GST: Benefits of availing inward supplies form an Un-registered Person

GST or the Goods and Services Tax is a very important tax reform that was introduced in India on July 1st, 2017. It has replaced multiple indirect taxes and has brought uniformity in the taxation system across the country. In this article, we will be discussing the benefits of availing inward supplies from an unregistered person under GST.

What are inward supplies from an unregistered person?

Inward supplies from unregistered persons refer to purchases made by a registered person from an unregistered person. As per the GST law, a registered person is required to pay tax on the goods or services procured from an unregistered person.

However, small businesses often find it difficult to comply with the GST registration formalities. To ease the compliance burden, the GST law has provided an option to the registered persons to avail the benefits of inward supplies from unregistered persons under certain conditions.

Conditions to avail the benefits of inward supplies from unregistered persons

As per the GST law, a registered person can avail the benefits of inward supplies from an unregistered person if the aggregate value of such supplies does not exceed Rs. 5,000 in a day. The registered person is required to self-invoice the purchases made from an unregistered person and pay the tax on such inward supplies.

Benefits of availing inward supplies from an unregistered person

Reduced compliance burden

Availing inward supplies from unregistered persons reduces the compliance burden for small businesses. It saves them from the hassle of GST registration and filing returns.

Lower cost of procurement

Inward supplies from unregistered persons are not eligible for input tax credit. However, the tax paid on such supplies can be added to the cost of procurement, which in turn reduces the tax liability of the registered person.

Increased competitiveness

Availing inward supplies from unregistered persons can help small businesses to become more competitive. They can offer lower prices to their customers as they do not have to bear the burden of GST on their procurement.

Conclusion

Availing inward supplies from unregistered persons can be beneficial for small businesses. It reduces the compliance burden, lowers the cost of procurement, and increases competitiveness. However, it is important to ensure that the aggregate value of such supplies does not exceed Rs. 5,000 in a day to avoid any legal issues.