27 January 2018
Dear Sir, I have a job worker (Unregistered), and I have made him Payment for his job work, more than Rs. 20 Lakhs. I want to know what is the consequences ( for both Parties i.e. for Me and Job Worker) when I made him further payment of Rs. 5 Lakhs,
21 July 2024
When dealing with payments to unregistered job workers under GST (Goods and Services Tax) regulations in India, there are specific provisions and consequences to consider. Here’s an outline of the implications for both parties involved:
### For the Principal (You, as the Paying Entity):
1. **GST Liability on Reverse Charge Mechanism (RCM):** - As per Section 9(4) of the CGST Act, 2017, if you are a registered person (taxable person) and you procure taxable goods or services from an unregistered supplier (including job workers), you are liable to pay GST under reverse charge mechanism (RCM). - This means you are required to pay GST on behalf of the unregistered job worker. The applicable GST rates will depend on the nature of the job work and the goods or services involved.
2. **Compliance Requirements:** - You need to comply with the provisions of GST law regarding payment of tax under RCM, including filing GST returns (GSTR-3B, GSTR-1, etc.) and payment of GST within the prescribed time frames. - Ensure that you correctly calculate and pay GST under RCM for the payments made to the unregistered job worker.
3. **Consequences of Non-Compliance:** - Failure to comply with RCM provisions can lead to penalties and interest under the GST law. Section 122 and Section 125 provide for various penalties for non-compliance, including incorrect tax payment and delay in payment.
### For the Unregistered Job Worker:
1. **Impact on the Job Worker:** - Since the job worker is unregistered, they are not required to collect GST on their supplies. However, they are indirectly impacted by the RCM because it affects the payment received from you, the principal. - They should ensure compliance with any documentation requirements you may have as a registered person under GST, such as providing necessary invoices and details for your GST compliance.
2. **Threshold Considerations:** - The threshold limit for exemption from registration under GST is Rs. 20 lakhs (Rs. 10 lakhs for special category states). If the job worker’s aggregate turnover exceeds this threshold, they would be required to register under GST.
### Practical Steps:
1. **Documentation and Invoices:** - Ensure proper documentation of all transactions with the unregistered job worker, including invoices and payment receipts. - Maintain records to substantiate the payment made and the GST paid under RCM.
2. **GST Returns and Payments:** - File your GST returns accurately and on time, reflecting the GST paid under RCM for the job work services. - Pay the GST liability within the due dates to avoid penalties and interest.
### Conclusion:
Making payments exceeding Rs. 20 lakhs to an unregistered job worker triggers GST liability under reverse charge mechanism for the principal. It’s crucial to understand and comply with these provisions to avoid legal implications and ensure smooth business operations.
For precise interpretation and compliance with GST laws, consulting a qualified tax professional or GST practitioner is recommended, as they can provide tailored advice based on your specific circumstances and transactions.
CAclubindia
