In any tax system, registration is the most fundamental requirement for the identification of taxpayers to ensure tax compliance in the economy. Registration of any business entity under the GST Law implies obtaining a unique alphanumeric code from the concerned tax authorities for the purpose of collecting taxes on behalf of the Government and to avail input tax credit of the taxes paid on its inward supplies. Without registration, a person can neither collect tax from his customers nor claim any input tax credit of tax paid by him.
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 Central Goods and Services Tax Act,2017 (“the CGST Act, 2017” or “the said Act”). 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, licence, 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.
Certain activities undertaken have been deemed to be a supply of goods or a supply of services as laid down in Schedule II. E.g.: 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 on 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. Section 22 is extracted hereunder for reference.
Section 22. (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:]
[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.
Explanation. — For the purposes of this subsection, 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.]
Persons Liable for Registration
As per Section 22 of the said Act, every person is required to obtain separate registration in each State/Union Territory (UT) from where taxable supplies of goods or services or both are being made if the aggregate turnover in a financial year exceeds 20 lakh rupees.
In the case of Special Category States, registration shall be required if the aggregate turnover in a financial year exceeds 10 lakh rupees. The Government may enhance this aggregate turnover limit at the request of a Special Category State and on the recommendations of the council from 10 lakh rupees to an amount not exceeding 20 lakh rupees.
As per Explanation (iii) to Section 22, the expression “The Special Category States” shall mean the States as specified in Article 279A (4) (g) of the Constitution except for the State of Jammu and Kashmir and [States of Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim, and Uttarakhand]. Accordingly, the Special Category States for the purpose of registration shall be the States of Manipur, Mizoram, Nagaland and Tripura from 1st Feb 2019. Therefore, the threshold limit of 10 lakh rupees shall be applicable for Manipur, Mizoram, Nagaland and Tripura.
|Particulars||Up to 31 Jan 2019||W.e.f 01 Feb 2019|
|Special Category States||
Similarly, the Government, at the request of a State and on the recommendations of the Council, may enhance the limit of 20 lakh rupees to an amount not exceeding 40 lakh rupees in case of suppliers who are engaged exclusively in the supply of goods., As per the explanation inserted in sub-section (1) of Section 22, 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. X runs a stationery shop in the State of Tamilnadu and has a turnover of Rs. 30 lakhs in an FY and apart from that also has interest from FD, bank, etc. of Rs. 3 lakhs, thus making his aggregate turnover of Rs. 33 lakhs. However, Mr X shall be considered as a supplier engaged exclusively in the supply of goods only.
The threshold for registration for service providers would continue to be 10 lakh rupees in the case of special category States and 20 lakh rupees in the case of other than Special Category States/UT.
Registration Limits as per Section 22
|Type of Supply||Up to 31st Jan 2019||
w.e.f 01st Feb 2019
w.e.f 01st Jan 2020
|Normal States/ UT||Special Category State||Normal States/ UT||Special Category State||Normal States/ UT||Special Category State|
|Only Goods||20 lakhs||10 lakhs||20 lakhs||Amount not exceeding 20 lakhs if opted by the SCS||Amount not exceeding 40 lakhs if opted by the States*||Amount not exceeding 20 lakhs if opted by the SCS|
|Services/ Goods & Services||20 lakhs||10 lakhs||20 lakhs||Amount not exceeding 20 lakhs if opted by the SCS||20 lakhs||Amount not exceeding 20 lakhs if opted by the SCS|
*Please note –
- 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
- 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 the exclusive supply of goods.
- Further, the Government as empowered under Section 23(2) of 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. 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 the exclusive supply of goods for the purpose of GST Registration from Rs. 20 Lakhs to Rs. 40 Lakhs.
Now the moot 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, 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 an 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 Notifications and Removal of Difficulty Orders, 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.
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