Casual Taxable Person in GST

1. Casual taxable person: Means a person who occasionally undertakes transactions involving supply of goods or services in course or furtherance of business, whether as an agent, principal or otherwise, in a State, UT where he has no fixed place of business.

The casual taxable person is a new concept introduced in GST. Casual taxable person can be anyone. The definition of casual taxable person can be broken down in 4 main phrases;

• Occasionally undertakes transactions
• supply of goods or services in course or furtherance of business – that means activity undertaken by the causal taxable person must be covered under definition of business.
• The supply can be made as principal (on its own basis) or as an agent (on behalf of principal) or otherwise. This implies that agents of the principal can also become casual taxable person. The capacity of providing such services or making such supplies is not important, it can be principal, it can be agent or it can be in any other form.
• Supply is made in a State or UT where the person making supply is not having any fixed place of business
• Supply shall be made in course or furtherance of business. It is implied by the fact that tax can only be charged on those activities which are carried in the course or furtherance of a business. This is a prerequisite of the chargeability of tax in GST that a business must be carried on.
• Phrase 3 & 4 as mentioned above should be read in conjuncture with one another.

As per phrase 4, the supply shall be made from a State or an Union Territory in which the person who is making supply has no fixed place of business. This is a mandatory clause and has pivotal role in deciding whether the person is liable to be declared as Casual Taxable Person or Not.

• Fixed place of business is not defined in the GST act, although the fixed establishment is clearly defined in the Act. The fixed place of business can be understood in the lines of fixed establishment, to mean a place which is characterized by sufficient degree of permanence. Fixed place as in its dictionary meaning will mean a place which is situated in a particular place which can’t be moved, such as fixed building or shop.
• Under GST registration provisions and rules, a person has to take registration in each and every state in respect of all his establishments if his aggregate turnover exceeds 20 Lakh or 10 Lakh as the case may be. This means that if a person is having multiple establishment in various part of the country, he needs to take registration of all such establishments.
• The detailed understanding of the registration provisions also entails that, the certificate of registration bears the name of principal place of business and not of all the places of business. Hence in every state for which the registration is obtained there will be a principal place of business.
• In my view the casual taxable person provision will apply only on registered person, since the unregistered person who makes occasional supplies in other states can’t be tracked and if he crosses 10L/20L limit he will become liable for normal registration anyway.
• Over and above this one of the most important and through way to decide whether a person is a casual taxable person or not is “definition of location of supplier”. The nature of tax is determined by the IGST Act. Whether a supply will be liable to CGST/SGST or IGST is based on 2 things – Place of supply and Definition of location of supplier. The IGST is payable when the place of supply and location of the supplier is located in different states and otherwise CGST/SGST is liable to be paid.

On a close look on the Location of supplier definition, we can find that words “where supply is made from” are used. This means that the location of supplier is determined by the place from where the supply is made. This provision helps in clarifying the doubts about the applicability  of the casual taxable person provisions.

• Situation I:

Suppose an Event organizing firm is registered in State of Gujarat as a taxable person under GST. They organized a concert of ABC in Bengaluru, Karnataka. The Event organizing company doesn’t have any fixed place of business or fixed establishment in Bengaluru or Karnataka. In this case clearly the services of organizing the event are not provided from State of Gujarat, they are provided in Bengaluru, Karnataka. Hence the location of supplier of services will become Bengaluru (the place where the services are provided). Since the location of supplier of services and POS are both in same state, the CGST and SGST will be applicable in that case. Now it is not possible for the event organizing company to charge SGST in State of Karnataka, since they are not registered in Karnataka. Now the provisions of casual taxable persons gets attracted.

The event organizing company will take registration in State of Karnataka as a Casual taxable person and will issue bill charged with CGST and SGST.

• What about the IGST and why IGST can’t be charged in above case:

For charging the IGST, the location of supplier and POS must be in different state. Now although the event organizing company is registered in Gujarat and the supply is provided in Karnataka, still IGST will not be applicable. The IGST would have become payable if, the services are provided from the office of event organizing company from Gujarat. In that case since the “services are provided from” is in Gujarat and the POS is in Karnataka, IGST could have been charged and no need is there to take registration.

• The registration in a particular State or UT is valid for a maximum period of 90 days. Such person can make taxable supplies only after receiving registration certificate, which means registration is mandatory and threshold is not applicable. When a person applies for the registration, he has to pay the estimated amount of tax in advance and such advance will be credited to his electronic ledger.

Disclaimer:

The topic discussed here is highly controversial and has a lot of ambiguity. The views expressed in the article are strictly personal and subject to differ according to individual interpretation