TO START WITH
- The taxable event under GST is 'supply'. Every person who undertakes a transaction amounting to supply has to register himself under the GST if his aggregate turnover in a financial year crosses the threshold limit prescribed from time to time.
- However, the person having turnover below the threshold limit can still opt for voluntary registration and such person shall be treated at par with all other normal registered persons.
Scope of Supply
- In order to fall within the chargeability of GST, a transaction/activity undertaken has to meet the scope of supply as defined in Section 7 of 'the CGST Act, 2017'.
- The definition of supply is wide enough to include –
- all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business,
- import of services for a consideration whether or not in the course or furtherance of business and
- activities specified in Schedule I, made or agreed to be made without consideration.
As per Schedule II, certain activities have been deemed to be a supply of goods or supply of services i.e., transfer of title in goods is a supply of goods but the transfer of right in goods without the transfer of title is treated as a supply of service; composite supply of food or any other article for human consumption or any drink is a supply of service; works contract is a supply of service, etc.
Neither supply of goods nor supply of service
Certain activities or transactions are treated as neither supply of goods nor supply of services as laid down in Schedule III (i.e.) they are outside the scope of supply and thus GST will not be applicable to these transactions. E.g.: Services by an employee to the employer in the course of or in relation to his employment, services by any court or Tribunal established under any law for the time being in force, Services of funeral, burial, crematorium or mortuary including transportation of the deceased, etc.
PERSONS LIABLE FOR REGISTRATION
Sub-section(1): Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both if his aggregate turnover in a financial year exceeds twenty lakh rupees:
Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees.
Provided further that the Government may, at the request of a special category State and on the recommendations of the Council, enhance the aggregate turnover referred to in the first proviso from ten lakh rupees to such amount, not exceeding twenty lakh rupees and subject to such conditions and limitations, as may be so notified – [Inserted vide The Central Goods & Services Tax Amendment Act, 2018 w.e.f 01.02.2019]
Provided also that the Government may, at the request of a State and on the recommendations of the Council, enhance the aggregate turnover from twenty lakh rupees to such amount not exceeding forty lakh rupees in case of a supplier who is engaged exclusively in the supply of goods, subject to such conditions and limitations, as may be notified – [Inserted vide Finance (No. 2) Act, 2019 w.e.f. dt.01.01.2020] **.
Explanation –– For the purposes of this sub-section, a person shall be considered to be engaged exclusively in the supply of goods even if he is engaged in the exempt supply of services provided by way of extending deposits, loans, or advances in so far as the consideration is represented by way of interest or discount.
Example: Mr. B runs a RETAIL shop in the State of Gujarat and has a turnover of Rs. 35 lakhs in a FY and apart from that also has interest from FD, bank, etc. of Rs. 4 lakhs, thus making his aggregate turnover of Rs. 39 lakhs. However, Mr. B shall be considered as a supplier engaged exclusively in the supply of goods only.
Sub-section(2): Every person who, on the day immediately preceding the appointed day, is registered or holds a license under existing law, shall be liable to be registered under this Act with effect from the appointed day – [i.e. if a person was registered in VAT or Service Tax in pre-GST era].
Sub-section(3): Where a business carried on by a taxable person registered under this Act is transferred, whether on account of succession or otherwise, to another person as a going concern, the transferee or the successor, as the case may be, shall be liable to be registered with effect from the date of such transfer or succession.
Sub-section(4): Notwithstanding anything contained in sub-sections (1) and (3), in a case of transfer pursuant to sanction of a scheme or an arrangement for amalgamation or, as the case may be, the demerger of two or more companies pursuant to an order of a High Court, Tribunal or otherwise, the transferee shall be liable to be registered, with effect from the date on which the Registrar of Companies issues a certificate of incorporation giving effect to such order of the High Court or Tribunal.
