Introduction
Getting registered under GST is the pre-eminent step for embarking on the journey of doing business. The registration under GST is compulsory [1] if the aggregate turnover in a financial year crosses threshold limit or the person may opt to get registered voluntarily. The answer to the question of ‘Who’ is mandatorily required to get registered under GST is fairly comprehendible, thanks to the straight forward language of the provision and the clarifications issued by CBIC. Unfortunately, the legislation is not as supportive in clarifying ‘Where’ i.e. in which State/U.T registration is required. This lack of clarity has upreared countless doubts, one of which being: Do Warehouses need to be registered under GST?
Issue
As per the provision which mandates registration under GST (full text in next heading), registration shall be required in the State/U.T. ‘from where he (supplier) makes a taxable supply’. However, the statute fails to shed light upon the argument that ‘from which State/U.T. the supply shall be deemed to have been made’. Whether the registration shall be taken in the State/U.T. from where the physical movement of the goods is initiated? Or the location where the goods are being stored before being delivered to the recipient should be given importance? Or whether the substance has been given more importance over the form and the place of business shall be treated as the place from where the taxable supply is made? The Act is not entirely silent on these issues for general public to wager but the remedy can be found in the bits of relevant provisions in the Act and rules discussed below:
Relevant Provisions
Even if the law is hazy in directly clarifying the problem in discussion, the relevant provisions which need to be referred to form an opinion are produced below:
- Mandatory Registration: Every supplier shall be liable[2] 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.
- Place of business: It includes[3]:
- a place from where the business is ordinarily carried on, and includes a warehouse, a godown or any other place where a taxable person stores his goods, supplies or receives goods or services or both; or
- a place where a taxable person maintains his books of account; or
- a place where a taxable person is engaged in business through an agent, by whatever name called.
- Principal Place of business: It means[4] the place of business specified as the principal place of business in the certificate of registration.
Analysis
- The registration may not be required for the warehouse on the basis of the following arguments:
This term place of business has been used in different provisions e.g. for determining location of supplier of services, determining the location of recipient of services etc. but there is no linkage of this term with the provision mandating registration. Whether such place of business (which includes warehouse) shall be deemed to be the place from where the taxable supply of goods or services or both is made, is not specifically provided in the Act. Though specifically meant for the supply of services, the definition of the ‘location of supplier of services’ itself states that it shall be the place of business if the registration has been obtained for the same. On this basis a view may be formed that registration is not mandated for every such place of business.
Further it was also ruled[5] by the AAR of Maharashtra, that registration was not required in the state where the warehouse is located. The applicant was importing goods at various ports located in different states in India. The goods were stored in different warehouses located in different states for further sale, but the head office was in Maharashtra. It was ruled by the AAR that the registration was not required in the states/U.T. where the warehouses are located and the business can be carried on through one registration in the state where head office is located i.e. Maharashtra. The reason provided was that, as per the provisions of place of supply in case of import, the place of supply shall be the location of importer i.e. Maharashtra. So, even if the goods are stored in warehouses located in different states, registration was not required in such states as the state from where the taxable supplies are being made was held to be Maharashtra.
Interestingly, according to the facts and contention submitted by the applicant, the applicant was also purchasing the goods from dealers located within India in different states. Even so, it was ruled that registration was only required in the state of Maharashtra, and not in other states where branch offices or warehouses are located.
- Potential Arguments by the GST Department requiring registration for warehouse
The department may argue that even if there is no direct linkage between the term ‘place of business’ and the place from where the supplier makes a taxable supply of goods or services or both, but the hint of the relationship between the both has been clearly laid down in the procedure for registration specified[6] under the Act. According to the procedure specified, a person seeking registration under this Act shall be granted a single registration in a State/U.T. However, person having multiple places of business in a State or Union territory may be granted a separate registration for each such place of business, subject to other conditions.
Further, the place of business has been specifically defined to include warehouse, godown or any other place where a taxable person stores his goods.
Author's take
Even if the advance ruling discussed above is binding only on the applicant and the jurisdictional officer, the principles relied on to pronounce the ruling may be used to further solve the issue in cases other than import. Following the same principle of the ruling, whether the registration shall be required for the warehouse shall depend on case-to-case basis.
As per the provisions[7] on the place of supply, where the supply involves movement of goods and the case is not of export/import, the place of supply shall be the location of goods where the movement is terminated for delivery to the recipient. In case of trading businesses, if the goods stored in the warehouse for further supply were originally received from the supplier’s vendors in those warehouse, the place of supply would be the state in which such warehouse is located. For these warehouses, it can be said that the business is ordinarily being carried on from such place. When such goods stored in the warehouse are further supplied by the supplier, the State/U.T. in which such warehouse is located shall be deemed to be the State/U.T. from where the supplier makes the taxable supply and registration shall be required in such State/U.T. if the registered principal place of business is not already present in such State/U.T. However, in manufacturing businesses and all other cases of trading businesses, where the goods stored in the supplier’s warehouse were originally transported to such warehouse from the principal place of business of the supplier, warehouse is only acting as medium of storage and no business is carried on from such place, so the registration shall not be required. In these cases, showing such warehouse as the additional place of business in the registration form of the principal place of business shall suffice.
The issue of whether registration is required for warehouse is just another drop in the ocean of doubts brought in by the new taxation regime. The law is in its early stages and there are numerous gaps between the intent of the lawmakers, the language drafted in the legislation and the understanding perceived by the taxpayers and authorities. These gaps will take years to fill by way of clarifications through circular, landmark rulings and case laws.
Disclaimer: Views and Opinions expressed in the article are my personal and do not construe suggestion or professional or legal advice.
The author can also be reached at vaibhavrai333@gmail.com
- [1] Section 22 of CGST Act (In general, when aggregate turnover > 20 Lakhs in a financial year)
- [2] Section 22 of CGST Act
- [3] Section 2(85) of CGST Act
- [4] Section 2(89) of CGST Act
- [5] [2019] 106 taxmann.com 291 (AAR - Maharashtra), Gandhar Oil Refinery (India) Ltd.
- [6] Section 25 of the CGST Act, 2017
- [7] Section 10(a) of the IGST Act, 2017
CAclubindia
