URD PURCHASE

This query is : Resolved

maheboob (Querist)
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07 February 2011 HI,

IN CASE OF GRANULE (PLASTICS WASTE)TRADING THE DEALER FILING THE RETURN HAVE TO CHARGE VAT @5%.

BUT IN CASE OF PURCHASES HE DONT GET ANY TAX INVOICE BECAUSE THEY ARE NOT REGISTERED WE ONLY GET KACCHA BILL.

MY QUERY IS THAT WHETHER I HAVE TO PAY TAX (VAT) ON PURCHASE , CAN I SHOW THAT URD BILL AMOUNT IN MY RETURN WHAT WILL BE THE CONSQUENCES

THANKS & REGARDS
MAHEBOOB PATHAN

K A Asmath

K A Asmath (Expert)
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07 February 2011 At the time of procurement you may have to pay tax as URD purchase and can utilise the credit of such tax against the tax payable on sale of granules to end customers by yourself.

maheboob

maheboob (Querist)
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09 February 2011 whether in assessement of vat i will have to pay tax on that urd purchase or not in mvat

Aashok Kumar Sharma

Aashok Kumar Sharma (Expert)
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02 August 2025 Here’s a clear explanation regarding your query on **URD (Unregistered Dealer) Purchase** of granules (plastic waste) and VAT implications:

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### Situation:

* You are **buying granules from unregistered dealers** who do not issue tax invoices, only **“kaccha bills”**.
* You sell these granules charging **VAT @ 5%**.
* You want to know if you have to pay VAT on the purchase (URD purchase) and how to report it in your return.

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### Key Points:

#### 1. **VAT on URD Purchase:**

* When you buy goods from an unregistered dealer (URD), **no tax invoice is issued**.
* To comply with VAT law, you are **liable to pay VAT on such purchases** under the **“reverse charge” or “URD purchase” mechanism** (depending on the state VAT rules).

#### 2. **Paying VAT on URD Purchase:**

* You must calculate VAT @ 5% (or applicable rate) on the purchase amount from URD.
* This VAT is **paid by you directly to the VAT department**.
* This mechanism ensures tax is collected even when the seller is not registered or paying VAT.

#### 3. **Input Tax Credit (ITC):**

* The VAT paid on URD purchase can usually be **claimed as input tax credit**.
* This credit can be adjusted against the VAT you collect on sales of granules.
* So effectively, you are paying VAT only once.

#### 4. **Showing URD Purchase in Return:**

* You **must disclose URD purchases separately** in your VAT return.
* Show the taxable value and the VAT paid on URD purchase under the designated section.
* This is important for transparency and proper credit claim.

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### Consequences if Not Complied:

| Issue | Consequence |
| ---------------------------------- | --------------------------------- |
| Not paying VAT on URD purchase | Penalties and interest on tax due |
| Not showing URD purchase in return | Assessment issues and scrutiny |
| Losing input tax credit | Higher VAT liability |

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### Summary Table:

| Aspect | Action Required |
| ----------------- | ---------------------------------------- |
| Purchase from URD | Pay VAT on purchase (reverse charge) |
| Tax Invoice | Not available from URD |
| VAT Return | Show URD purchase value and VAT paid |
| Input Tax Credit | Claim credit on VAT paid on URD purchase |

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If you want, I can help you draft the VAT return entry for URD purchases or explain how to calculate VAT payable on such purchases. Would you like that?

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