Explanation. For the purposes of this section, -
(i) the expression 'aggregate turnover' shall include all supplies made by the taxable person, whether on his own account or made on behalf of all his principals;
(ii) the supply of goods, after completion of job work, by a registered job worker shall be treated as the supply of goods by the principal referred to in section143, and the value of such goods shall not be included in the aggregate turnover of the registered job worker;
(iii) the expression 'special category States' shall mean the States as specified in sub-clause (g) of clause (4) of article 279A of the Constitution except for the State of Jammu & Kashmir [and States of Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim, and Uttarakhand]. – [Inserted vide The Central Goods & Services Tax Amendment Act, 2018 w.e.f 01.02.2019]
POINTS TO BE NOTED/ANALYSIS
As per Explanation to Section 22(1), a supplier shall be treated as engaged exclusively in the supply of goods even if he is engaged in the exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount.
It is important to note that registration is required ‘in’ the State ‘from which’ taxable supplies are made. Registration is not required ‘in’ the State ‘to’ which taxable supplies are made.
Therefore, for purposes of obtaining registration, it is important to identify the ‘origin’ of supply even though GST is a ‘destination’ based tax.
Place of Supply (as determined from IGST Act) provides the ‘destination’ and this is not relevant for registration. The location of the Supplier is relevant for registration.
In the case of services, the location of the Supplier of services is defined in section 2(71) of the CGST Act but in the case of goods, the location of the Supplier of goods is not defined.
Services leave no trail as to the location ‘from’ where they are supplied and for that reason, a definition is required. Whereas goods leave a trail, that is, where the goods are actually ‘located’.
This can be seen from the definition of Place of Business [Section 2(85)] of the CGST Act. Place of Business is where the business is ‘ordinarily carried on’ – this would be the location ‘from’ where taxable supplies are made, whether for goods or for services. But, if this is not (in the case of goods), this definition goes on to include ‘place where goods are stored’. Hence, the location of the Supplier of goods is where the business is ordinarily carried on or where the goods themselves are located, if that were more accurate.
** This provision is applicable only for the States and Union Territories with Legislature (E.g.:Delhi, Puducherry, Jammu & Kashmir) and w.e.f 01.01.2020. This is only an enabling provision inserted which gives power to the Government to increase the threshold limit for the exclusive supply of goods. However, the States/UT with legislature have to make a recommendation to the GST Council for increasing the threshold limit and the Government will then issue a Notification to this effect. To date, no notification has been issued under this new proviso of Section 22(1) to increase the threshold limit to 40 lakhs for an exclusive supply of goods.
** Further, the Government as empowered under Section 23(2) of the CGST Act, 2017, provided an exemption from registration w.e.f. 01 April 2019 vide Notification No. 10/ 2019 - Central Tax dated 7-03-2019 (ATTACHED). The Notification provides that any person, who is engaged in the exclusive supply of goods and whose aggregate turnover in the financial year does not exceed 40 lakh rupees is exempted from taking registration under the said Act except if -
- they are compulsorily required to register under Section 24 of the said Act
- they are engaged in making supplies of ice-cream and other edible ice, pan masala, and tobacco.
- they have taken voluntary registration
- they are engaged in making intra-State supplies in the States of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura, Uttarakhand;
The above Notification effectively increases the threshold limit for persons who are engaged in an exclusive supply of goods for the purpose of GST Registration from 20 Lakhs to 40 Lakhs.
Now the question arises - whether the value of supply of exempt services by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount, shall be included in calculating the aggregate turnover of 40 lakhs as per this Notification. In the said Notification (No. 10/2019 – CT dated 07.03.2019), there is no provision allowing the supplier to also be engaged in the exempt supply of services (unlike in the case of Section 22(1) notified w.e.f. 01-01-2020). Hence, if such persons provide any services, then such exemption will not be applicable.
