What Is an Unregistered Dealer?
Plenty of small suppliers in India trade legally without a GST number.
An unregistered dealer is a business that is not registered under GST, so it has no GSTIN, cannot charge GST on its bills, and passes on no input tax credit to whoever buys from it. Its paperwork is a plain bill, not a tax invoice.
The word “dealer” is a leftover from the VAT years. GST itself says “unregistered person” or “unregistered supplier”. What matters more are the two gates deciding which side of the line a supplier sits on.
Who Counts as Unregistered Under GST
Section 22 sets the turnover gate, and it is not one number:
- Rs.20 lakh aggregate turnover in a financial year, for most states.
- Rs.10 lakh in the special category states, several of which have since moved up to Rs.20 lakh.
- Rs.40 lakh where the supplier deals exclusively in goods, adopted by most states through notification, though not all.
Then comes the gate people miss. Section 24 overrides the threshold entirely for several categories: anyone making an inter-state taxable supply, casual taxable persons, non-residents and anyone already liable to pay tax under reverse charge.
A supplier turning over Rs.6 lakh who ships one consignment of goods across a state border is not an unregistered dealer for long, though a notification carves out inter-state supplies of services below the threshold.
Difference Between an Unregistered and a Composition Dealer
Neither hands you input tax credit, which is why the two get muddled. They are not the same.
| Aspect | Unregistered | Composition |
|---|---|---|
| GSTIN | None | Has one |
| Returns | Files nothing | Files under the scheme |
| Document | A plain bill | A bill of supply |
| Tax | Charges none | Pays from own pocket |
| Credit | None to pass on | None to pass on |
A composition dealer is inside the system, paying tax at a flat rate out of its own margin. An unregistered one is outside it altogether, with no GSTIN to quote and no return to file.
Unregistered Dealer Example
An invented purchase by a garment store in Panipat, Haryana, from a local embroidery unit with no GST registration.
| Line | Detail | Amount (Rs.) |
|---|---|---|
| Purchase | Embroidery work, plain bill | 47,350 |
| GST | None charged, no GSTIN | Nil |
| Credit | Nothing to claim | Nil |
| Cost | The whole amount | 47,350 |
Note: this is an invented example for illustration only. The store, the supplier and every figure are made up.
The point is the last row. Buy the same work from a registered unit at Rs.47,350 plus GST and the tax comes back as input tax credit where the purchase is creditable; here the full amount stays a cost, worth knowing before comparing two quotes on price alone.
What Changes When You Buy From an Unregistered Dealer
Less than most articles suggest, and this is where stale advice does real damage.
Section 9(4) once put reverse charge on nearly every purchase from an unregistered supplier, with a small daily exemption. That version is gone.
The section now reads that the Government may notify a class of registered persons who pay reverse charge on specified categories received from unregistered suppliers, and that class is narrow. Most buyers are not in it.
Two things still bite. Section 9(3) categories, such as goods transport or legal services, carry reverse charge whoever the supplier is. And where reverse charge does apply, section 31(3)(f) makes you raise a self-invoice for the supply, because your supplier cannot.
See Which Purchases Earn You Credit
The number that suffers is not the purchase price. It is the credit figure at month end.
For retail businesses, Petpooja Invoice calculates GST on every invoice and tracks GST liability in real time, tax payable, input tax credit and cash ledger balance, so a month heavy on unregistered suppliers shows up as a thinner credit balance, not a filing surprise.
The pattern we see across the businesses we work with: mixed supplier books go wrong at the credit line, not the cost line.
Two things worth having to hand: this composition scheme calculator when a supplier weighs registration, and this guide to getting GST registration for the day you cross a gate.
Frequently Asked Questions
Yes. A supplier below the registration threshold and outside the section 24 categories trades lawfully, and you may buy from it freely.
There is nothing to claim, because no GST was charged. The exception is where reverse charge applies and you pay the tax yourself, in which case the credit follows.
No. Section 9(4) now covers only a notified class of registered persons for specified categories, so most buyers are outside it. Older articles describing a blanket charge with a Rs.5,000 daily limit are out of date.
One sits inside the GST system, the other does not. A composition dealer holds a GSTIN and files returns; an unregistered one has no registration at all.
An ordinary bill or cash memo with no GSTIN and no tax line. It is neither a tax invoice nor a bill of supply, both of which belong to registered persons.
