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GST has come into force with effect from 1st July, 2017. Everybody is busy in interpretation of law as well as application of law to its business models. During interpretation of law sometimes we come across controversies in legal provisions. Language of law must be clear and not ambiguous. Ambiguity in law creates scope for misinterpretation because intention of law makers cannot be understand correctly.
Here I am going to discuss controversy in the GST law which are going to affect business to the great extent.
As per Section 24 (i) of the Central Goods and Service Tax Act, 2017 a person making interstate taxable supply is compulsorily required to be registered. A person is required to be registered if following two conditions are fulfilled:-
It means if a person is engaged in making interstate supply of taxable goods then he is required to be registered under the act even if taxable supply is of the value of Rs. 1 only. In another sense we can say that an unregistered person cannot make interstate supply.
Now coming to Section 5 (4) of Integrated Goods & Service Tax Act, 2017, as per this section integrated tax in respect of taxable supply of goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient.
Mandate of section 5(4) of IGST Act, 2017 is that interstate tax in case of interstate taxable supply from unregistered person to registered person will be paid by the recipient on reverse charge basis. At the same time Section 24 (i) of CGST Act, 2017 mandate that every person making interstate taxable supply is compulsorily required to be registered.
Now both these sections are contra to each other. CGST Act, 2017 says that every person making interstate supply of taxable goods or services or both is compulsorily required to be registered. Other side IGST Act, 2017 says that interstate tax is payable by recipient if supplier of goods or services or both is unregistered. It is not clear if everybody making interstate taxable supply is compulsorily required to be registered then how a person will receive goods or services or both from unregistered person in interstate transactions and what is requirement of Section 5(4) of IGST Act, 2017.
I will be grateful if anybody can give clarity and rational behind these two sections playing in different directions.