A supply of goods, or services, or both which results in export of the goods, or services, or both out of the territory of India has been referred to in Article 286 of the Constitution as supply of goods, or services, or both in the course of export of the goods, or services, or both out of the territory of India. Similarly, supply of goods, or services, or both which results in import of goods, or services, or both has been referred to in the same Article 286 as the supply of goods, or services, or both in the course of import of the goods, or services, or both into the territory of India. However, an import supply of goods, or services, or both has been referred to in Article 269A of the Constitution as supply of goods, or services, or both in the course of import into the territory of India. In the Goods and Services Tax Laws, such supplies of goods, or services, or both have been referred by different names, e.g. in section 7(5) (a) of the Integrated Goods and Services Tax Act, 2017, export supply has been referred to as supply of goods, or services, or both when the supplier is located in India and the place of supply is outside India. In section 16 of the same Act, and in clause (6) of section 2 of the Central Goods and Services Tax Act, 2017, export supply has been referred to as “export of goods, or services, or both”.
Here my purpose is not of discussing which supplies of goods, or services, or both can be said to be in the course of export of goods, or services, or both out of the territory of India; or when a supply of goods, or services, or both can be said to take place in the course of the export of the goods, or services, or both out of the territory of India. In this article I will discuss that whether a supply of goods, or services, or both in the course of export of the goods, or services, or both out of the territory of India is an inter-State supply for the purpose of registration under the Goods and Services Tax Laws.
Section 22, and section 24, of the Central Goods and Services Tax Act, 2017 are related to liability of registration of persons under goods and services tax. Section 22 of the said Act runs as follows:–
“22. Persons liable for registration.— (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:
[Provided further that the Government may, at the request of a special category State and on the recommendations of the Council, enhance the aggregate turnover referred to in the first proviso from ten lakh rupees to such amount, not exceeding twenty lakh rupees and subject to such conditions and limitations, as may be so notified:
Provided also that the Government may, at the request of a State and on the recommendations of the Council, enhance the aggregate turnover from twenty lakh rupees to such amount not exceeding forty lakh rupees in case of supplier who is engaged exclusively in the supply of goods, subject to such conditions and limitations, as may be notified:
Explanation.––For the purposes of this sub-section, a person shall be considered to be engaged exclusively in the supply of goods even if he is engaged in exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount.
(2) Every person who, on the day immediately preceding the appointed day, is registered or holds a licence under an existing law, shall be liable to be registered under this Act with effect from the appointed day.
(3) Where a business carried on by a taxable person registered under this Act is transferred, whether on account of succession or otherwise, to another person as a going concern, the transferee or the successor, as the case may be, shall be liable to be registered with effect from the date of such transfer or succession.
(4) Notwithstanding anything contained in sub-sections (1) and (3), in a case of transfer pursuant to sanction of a scheme or an arrangement for amalgamation or, as the case may be, demerger of two or more companies pursuant to an order of a High Court, Tribunal or otherwise, the transferee shall be liable to be registered, with effect from the date on which the Registrar of Companies issues a certificate of incorporation giving effect to such order of the High Court or Tribunal.
Explanation.––For the purposes of this section,––
(i) the expression “aggregate turnover” shall include all supplies made by the taxable person, whether on his own account or made on behalf of all his principals;
(ii) the supply of goods, after completion of job work, by a registered job worker shall be treated as the supply of goods by the principal referred to in section 143, and the value of such goods shall not be included in the aggregate turnover of the registered job worker;
(iii) the expression “special category States” shall mean the States as specified in sub-clause (g) of clause (4) of article 279A of the Constitution except the State of Jammu and Kashmir and States of Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand.”
In the above quoted text, in sub-section (1) of section 22 of the Central Goods and Services Tax Act, 2017, expression aggregate turnover has been used. Definition of expression “aggregate turnover” has been provided in clause (6) of section 2 of the said Act as follows:–
“(6) “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess;”
In the above quoted definition of expression “aggregate turnover”, following supplies have been referred to, namely:-
(i) taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis);
(ii) exempt supplies;
(iii) export of goods, or services, or both; and
(iv)inter-State supplies,
of persons having same Permanent Account Number.
In the definition of expression, expressions “exempt supplies” and “taxable supplies”, respectively refer to such supplies as defined in clauses (47) and (108) of section 2 of the Goods and Services Tax Act, 2017. Section 2 of the Integrated Goods and Services Tax Act, 2017 also relates to definitions. Section 2 of the Integrated Goods and Services Tax Act, 2017 does not define expression “inter-State supply”. However, clause (24) of section 2 of the Integrated Goods and Services Tax Act, 2017 runs as follows:–
“(24) words and expressions used and not defined in this Act but defined in the Central Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act shall have the same meaning as assigned to them in those Acts;”
Similarly, clause (120) of section 2 of the Central Goods and Services Tax Act, 2017 runs as follows:–
“(120) words and expressions used and not defined in this Act but defined in the Integrated Goods and Services Tax Act, the Union Territory Goods and Services Tax Act and the Goods and Services Tax (Compensation to States) Act shall have the same meaning as assigned to them in those Acts;”
That expression “inter-State supply” has not been defined in any other Goods and Services Tax Law referred to in clause (120) of the Central Goods and Services Tax Act, 2017. However, section 7 of the Integrated Goods and Services Tax Act, 2017, titled as “Inter-State supply” runs as follows:–
“Inter-State supply.