(However, there is another school of thought connected to the limit of Rs. 40 Lakhs prescribed in the above referred Exemption Notification. Few experts are of the view that the person who is engaged in the supply of goods can also engage in the exempt supply of services provided by way of extending deposits, loans, or advances in so far as the consideration is represented by way of interest or discounts. This analogy is drawn on the fact that the Government has, through various Notifications5 and Removal of Difficulty Orders6, for the purpose of calculating the turnover for Composition Scheme and for calculation of reversal of input tax credit under Rule 42 and Rule 43, specifically stated to exclude such income from aggregate turnover. The proviso inserted in Section 22(1) also provides such exclusion. Thus, they are of the view that the intention of the lawmakers is thus not to consider such income. However, one must exercise caution while availing the exemption from registration under this Notification based on such analogy.)
Exemption Limit vs. Registration Limit (VERY IMPORTANT POINT)
In the erstwhile law, the facility of SSI/ SSP exemptions was provided wherein even though the assessee has taken the registration it was not required to collect and pay tax unless they crossed the threshold limit. However, in the GST regime, no such exemption is provided under the law. Once registration is taken the taxpayer is mandatorily required to collect and pay tax to the Government irrespective of the threshold. As per sections 2(107) of the CGST Act, 2017 'taxable person' means a person who is registered or liable to be registered under section 22 or section 24; this means a registered person is a taxable person. It is important to note that section 9 of the CGST Act, 2017 imposes leviability to taxable persons and, therefore, once registration is obtained the concept of taxable person gets triggered.
Calculation of Threshold Limit for Registration Under GST
The entire section is dependent upon a single term 'aggregate turnover' which has been defined in Section 2(6) of the CGST Act, 2017. If the aggregate turnover crosses the threshold limit, then registration needs to be taken. Aggregate Turnover is PAN based and not State/ Union Territory based.
The term ‘aggregate turnover’ means – aggregate value of all taxable supplies, exempt supplies, export supplies, inter-state supplies of persons having the same PAN, but excludes inward supplies liable to RCM, CGST, SGST, UTGST, IGST and cess.
All the components of 'aggregate turnover' are briefly explained under:
- Definition in Section 2(108) of the CGST Act, 2017: "Taxable supply" means a supply of goods or services or both which is leviable to tax under this Act.
- Activities/transactions undertaken shall be considered as taxable supplies only when such activities/transactions qualify as a 'supply' in terms of Section 7 of the CGST Act, 2017, and such supplies are chargeable to tax in terms of Section 9 of CGST Act, 2017.
- Taxable supplies mean the supply of goods or services or both which are liable to tax under the said Act. This indicates that even supplies that are exempted by way of notification shall also be considered as taxable supplies because of the established principle that a supply of goods or services or both could be exempted through a notification only when a levy is present in the first place under the legislation.
- Taxable supplies do not include activities or transactions that are specified in Schedule III as the same do not qualify as supplies under GST law. It also does not include non-taxable supplies.
Definition in Section 2(47) of the CGST Act,2017: 'Exempt supply' means the supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes the non-taxable supply.
- Definition in Section 2(78) of the CGST Act: 'Non-taxable supply' means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act;
- A transaction must be a ‘supply’ as defined under the GST law, to qualify as a non-taxable supply under the GST law. Supplies that are not leviable to tax are known as non-taxable supplies.
- Supplies that are excluded from the charging section (i.e.) Section 9(1) and 9(2) of the CGST Act, 2017 are to be considered as non-taxable supplies as they are not leviable to tax under this Act. Thus, the supply of alcoholic liquor for human consumption, petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas, and aviation turbine fuel have been excluded from the scope of levy and thus will be considered as non-taxable supplies.
- The general perception is that the supplies can broadly be classified into taxable and non-taxable supplies. Only those activities which first answer the definition of supply can be further categorized into taxable or non-taxable supplies.
