To most of the people directly or indirectly concerned with goods and services tax (hereinafter referred to as the GST) will take the title of this post as a surprise but it is absolutely true that GST Law not provides threshold limit of turnover.
Sub-clause (d) of clause (4) of Article 279A of the Constitution, which is related to Goods and Services Tax Council, runs as follows:
“(4) The Goods and Services Tax Council shall make recommendations to the Union and the States on—
(d) the threshold limit of turnover below which goods and services may be exempted from goods and services tax;”
We see here that the above quoted provision of the Constitution requires that the Goods and Services Tax Council (hereinafter referred to as the GST Council) shall make its recommendation about the threshold limit of turnover below which goods and services may be exempted from goods and services tax. Synonyms of word threshold are ” doorstep, sill, doorsill, doorway, entrance, entry, way in, door, gate, gateway”.
Let us draw a graph, on “X” axis of which certain persons are located, and axis “Y” of which represent values turnover. Let there be six persons with their turnovers of 5,00,000.00, 7,00,000.00, 13,00,000.00, 19,99,999.00, 20,00,000.00 and 23,00,000.00. Now let us draw a line parallel to X axis passing through a point “T” on axis Y which represents value of turnover of 20,00,000.00. Let us draw lines parallel to Y axis representing the turnovers of all persons. Lines drawn in cases of first 4 persons will not touch the line drawn parallel to X axis passing through point P. Line drawn in case of fifth person will touch the line drawn parallel to X axis and line drawn for sixth person will cross the line drawn parallel to Y axis. If turnover of 20,00,000.00 is assumed to be threshold limit of turnover, then for all persons whose turnovers are below this threshold limit of turnover, goods and services be exempt from goods and services tax. They will not be liable for payment of goods and services tax. Persons whose turnover will be 20,00,000.00 or greater than 20,00,000.00 shall be liable for payment of goods and services tax. Consequently, such persons will also not be liable for obtaining registration under GST Laws.
Here it is noteworthy that persons whose turnover is 20,00,000.00 or greater than 20,00,000.00 shall also be not liable for payment of tax on their turnover of 19,99,999.00 (converted in nearest rupee). This is because, threshold limit of turnover, referred to in the Constitution, is the value of turnover below which goods and services will be exempt from goods and services tax.
In section 9(1) of the Central Goods and Services Tax Act, 2017, a taxable person has been made liable for payment of tax. In clause (107) of section 2 of the said Act, expression “taxable person” has been defined as follows:
“(107) “taxable person” means a person who is registered or liable to be registered under section 22 or section 24;”
Sub-section (1) of section 22 runs as follows:
“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.”
Section 24 of the Central Goods and Services Tax Act, 2017 runs as follows:
“24. Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act,––
(i) persons making any inter-State taxable supply;
(ii) casual taxable persons making taxable supply;
(iii) persons who are required to pay tax under reverse charge;
(iv) person who are required to pay tax under sub-section (5) of section 9;
(v) non-resident taxable persons making taxable supply;
(vi) persons who are required to deduct tax under section 51, whether or not separately registered under this Act;
(vii) persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise;
(viii) Input Service Distributor, whether or not separately registered under this Act;
(ix) persons who supply goods or services or both, other than supplies specified under sub-section (5) of section 9, through such electronic commerce operator who is required to collect tax at source under section 52;
(x) every electronic commerce operator;
(xi) every person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered person; and
(xii) such other person or class of persons as may be notified by the Government on the recommendations of the Council.”
If we look at sub-section (1) of section 22, we find that▬
(i) limit of aggregate turnover of 20 lakh rupees is for fixing liability of registration of a person (liability of payment of tax of a person) whereas threshold limit of turnover referred to in clause (4)(d) of Article 279A of the Constitution is meant for granting exemption to goods and services from goods and services tax.
(ii) person exactly having turnover equivalent to threshold limit of turnover, provided in the Constitution, is liable for payment of tax whereas person referred to in section 22(1) exactly having the value of aggregate turnover mentioned there in the section is not liable for payment of tax;
(iii) a person has been made liable for registration in the State from where he makes a taxable sale. A person who exclusively makes supplies of goods or services or both, which are not liable to tax or which are wholly exempt from tax will not become liable for registration until he makes a taxable supply of goods or services or both, even if his aggregate turnover exceeds the limit of aggregate turnover provided in section 22(1).
(iv) limit of turnover provided in section 22(1) is not available to persons referred to in section 24.
This is noteworthy that the Honorable Supreme Court, in its judgment in the Commissioner, Hindu Religious Endowments, Madras vs. Sri Lakshmindra Thirtha Swamiar of Sri Shirpur Mutt. Judgment Dated: 16/04/1954 has inter-alia held that tax is a part of the common burden, the quantum of imposition upon the taxpayer depends generally upon his capacity to pay. Although, in GST taxpayers are allowed to collect tax from recipients of supplies yet business of small taxpayers will be effected adversely in making compliance of the law. Many small businesses, which are run by a single person, will suffer due to want of time and money both.
Disclaimer: Except the quoted versions, all other views expressed here are my personal views and are meant only for academic discussion. Readers are advised to obey the law and to seek opinion of their legal advisors before acting upon the views expressed here. I and the publishers of this article disown any liability on account of any loss or damage that may be caused on account of use of views expressed here.
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Learned readers of the article:
I am sorry for certain errors which have crept in the article.
(i) In first paragraph, for words “not provides”, words “does not provide” are to be read.
(ii) In 4th paragraph, in place of last sentence viz. “Consequently, such persons will also not be liable for obtaining registration under GST Laws.”, sentence “Consequently, such persons will also be liable for obtaining registration under GST Laws.” is to be read.