The entire section hangs 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.
- Taxable Supplies
- Exempt Supplies
- Export Supplies
- Interstate supplies of persons having the same PAN
But it Excludes
- Inward supplies liable to RCM
The different types of Supplies mentioned in the above definition are explained below –
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 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 which 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 which are discussed below.
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.
Exempt supplies mean
- Supplies that attract nil rate of tax as per the tariff itself
- Supplies that are wholly exempt under Section 11 of CGST Act,2017 or Section 6 of IGST Act,2017. These sections grant power to the Government to exempt generally, either absolutely or subject to such conditions as may be specified therein, goods or services or both of any specified description from the whole or any part of the tax leviable thereon with effect from such date as may be specified in such notification and
- Includes non-taxable supplies
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 CGST Act, 2017 are to be considered as non-taxable supplies as they are not leviable to tax under this Act.
Thus, 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.
“Export of goods is defined in Section 2(5) of the IGST Act,2017 as: “export of goods” with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India;
“Export of services is defined in Section 2(6) of the IGST Act,2017 as –
Export of services means the supply of any service when, —
- the supplier of service is located in India;
- the recipient of service is located outside India;
- the place of supply of service is outside India;
- the payment for such service has been received by the supplier of service in convertible foreign exchange or in Indian rupees wherever permitted by the Reserve Bank of India; and
- the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;
Inter-State supplies to persons having PAN
This covers the supply of goods or supply of services or both to persons located in other States/Union Territories but is 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.
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Inward supplies liable to be taxed under reverse charge is excluded
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.
As per the notification issued under Section 9(3), legal services provided by an advocate is liable for payment of tax under reverse charge under Section 9(3).
Thus, XYZ Pvt Ltd will be liable to pay tax under reverse charge for the legal services. However, the inward supply of legal services of Rs 1.50 lakhs will not be added to the turnover of Rs 19 lakhs. Therefore, XYZ Private Limited will not be required to be registered under GST as the aggregate turnover is below the threshold limit.
Aggregate Turnover to be calculated on an all-India basis
It may be noted that the term ‘aggregate turnover’ includes the turnover of all branches under a single PAN. The calculation of the turnover has to be done at a PAN level and not per GST registration number.
Supplies made on behalf of Principal
For the purpose of this Section, aggregate turnover shall include all supplies made by the taxable person, whether on his own account or made on behalf of all his principals.
Transfer of business
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.
In a case of transfer pursuant to sanction of a scheme or an arrangement for amalgamation or, 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.
Q. A person has a turnover of less than 20 lakh rupees from the sale of goods and hence has not taken GST registration. Due to compulsory registration provisions of Section 24, he had to take registration to pay tax on reverse charge for a particular transaction. Whether he has to pay tax on other outward supplies of goods?
A. The person who obtains GST registration either voluntarily or compulsorily, will have to comply with all the provisions as applicable to a registered person. He has to charge GST on the outward supplies of goods
Q. The GST limit has been crossed during the financial year and registration has been obtained in the middle of the year. What has to be done for the invoices raised before the date of obtaining registration?
A. GST is applicable only from the effective date of registration. No GST shall be collected for the invoices issued prior to such an effective date of registration. However, from the effective date of registration, if any invoice has been issued, then a revised invoice has to be issued in line with the provisions of Section 31 of the CGST Act.
Q. An advocate is having a professional income of Rs. 16 lakhs and Bank interest from FD of Rs. 5 lakhs. Is he required to be registered?
A. Advocates are exempt from registration in view of Notification No. 5/2017 – Central Tax dated 19-06-2017 whereby persons who are only engaged in making supplies of taxable goods or services or both, the total tax on which is liable to be paid on reverse charge basis by the recipient of such goods or services or both under sub-section (3) of section 9 of the said Act as the category of persons exempted from obtaining registration under the aforesaid Act. Further, interest from FD is exempt vide Notification No. 12/2017 – Central Tax (Rate) dated 28-06-2017. Thus the advocate will not be liable for registration even if his turnover crosses the threshold limit.