(1) Subject to the provisions of section 10, supply of goods, where the location of the supplier and the place of supply are in—
(a) two different States;
(b) two different Union territories; or
(c) a State and a Union territory,
shall be treated as a supply of goods in the course of inter-State trade or commerce.
(2) Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-State trade or commerce.
(3) Subject to the provisions of section 12, supply of services, where the location of the supplier and the place of supply are in—
(a) two different States;
(b) two different Union territories; or
(c) a State and a Union territory,
shall be treated as a supply of services in the course of inter-State trade or commerce.
(4) Supply of services imported into the territory of India shall be treated to be a supply of services in the course of inter-State trade or commerce.
(5) Supply of goods or services or both,—
(a) when the supplier is located in India and the place of supply is outside India;
(b) to or by a Special Economic Zone developer or a Special Economic Zone unit; or
(c) in the taxable territory, not being an intra-State supply and not covered elsewhere in this section,
shall be treated to be a supply of goods or services or both in the course of inter-State trade or commerce.”
Although, title of section 7 of the Integrated Goods and Services Tax Act, 2017 is “Inter-State supply”, but inside the section, no provision defines the expression “inter-State supply”. Sub-sections (2) and (4) are related to import of goods, and import of services , respectively. Clause (a) of sub-section (5) of section 7 of the said Act is related to export supply of goods, or services, or both. In view of this, it cannot be said that all supplies of goods, or services, or both referred to in various sub-sections of section 7 of the Integrated Goods and Services Tax Act, 2017 are inter-State supplies.
For the sake of arguments, let us assume that in definition of expression “aggregate turnover”, expression “inter-State supplies” refers to all supplies of goods, or services, or both mentioned in various sub-sections of section 7 of the Integrated Goods and Services Tax Act, 2017. Then, supply of goods, or services, or both referred to in clause (a) of sub-section (5) of section 7 of the Integrated Goods and Services Tax Act, 2017, being export supply of goods, or services, or both, is already included in the definition of expression “aggregate turnover”, in the name of “export of goods, or services, or both”. This conclusion renders the definition of expression “aggregate turnover” vicious, because export supply of goods, or services, or both gets included twice in the definition, once as “export of goods, or services, or both” and once as “inter-State supply”. Therefore, assumption that the expression “inter-State supplies”, used in definition of expression “aggregate turnover”, refers to all supplies of goods, or services, or both mentioned in various sub-sections of section 7 of the Integrated Goods and Services Tax Act, 2017 is false.
Now, clause (i) of section 24 of the Central Goods and Services Tax Act, 2017 runs as follows:–
“24. Compulsory registration in certain cases.— 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;”
In the above quoted section 24(i) of the Central Goods and Services Tax Act, 2017, ‘persons making inter-State taxable supply’ have been referred to. Actually, term “inter-State taxable supply” is misnomer. Section 5(1) of the Integrated Goods and Services Tax Act, 2017, provides levy of tax on “inter-State supply” of goods, or services, or both. Therefore, words “taxable” or exempt may qualify the term “inter-State supply”. For being a taxable inter-State supply, firstly, supply should be an inter-State supply, only thereafter, it can be ascertained whether an inter-State supply is a taxable inter-State supply, or an exempt inter-State supply. Inter-State supply is the name of supply which can be a taxable supply or an exempt supply. Here, we can notice that section 24 of the Central Goods and Services Tax Act, 2017 does not provide separate definition of expression “inter-State supply”, or expression “inter-State taxable supply”. Secondly, expression, “inter-State supplies”, used in definition of expression “aggregate turnover”, includes within it taxable inter-State supplies (inter-State taxable supplies) as well as exempt inter-State supplies. For these reasons, expression “inter-State taxable supply” used in section 24(i) of the Central Goods and Services Tax Act, 2017 is included in the expression “inter-State supplies”, used in definition of expression “aggregate turnover” as “inter-State supply”. Therefore, expression “inter-State taxable supply” used in section 24(i) of the Central Goods and Services Tax Act, 2017 has nothing to do with expression “export of goods, or services, or both” used in the definition of expression “aggregate turnover”.
In view of analysis as provided above, it has to be inferred that expression “inter-State taxable supply” does not include export supply of goods or services, or both.
Expressions, “all taxable supplies” and “exempt supplies” are to be understood as “all taxable intra-State supplies”, and “all exempt intra-State supplies”, respectively. These expressions do not include any kind of export of goods, or services, or both, or any kind of inter-State supply. Contrary view, will render definition of expression “aggregate turnover” unusable.
In view of the discussion above, I am of the view that expression “inter-State taxable supply” does not include supply of goods, or services, both in the course of export of the goods, or services, or both out of the territory of India, or any other export supply.
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Disclaimer: Except the quoted versions, interpretations made and all other views expressed here are my personal views and are meant only for academic discussion. Readers are advised to follow the provisions of 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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