- But certain activities are deemed to be treated as neither supply of goods nor services as specified in Schedule III. So, these transactions are outside the purview of Section 7 itself. E.g.: Services by an employee to the employer in the course of or in relation to his employment, services by any court or Tribunal established under any law for the time being in force, actionable claims, other than lottery, betting, and gambling, etc. Thus, they are treated as falling under the third category of supply (i.e.) no supply.
- Further, the definition of goods given in Section 2(52) of the CGST Act excludes money and securities. Thus, the supply of money and securities shall be considered as no-supply.
- Transactions classified under 'No-supply' shall not be considered for the purpose of aggregate turnover calculation.
Export of goods or services or both are treated as a zero-rated supply under GST and are included in 'aggregate turnover'.
Inter-State supplies to persons having the SAME PAN
This covers the supply of goods or supply of services or both to persons located in other States/Union Territories but are under the same legal entity. These are taxable supplies under GST and are liable to tax even if such supplies are made without consideration as per Schedule I.
Inward supplies liable to be taxed under reverse charge is excluded from 'aggregate turnover'.
Inward supplies on which the recipient has to pay the tax on reverse charge in view of the provisions contained in Section 9(3) and Section 9(4) of the CGST Act,2017 / Section 5(3) and Section 5(4) of IGST Act,2017 shall not be included in the calculation of the aggregate turnover.
Persons not liable for registration (Section 23)
23. Persons not liable for registration
The following persons shall not be liable to registration, namely: ––
(a) any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act;
(b) an agriculturist, to the extent of supply of produce out of cultivation of land.
The Government may, on the recommendations of the Council, by notification, specify the category of persons who may be exempted from obtaining registration
under this Act.
As per section 2(7), agriculturist means an individual or HUF who undertakes cultivation of land:
(a) By own labour, or
(b) By the labour of family, or
(c) By servants on wages payable in cash or kind or by hired labor under personal supervision or the personal supervision of any member of the family].
Exclusively engaged in Exempt Supplies
The term exclusive indicates engaging in only those supplies which are exempted. Therefore, if a supplier is supplying both exempted and taxable goods and/or services, then this provision is not applicable, and he is required to obtain registration under section 22.
It essentially permits any person whose ‘entire’ supply consists of ‘exempt supplies’, to be excluded from obtaining registration. Care should be taken to validate the premise of (a) entire supply and (b) it is exempt. Even if a small value of supplies is taxable, then exempt supplies will be included to determine if aggregate turnover has exceeded the exemption threshold under section 22 for attracting registration.
Persons exempt from obtaining registration by Notification
Persons engaged in rendering taxable services that are liable to GST under reverse charges are not required to take registration - (Notification No. 5/2017–Central Tax, dated 19.06.2017).
Job-workers engaged in making inter-state supply of services to a registered person except those who are liable to be registered under section 22(1) of the CGST Act, 2017 or persons opting for voluntary registration or persons engaged in making the supply of services in relation to jewelry, goldsmiths’ and silversmiths’ wares and other articles (w.e.f. 14.09.2017) - Notification No. 7/2017–Integrated Tax, dated 14.09.2017 as amended vide Notification No. 2/2019-Integrated Tax, dated 29-Jan-2019, w.e.f. 1-Feb-2019.
Persons effecting inter-State supplies of taxable services – where the aggregate value of supplies on a PAN-India basis does not exceed Rs. 20 Lakhs in a year (Rs. 10 Lakhs for special category States- Manipur, Mizoram, Nagaland, and Tripura) (w.e.f. 13.10.2017) - Notification No. 10/2017–Integrated Tax, dated 13.10.2017 as amended vide Notification No. 3/2019-Integrated Tax, dated 29-Jan-2019, w.e.f. 1-Feb-2019.
Categories of persons affecting inter-State taxable supplies of handicraft goods – where the aggregate value of supplies on a PAN-India basis does not exceed Rs. 20 Lakhs in a year (Rs. 10 Lakhs for special category States- Manipur, Mizoram, Nagaland, and Tripura) - (w.e.f. 22.10.2018) - Notification No. 3/2018–Integrated Tax dated 22.10.2018. This notification has superseded Notification No. 8/ 2017-Integrated Tax, dated 14.09.2017.
