20 July 2025
GST on Purchase of Old Machinery from Unregistered Dealer Supplier is Unregistered: The seller (unregistered dealer) does not charge GST since they are not registered under GST. Reverse Charge Mechanism (RCM): If you (the buyer) are a registered person (registered under GST), you may have to pay GST under Reverse Charge Mechanism on the purchase of goods from an unregistered dealer, only if the purchase value exceeds ₹5,000 in a single transaction. Since your purchase is ₹45,000, RCM is applicable. Applicable GST Rate: GST on machinery generally falls under 18% (standard rate for capital goods and machinery unless specified otherwise). Payment under RCM: You must pay 18% GST on ₹45,000 (i.e., ₹8,100) to the government. You can claim this input tax credit (ITC) if the machinery is used for business. Payment Mode & Documentation: Payment in cash is limited under GST rules: cash payments above ₹10,000 to a single person in a day are prohibited (Section 269ST). So, paying ₹45,000 in cash is not allowed. Payment should be made via cheque, bank transfer, or digital mode to be compliant. Summary: Scenario Details Seller Unregistered dealer Purchase Value ₹45,000 GST Rate 18% (on ₹45,000 = ₹8,100) Payment Mode Should NOT be cash (due to limit) GST Payment Responsibility Buyer under Reverse Charge Mechanism (RCM) Important: Paying ₹45,000 in cash is against GST cash transaction rules. You should request payment via banking channels to avoid penalty.
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