In GST Era Your Vendor’s Mistake Can Harm a Lot to You and Your Customers

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From Manufacturer to Final Consumer, goods pass through a chain of many Business men like

  • Manufacturer
  • Wholesaler
  • Wholesaler 1
  • Wholesaler 2
  • Trader
  • Trader 1
  • Trader 2
  • Final Consumer

Every person in the chain will pay GST to the government on the incremental sales over his purchase price of goods because on the purchase price GST is already paid to the vendor for which you will get the benefit.

If you have purchased goods from your vendor for Rs. 10,00,000 and you are selling for Rs. 11,00,000 then it means you have paid GST to your vendor @ 18% amounting Rs. 1,80,000 and you will collect from your customer amounting Rs. 1,98,000 on sales of Rs. 11,00,000 @ 18%.

You have already paid GST amounting Rs.1,80, 000, to your vendor. Now you will pay Rs. 18,000 to the government and file your GST return.

GST credit will be verified after 2 months. Now if your vendor has not paid the GST amount or does not file his GST return properly then after this period of 2 months your GST credit of Rs. 1,80,000 will not be allowed and you will be liable to pay full GST amount Rs. 1,98,000. This way your return will not be valid and further your customers who have availed GST credit on the basis of invoice issued by you will also loose their respective GST credits.

This way default of one person in the chain will have impact on all the GST dealers and any day you may come to know that your liability has increased multifold because if you are not paying in time then your customers will yell at you.

Moreover, within these 2 months you may have purchased more goods from the same vendor and paid GST to him then your business will turn into a hell. Your tax liabilities will increase and your customers will also be in trouble due to this and as a result you may also loose your business.

So lot of care is to be taken while choosing your vendor.

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