under the GST Act. In addition, the recipient of the goods or services is required to pay tax on the supply under the reverse charge mechanism.

Reverse Charge Mechanism

The reverse charge mechanism is a provision of the CGST Act that requires the recipient of goods or services to pay tax instead of the supplier. This mechanism applies in the following situations:

1. Supply of goods or services by an unregistered person to a registered person.

2. Supply of specified goods or services by a registered person to another registered person.

Under the reverse charge mechanism, the recipient of the goods or services is required to pay tax at the applicable rate. The tax paid can be claimed as input tax credit by the recipient.

Impact on Small and Medium Business Owners and Startup Founders

The provisions of the CGST Act that apply to the supply of goods or services by an unregistered person to a registered person can have an impact on small and medium business owners and startup founders. If the value of the goods or services supplied does not exceed Rs. 5,000 per day, the unregistered person can supply the goods or services without obtaining registration under the GST Act. This can be beneficial for small and medium business owners and startup founders who may not have the resources to obtain registration under the GST Act.

However, if the value of the goods or services supplied exceeds Rs. 5,000 per day, the unregistered person is required to obtain registration under the GST Act. This can be a challenge for small and medium business owners and startup founders who may not have the resources to comply with the registration requirements.

Conclusion

The CGST Act regulates the goods and services tax in India. The provisions of the Act that apply to the supply of goods or services by an unregistered person to a registered person are important for small and medium business owners and startup founders to understand. By complying with the conditions for such supplies, business owners can avoid the need to obtain registration under the GST Act and can benefit from the reverse charge mechanism.