In this blog, we look at a query on taxability of services provided by unregistered persons.
We engage computer science graduates on specific engagements on a contract basis. Should all such persons be registered under GST?
No. Only persons whose aggregate PAN-India turnover exceeds Rs. 20 Lakhs in a financial year (or 10 Lakhs in where persons operate from Special Category States), or when such persons effect inter-State supplies etc. (other cases where registration is mandatory), a supplier of goods or services would be liable for registration. However, whenever a registered person inwards a supply (may be a supply of goods or a supply of service) from an unregistered person, the recipient of the supply would be liable to discharge tax on the same on reverse charge basis. Consequently, GST would be payable by the Company engaging the graduates, on reverse charge basis, and after making payment of the same, and on receipt of services, the Company would be entitled to claim credit of the taxes paid.
Legislative reference: Section 9 read with Section 49 of the CGST Act, 2017
Authors: Meghana Belawadi and NR Badrinath
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