Q. A person is having rental income from commercial property of Rs. 6 lakhs and interest income from the lending of Rs. 22 lakhs. Whether the person is liable to be registered?
A. Income earned by way of interest from loans is an exempted supply vide Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017. Aggregate turnover in an FY includes taxable supplies as well as exempted supplies. Therefore, the total turnover is Rs. 28 lakhs, and therefore the person is liable to be registered under GST. However, tax has to be paid only on the rental income from commercial property.
Q. If a religious trust received Rs. 15 lakhs as offerings, Rs. 5 lakhs as rental income, and Rs. 2 lakhs as exempted rental income (Notification 12/2017 –Central Tax (Rate) dated 28-06-2017 -an area within precincts of the temple). Whether they need to take registration under GST.
A. The offerings received are not covered by the definition of supply as there is no quid pro quo. Therefore, it will not be considered for the calculation of the aggregate turnover. The remaining income of Rs 7 lakhs will be taken into consideration for calculation. Since the income is less than 20 lakhs, the trust need not register in GST.
Q. The dealer has an only export turnover exceeding Rs. 20 lakhs during the FY. Is he required to get registration under GST? He does not have any other income except interest on FD and saving bank account and capital gains on the sale of shares.
A. Exports are inter-State supplies under Section 7 of IGST Act,2017. Hence, persons NOT liable to payment of tax on their outward supplies on account of exports, would STILL be required to obtain GST registration and submit to all compliances. All exporters, regardless of turnover limit, MUST obtain registration, file LUT, file returns, repatriate forex (not INR) and demonstrate the correctness of their claim to zero-rated benefits.
Q. A Ltd. registered in Bihar is having 10 warehouses in 10 different States and supplying goods to its customers from such warehouses. Can A Ltd. supply goods from different warehouses by raising GST invoices?
A. Registration has to be taken in every state from where the taxable supply is being made. Warehouses are covered by the definition of the fixed establishment and thus registration has to be taken in every State where the warehouse is located.
Q. Whether income from the sale of shares and dividends needs to be included in the turnover for ascertaining the applicability of GST Registration in the following cases: 1) if shares are purchased as an investment. 2) if shares are purchased for trading purposes
A. Transaction in securities is neither good nor service. Securities have been specifically excluded from the definition of ‘goods’ and ‘service’. Section 2(101) of CGST Act,2017 defines ‘service’, and Section 2(52) of CGST Act,2017 defines ‘goods’. Hence, ‘supply of securities’ will not be subject to GST and the same will not be considered for the threshold limit for obtaining registration
Q. ABC is providing exempt services exceeding 20 lakhs but since it has engaged in exempt services only, registration is not mandatory. Now, it is selling a capital good(machinery). Whether registration is required just because it is selling the business asset?
A. The benefit of the exemption under Section 23 shall be lost and the aggregate turnover (exempt supplies +supply of machinery) shall be considered and if it crosses the threshold limit then the registration shall be required under Section 22.
Q. ABC Private Limited is having businesses in Goa and Maharashtra. The aggregate turnover of goods and services in FY 17-18 is Rs. 25 lakhs. However, the turnover from the State of Goa is Rs. 7 lakhs only. Is ABC required to obtain registration in Goa?
A. The aggregate turnover is Rs. 25 lakhs calculated on an all-India basis (at a PAN level). Thus, ABC Pvt Ltd will have to obtain registration in Maharashtra as well as Goa.
Q. In the above case, what if ABC Private Limited also has a branch in Manipur for which the turnover is 11 lakhs making the total turnover 36 lakhs.
A. Since the entity has a branch in a Special Category State, the threshold limit for registration is Rs. 10 lakhs. Since the entity crosses such limit, the registration will be required in all the 3 States