Section 23 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Two provisions said opposite things about the same person, and for six years nobody could say which won.
Section 23(1) exempts from registration a person engaged exclusively in supplying goods or services not liable to tax or wholly exempt, and an agriculturist to the extent of supply of produce out of cultivation of land. Section 24 compels registration for thirteen categories "notwithstanding anything contained in sub-section (1) of section 22" — but originally said nothing about s.23. The Finance Act, 2023 substituted the opening words of s.23 to read "Notwithstanding anything to the contrary contained in sub-section (1) of section 22 or section 24", with retrospective effect from 1 July 2017.
The conflict
A person makes only exempt supplies — say, an educational institution supplying exempt education services — and receives a notified reverse charge service such as legal advice from an advocate.
Section 23(1)(a): not liable to register, because engaged exclusively in supplying wholly exempt services.
Section 24(iii): must register, being a person required to pay tax under reverse charge, irrespective of turnover.
Both applied. Section 24's non-obstante clause covered only s.22(1), not s.23. Section 23 had no non-obstante clause at all.
The consequence was real: departments issued notices to exempt entities for failing to register on account of a single RCM transaction, and the entities pointed to s.23.
What the amendment did
The Finance Act, 2023 substituted the opening of s.23(1):
"Notwithstanding anything to the contrary contained in sub-section (1) of section 22 or section 24, 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."
Retrospective from 1 July 2017.
So s.23 now wins over both s.22(1) and s.24. A person who falls within s.23 is not liable to register even if a s.24 category would otherwise apply.
Who benefits
Entities making only exempt supplies that receive an occasional RCM service — legal services, sponsorship, GTA, director's services, security services.
Typical examples: charitable trusts supplying exempt services, educational institutions, hospitals supplying exempt health care, and religious institutions.
Agriculturists, to the extent of supply of produce out of cultivation of land. Section 2(7) defines an agriculturist as an individual or Hindu undivided family who undertakes cultivation of land — by own labour, by the labour of family, or by servants on wages payable in cash or kind or by hired labour under personal supervision or the personal supervision of any member of the family.
Note the limits: it must be an individual or HUF — a company or LLP farming land is not an agriculturist — and the exemption extends only to produce out of cultivation of land, not to other business the same person carries on.
Who does not benefit
Anyone making any taxable supply. "Exclusively" is strict. An exempt-services entity that makes a single taxable supply — renting out a hall, selling scrap, supplying a taxable service — is no longer engaged exclusively in exempt supplies, and s.23 falls away entirely. Section 24 then applies on its own terms.
That is a sharp edge. Selling old furniture can bring an exempt trust into compulsory registration.
Persons whose supplies are zero-rated. Exports are taxable supplies with a nil effective rate, not exempt supplies. An exporter of services is making taxable supplies and cannot use s.23.
Section 23(2) persons. The Government may, on the Council's recommendation, by notification specify the category of persons who may be exempted from obtaining registration. Notifications under this sub-section are separate from s.23(1) and carry their own conditions.
Practical notes
- Test exclusivity every year, and on any unusual transaction. Scrap sales, asset disposals and one-off rentals are the usual breakers.
- Where exclusivity breaks, the entity becomes liable under s.24 on the RCM ground and must apply within thirty days.
- Do not confuse exempt with zero-rated. Only exempt and non-taxable supplies support s.23.
- An agriculturist's other business is outside the exemption — the words are "to the extent of supply of produce out of cultivation of land".
- A person voluntarily registered under s.25(3) is outside s.23 by choice, and takes on all the obligations of a registered person.
- The amendment is retrospective, so a notice for a past period based on the old conflict should not survive.
Key takeaways
- s.23(1) now opens with a non-obstante clause over s.22(1) and s.24, retrospective to 01.07.2017.
- Covers persons engaged exclusively in supplying goods or services not liable to tax or wholly exempt, and agriculturists.
- Resolves the long-running conflict where a single RCM transaction triggered s.24.
- "Exclusively" is strict — a single taxable supply removes the protection.
- Zero-rated supplies are taxable, not exempt, so exporters are outside s.23.
- An agriculturist must be an individual or HUF, and the exemption covers only produce from cultivation.
Read next
- Compulsory GST Registration: 13 Cases Under Section 24
- GST Registration Thresholds by State and Supply
- Who Must Register: Threshold Limits and Exemptions
- GST Applicability and Compliance for NGOs
Disclaimer: Positions stated as on 5 September 2026, based on the CGST Act as amended to 31 March 2026 (ICAI Bare Law, 12th edition) and the ICAI Handbook on Registration under GST (November 2025).