Threshold limit for registration under GST

As we know that Goods and Service Tax (GST) cannot be charged by the supplier until he gets himself registered under GST Act. The journey of GST started from 1st July 2017, and lot of changes have come since then. Due to continuous amendments in the Act, there is lot confusion on the part of threshold limit for registration under the Act.

In this article, it is tried to understand and have clarification on the requirement for registration under GST.

Following are the three events when a taxable person is required to register itself under GST:

1. Crossing of Threshold limit of aggregate turnover
2. Compulsory Registration (Will be discussed in our next article)
3. Voluntary Registration (Will be discussed in our next article)

Under this article the author has focused on point no. 1 i.e. crossing of threshold limit of aggregate turnover

The provisions for requirement of registration under GST have been given under Section 22 of CGST Act, 2017, which is interpreted as follows:

Registration is required if the aggregate turnover in a financial year exceeds rupees twenty lakhs. This threshold limit will be rupees ten lakhs if a taxable person conducts his business in any of the special category States as specified in sub-clause (g) of clause (4) of Article 279A of the Constitution.

However, vide CGST (Amendment) Act, 2018 second proviso to section 22(1) has been inserted to provide that 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 ` 10 lakh to such amount, not exceeding ` 20 lakh and subject to such conditions and limitations, as may be so notified.

Accordingly, threshold limit remains rupees twenty lakhs for the States of Jammu and Kashmir, Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand w.e.f. 1-Feb-2019 and rupees ten lakhs for the States of Manipur, Mizoram, Nagaland and Tripura.

The expression 'aggregate turnover' has been defined under section 2(6) of the CGST Act. Aggregate Turnover is PAN based and not State/ Union Territory based

In the below table, illustrations have been provided to understand how aggregate turnover is calculated and what will be the requirement of registration in each of these illustrations-

Illustration 1

Illustration 2

* Please note that the proviso to section 22(1) appearing in CGST Act also appears in SGST Act(s). As a result, for a taxable person in a non-Special Category State, who has a branch in Special Category State, the threshold becomes 10 lacs and not 20 lacs.

For calculating the threshold limit, the turnover shall include all supplies made by the taxable person, whether on his own account or made on behalf of all his principals. Further, supply of goods by a registered job worker, after completion of job work, shall be treated as the supply of goods by the 'principal' referred to in section 143 (i.e. Job work procedure) of this Act. The value of such goods shall not be included in the aggregate turnover of the registered job worker

The following notified persons may also be granted an exemption from registration. In this regard, the Government has exempted the following persons from obtaining registration:

1. Persons engaged in rendering taxable services which are liable to GST under reverse charges are not required to take registration - (Notification No. 5/2017- Central Tax, dated 19.06.2017)
2. 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 supply of services in relation to jewellery, 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.
3. Persons effecting inter-State supplies of taxable services - where the aggregate value of supplies on PAN-India basis does not exceed ` 20 Lakhs in a year (` 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.
4. Categories of persons effecting inter-State taxable supplies of handicraft goods - where the aggregate value of supplies on PAN-India basis does not exceed ` 20 Lakhs in a year (` 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
5. Persons providing services through an e-commerce who is required to collect tax at source, provided their aggregate turnover does not exceed ` 20 lakh (` 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
6. Categories of casual taxable persons making taxable supplies of handicraft goods- where the aggregate value of supplies on PAN-India basis does not exceed ` 20 Lakhs in a year (` 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.

Note: W.e.f. 01.04.2019 - the basic limit beyond which obtaining registration becomes mandatory is increased from ` 20 lakhs to ` 40 lakhs for certain categories of persons vide notification No. 10/2019-Central Tax, dated 07.03.2019

As per the said notification, any person, who is engaged in exclusive supply of goods and whose aggregate turnover in the financial year does not exceed forty lakh rupees, except, -

• persons required to take compulsory registration under section 24 of the said Act;
• persons engaged in making supplies of the following goods,

• persons engaged in making intra-State supplies in the States of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura, Uttarakhand; and
• persons exercising option under the provisions of sub-section (3) of section 25 [voluntary registration], or such registered persons who intend to continue with their registration under the said Act.

Note: The new exemption from registration (w.e.f. 01.04.2019) up till ` 40 lakhs is applicable only for those taxable persons, who are engaged in exclusive supply of goods. Therefore, in case a person in supplying goods but also earns a nominal amount of service income (whether taxable or not) such as commission income, or interest income say from bank (which is exempt), then he shall be liable to take registration above ` 20 lakhs and not ` 40 lakhs.

Conclusion:

In the nutshell we can conclude that

• Exclusive intra state supply of goods the threshold limit of registration is Rs. 40 lakhs
• Exclusive supply of services on PAN-India based the threshold limit of registration is Rs. 20 lakhs
• Exclusive supply of handicraft goods either normal taxpayer or casual tax payer on PAN-India based the threshold limit of registration is Rs. 20 lakhs
• Person providing services through an e-commerce, the threshold limit of registration is Rs. 20 lakhs
• Job worker providing services on PAN-India bases the threshold limit is Rs. 20 lakhs

Source:

1. www.cbic.gov.in
2. https://idtc.icai.org/
3. http://icmai.in/TaxationPortal/IndirectTaxation/ppt.php

The author can also be reached at cmamohitarora@gmail.com