CA Dr Arpit Haldia

Arpit Haldia

GSTUpdates-2: Requirement of Registration proposed under Draft GST Law:-Person making Inter State Supplies -Part II

In the earlier update I had shared my views on Registration requirement in GST for persons engaged in making local or Intra State Supplies. In this update I would be sharing my views on Registration requirement in GST for persons engaged in making Inter-State supply alongwith Intra State Supply having offices in single or multiple States.

Schedule III of the Draft GST law:  This schedule mandates condition for registration under GST. The heading of the Schedule provides “Liability to be registered”. Para 5 of Schedule III provides as follows:

 “Notwithstanding anything contained in paragraph 1 and 2 above, the following categories of persons shall be required to be registered under this Act:

(i) persons making any inter-State taxable supply, irrespective of the threshold specified under paragraph 1;”

The following conclusion can be made

a) Person making Inter State Taxable Supply: If a person makes any Inter-State Taxable supply of Goods and /or Services, then threshold limit is not available and he would be required to be registered from that point onwards.

b) Person making Inter State Exempted Supply: If a person is making a local supply and he also makes exempted Inter State Supply, the given provision would not be applicable and he would be governed by threshold limit of Rs 9 Lakh (Except North Eastern States) as provided in Para 1 of Schedule III.

c) Person only making Local/ Intra State Supply: If a person is making only local/Intra State supplies, threshold limit for registration would be Rs 9 Lakh (Except North Eastern States) as provided in Para 1 of Schedule III.

Following scenarios can be considered in the light of the above provisions of threshold limit for registration in case of Local and Inter State Supplies. For better understanding, scenarios can been divided in two parts:

a) Person having business place in a Single State:

Example-1:- Business place situated in Rajasthan and his first supply is taxable inter-state supply of Services: If a person situated in Rajasthan starts supplying services and his first supply is a Taxable Inter-State Service, then no threshold limit would be available to him and he would be required to be registered under GST mandatorily.

Example-2: Business place situated in Rajasthan is already making taxable local supplies and starts making taxable inter-state supply: Suppose a person is situated in Rajasthan has an aggregate turnover of Rs 7 Lakh from taxable local supplies and subsequent to that he makes a Taxable Inter State Supply of goods and/or services, he would not have the benefit of threshold limit of Rs 9 Lakh and he would be required to be registered from that point onwards.

Example-3: Business place situated in Rajasthan is already making taxable local supplies and starts making exempted inter-state supply: Suppose a person situated in Rajasthan has an aggregate turnover of Rs 7 Lakh of taxable local supplies and subsequent to that he makes a Exempted Inter State Supply of goods and/or services, he would continue to enjoy benefit of threshold limit of Rs 9 Lakh and he would not be required to be registered till his aggregate turnover exceeds Rs 9 Lakh.

Example-4: Business place situated in Rajasthan making both taxable and exempted local supplies: If a person situated in Rajasthan is making taxable local supply of Rs 7 Lakh and exempted local supply of Rs 8 Lakh, then as his aggregate turnover exceeds Rs 9 Lakh in the financial Year, he would be required to be registered in Rajasthan.

b) Scenario for Person having business place in Multiple States:

Example-1: Business place situated in Multiple States making only local taxable supplies and no inter-state supply: If a person is having offices in Rajasthan and Maharashtra, then up-till the point such offices are providing taxable local supplies within the State of Rajasthan and Maharashtra respectively, there would be no requirement for registration till aggregate turnover of both branches exceeds Rs 9 Lakh. If the aggregate turnover exceeds Rs 9 Lakh, both of them would be required to be registered under GST.

Example-2: Business place situated in Multiple States are making only local taxable supplies and one of the branches starts making exempted inter-state supply: If a person is having Offices in Rajasthan and Maharashtra and suppose they are only making taxable local supplies from Rajasthan and Maharashtra and their aggregate turnover is less than Rs 9 Lakh. Suppose From Rajasthan, the person makes exempted Inter State Supply, they would continue to enjoy benefit of Threshold limit.

Example-3: Business place situated in Multiple States are making only local taxable supplies and one of the branches starts making taxable inter-state supply: If a person is having Offices in Rajasthan and Maharashtra and suppose they are only making taxable local supplies from Rajasthan and Maharashtra and their aggregate turnover is less than Rs 9 Lakh. Suppose From Rajasthan, the person makes taxable Inter State Supply, both the offices of the person would be required to be registered.

Example-4: Business place situated in Multiple States and one of branches is making taxable local supplies and other one is making only exempted local supplies: If a person is situated in Rajasthan and Maharashtra and from Rajasthan he is making taxable local supply of Rs 7 Lakh in the State of Rajasthan and from Maharashtra he is making exclusively exempted local supply of Rs 8 Lakh in the state of Maharashtra, then as his aggregate turnover exceeds Rs 9 Lakh in the financial Year, he would be required to be registered in Rajasthan but he would not be required to be registered in Maharashtra as he is making exclusively exempted supplies but as and when he makes any taxable supply of any amount from Maharashtra, he would be required to be registered in Maharashtra as well.

From the Author: In the next update I would be starting comprehensive update on registration and collection of tax by Electronic Commerce Entities, Electronic Commerce Operators and aggregators.

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