Persons providing services through e-commerce who is required to collect tax at source provided their aggregate turnover does not exceed Rs. 20 lakh (Rs. 10 lakh in special category States-Manipur, Mizoram, Nagaland, and Tripura) (w.e.f. 15.11.2017). - Notification No. 65/2017–Central Tax, dated 15.11.2017 as amended vide Notification No. 6/2019-Central Tax, dated 29-Jan-2019, w.e.f. 1-Feb-2019.
Categories of casual taxable persons making taxable supplies of handicraft goods where the aggregate value of supplies on a PAN-India basis does not exceed Rs. 20 Lakhs in a year (Rs. 10 Lakhs for special category States-Manipur, Mizoram, Nagaland, and Tripura) - (w.e.f. 23.10.2018) – Notification No. 56/2018-Central Tax, dated 23.10.2018. This notification has superseded Notification No. 32/ 2017-Central Tax, dated 15.09.2017.
Compulsory registration in certain cases (Irrespective of Threshold Limit)
Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act, ––
(i) persons making any inter-State taxable supply [Exemption: Inter-State supplies of taxable services (Notification No. 10/2017–Integrated Tax, dated 13.10.2017 amended vide Notification No. 3/2019-Integrated Tax, dated 29-Jan- 2019, w.e.f. 1-Feb-2019) and handicraft goods except when their turnover exceeds the threshold limit (Notification No.3/2018– Integrated Tax, dated22.10.2018 which superseded Notification No. 8/ 2017-Integrated Tax, dated 14.9.2017)];
(ii) casual taxable persons making taxable supply [Exemption: Casual taxable persons making taxable supplies of handicraft goods if the aggregate turnover does not exceed Rs. 20 lakhs (Notification No. 56/2018-Central Tax, dated 23.10.2018 which superseded Notification No. 32/ 2017–Central Tax, dated 15.9.2017);
(iii) persons who are required to pay tax under reverse charge;
(iv) person who is required to pay tax under sub-section (5) of section 9;
(v) non-resident taxable persons making taxable supply;
(vi) persons who are required to deduct tax under section 51, whether or not separately registered under this Act; [Relaxation provided under RCM notification (entries 1 and 14 of Notification No. 13/2017-CT(R) dated 28 Jun 2017) who have ‘nil’ taxable supplies and are registered only to comply with section 51 and hence, section 24].
(vii) persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise; [Although not expressly stated, ‘agents’ will become liable to compulsory registration only if their transactions attract schedule I. The term 'agent' here refers to the 'agent' who supplies goods to the customers under his invoice on behalf of the principal (linked to Para 3 of Schedule I of the CGST Act which refers to the deemed supply of goods by principal to the agent where the agent undertakes to supply goods on behalf of the principal) and it does not cover within its ambit, all types of agents like those who act as an intermediary. This matter has also been clarified in Circular No. 57/31/2018-GST dated September 4, 2018, and also Circular No. 73/47/2018-GST, dated November 5, 2018.].
(viii) Input Service Distributor, whether or not separately registered under this Act;
(ix) persons who supply goods or services or both, other than supplies specified under sub-section (5) of section 9, through such electronic commerce operator who is required to collect tax at source under section 52 [Exemption: Supplier providing services through an e-commerce operator if the aggregate turnover does not exceed Rs. 20 Lakhs (Notification No. 65/2017–Central Tax, dated 15.11.2017 amended vide Notification No. 6/2019-Central Tax, dated 29-Jan-2019, w.e.f. 1-Feb-2019);
(x) every electronic commerce operator [who is required to collect tax at source under section 52];
(xi) every person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered person; and
(xii) such other person or class of persons as may be notified by the Government on the recommendations of the Council.