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GST Registration – Issues in GST Law

Nil rate is a rate in tax hence the supplier making Nil Rated supply is also liable for registration in spite of the fact there is no liability of GST on him. Should the NIL Rated Supply be not included in the definition of Taxable Supply for the purpose of this Section and Section 23 which deals with the situation where no registration is required?

GST Registration

The Baby GST has celebrated its first BDAY, let’s try to get the mumbling of this Baby with my best endeavor to decode the sounds which actually have the alphabets but no meaning.

Starting with the registration process in GST covered under Section 22 to Section 30 of the CGST Act, 2017.

Section 22 (1) provides “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 22 lays down two fundamentals –

1. Liability to register in the state from where Taxable supply is being made ( it means no need of registration in a state from where the exempted supply is being made even if Aggregate Turnover on the same PAN exceeds 20 lacks which includes taxable supply from some other state)

2. Aggregate Turnover must exceed 20 lacks or 10 lacks as the case may be. Aggregate Turnover is defined in Sec 2 (6) of the Act.

Now Section 22 opens the following issues –

1. Nil rate is a rate in tax hence the supplier making Nil Rated supply is also liable for registration in spite of the fact there is no liability of GST on him. Should the NIL Rated Supply be not included in the definition of Taxable Supply for the purpose of this Section and Section 23 which deals with the situation where no registration is required?

2. GST is a Destination Based Taxation it means the consumer state will have the right over Tax Revenue however registration process is on Origination Based. Further all the compliances related to GST has to complied with State Authority from where he is making a supply ( it is being assumed that the supplier is allotted to State Authority). This means all the expenses of GST Department of a State is to generate the Revenue of other State. So is the Producer state is really motivated for further production in the Economy? And are we really implementing GST as Destination Based Taxation System?

There is another Section 25 (4)/(5) in view of which different establishment  or more than one GSTIN on Single PAN will be considered as distinct person.

So in view of Section 25(5) the different sales office from where no taxable supply is being made of a Supplier shall be regarded as distinct person. It might possible that in view of Section 22(1) the supplier may not get himself registered for the sales office at different location. But the basic issue is, all the expenses related to the sales office is being born by the HO of the Supplier, will it be considered as consideration for the services rendered by Sales Offices to its HO? Further since it is the transaction between related people Section 15 would may not be applicable, so may the valuation issue knock at the door of litigation? Further more Supply is defined in Section 7 of the Act in the widest manner and inclusive in the nature.

Thus, is GST really following the Legal Prudence while talking about the registration of Sales office at different location of a supplier?

Categories: CA, CS, CMA
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