Purchase Return to Unregistered Vendor (Reverse Charge)
Persons whose aggregate turnover in a financial year does not exceed forty lakh rupees are not required to be registered with the GST authorities. Such persons are called unregistered vendors. Any purchases from unregistered vendors do not attract GST. However, there are some notified services under GST, on supply of such services GST is applicable under reverse charge i.e. the purchasers are required to pay GST to the Government.
A buyer may have to return the goods or issue credit note due to various reasons like damaged goods, quality issues etc.
Process for purchase returns to unregistered vendor has been explained in this document.
Create a purchase return order or credit memo
- Choose the
icon, enter Purchase Return Order or Purchase Credit Memo, and then choose the related link. - Select Vendor on Purchase Credit Memo header, GST vendor type should be Unregistered.
- Select Item Code for goods, G/L Account for Service purchase, Fixed Asset for Fixed Asset purchase and Charge (Item) for Item Charge on Purchase Credit Memo line. GST Group Code, HSN/SAC Code and GST Credit value should be selected as Availment if the tax input credit is available or else Non-Availment on the Item, G/L Account, Fixed Asset, Item (Charge).
For example, purchase credit memo or return order is issued for INR 10,000 on which 18% GST (9% CGST and 9% SGST/UTGST in case of Intra-State or Intra-Union Territory transaction or 18% IGST in case of Inter-State transaction), has to be charged.
GST calculation will appear in the Fact Box, as following:
Component Amount GST Base Amount 10,000 CGST 900 SGST 900 IGST 1800 GL Entries for Intra-State or Intra-Union Territory purchase return of goods, services, fixed asset, charge item to unregistered vendor where input tax credit is available (reverse charge), will be as following:
Particulars Amount Vendor Account 10000 CGST Payable Account 900 SGST/UTGST Payable Account 900 CGST Receivable Account -900 SGST/UTGST Receivable Account -900 Purchase or Services Account or Fixed Asset increase during the year -10000 GL Entries for Intra-State or Intra-Union Territory purchase return of goods, services, fixed asset, charge item to unregistered vendor where input tax credit is not available (reverse charge), will be as following:
Particulars Amount Vendor Account 10000 CGST Payable Account 900 SGST/UTGST Payable Account 900 Purchase or Service Account or Fixed Asset increase during the year -11800