In re Jalaram Feeds (GST AAR Maharashtra)
Applicant has stated that they require services of Goods Transport Agency like any other business. Applicant being a recipient of supply is liable to pay tax under reverse charge basis and as per Section 9(4) of the Act, all the provisions of this act shall apply to such recipient ( in this case, the applicant), as if they are the persons liable for paying the tax in relation to such supply. Thus from conjoint reading of Section 9 and section 24 of the Act, since the applicant is required to pay tax under reverse charge, they have to compulsorily register under GST and the requirements of Section 22(1) pertaining to taxable supply and the threshold limit are not applicable to them.
The Applicant has argued that Section 23 of the Act is standalone section and the provisions of Section 24 pertaining to compulsory registration are applicable to a person liable for registration under subsection (1) of the Section 22 of the GST Act. This argument makes the Section 24 of the Act redundant and the applicant would not be required to pay the tax on Services of Goods Transport Agency on reverse charge basis provided in the Section 24 of the Act. In this context it is pertinent to remind a well settled principle of law that the law should not be interpreted in such a way to make any part of the statute redundant.
By application of the above principles of jurisprudence namely the rule of harmonious construction and the rule against redundancy, the applicant would go out of the scope of Section 23 of the GST Act because he is making certain quantity of taxable supply of goods transport service by way of reverse charge mechanism and would fall within the scope of section 24 of the GST Act for the purpose of registration and hence he would be required to obtain registration under the Act in order to discharge his duty liability under reverse charge, notwithstanding the turnover limits specified in sub-section (1) of Section 22 of the GST Act.
FULL TEXT OF ORDER OF AUTHORITY OF ADVANCE RULING, MAHARASHTRA
The present application has been filed under section 97 of the Central Goods and Services Tax Act 2017 and the Maharashtra Goods and Services Tax Act, 2017 [hereinafter referred to as “the CGST Act and MGST Act” respectively] by M/s JALARAM FEEDS, seeking an advance ruling in respect of the following question.
Whether the firm is liable to take registration under section 24 or is exempted from registration under section 23?
At the outset, we would like to make it clear that the provisions of both the CGST Act and the MGST Act are the same except for certain provisions. Therefore, unless a mention is specifically made to any dissimilar provisions, a reference to the CGST Act would also mean a reference to the same provision under the MGST Act. Further to the earlier, henceforth for the purposes of this Advance Ruling, the expression `GST Act’ would mean CGST Act and MGST Act.
02. FACTS AND CONTENTION – AS PER THE APPLICANT
The submissions, as reproduced verbatim, could be seen thus-
STATEMENT OF FACTS
The said firm M/s Jalaram Feeds a registered Partnership firm having its registered office at K-31/2A, MIDC, Hingna Road, Nagpur-16, is into manufacturing of only Compound Animal Feed (HSN Code : 2309). The above product is exempted under the CGST Act, 2017. No other supply of any kind of Goods and Services is made by the firm which in anyways is chargeable to Tax under CGST Act, 2017.
The Firm says that since it is into supply of only exempted goods, it is covered under section 23 of CGST Act, 2017 and is not liable to take registration under any of the provisions of the Act, since the firm is into the supply of Exempted goods, it requires services of Goods Transport Agency like any other business. As per the provisions of Act, 2017, a firm is liable to take registration as it is liable to pay GST under Reverse Charge. The firm is of the opinion that Sec 24 overrules sec 22 (Person Liable to register beyond a specific aggregate turnover) and not sec 23, Since section 23 is a specified section and independent and is not overruled by section 24, it is covered under sec 23 and not required to take registration under the CGST Act, 2017.
Section 24 specifically starts with
“Notwithstanding anything contained in sub-section (1) of section 22,” so as to overrule sec 22 and not sec 23.
Most of the persons in the supply of Exempted goods and services require services under which reverse charge is payable. And hence there would be no need of section 23 as everyone would be covered under see 24.
Section 22 of CGST Act, 2017 from bare act: – Section 22 of CGST Act – Persons liable for registration
(1) Every suppliers 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,
(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.
Section 23 of CGST Act, 2017 from bare act : –
(1) The following persons shall not be liable to registration, namely:—
(a) Any person engaged exclusively in the business of supplying goods or services or both that is not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act;
(b) An agriculturist, to the extent of supply of produce out of cultivation of land.
(2) The Government may, on the recommendations of the Council, by notification, specify the category of persons who may be exempted from obtaining registration under this Act.
Section 24 of CGST Act – Compulsory registration in certain cases Section 24 of CGST Act, 2017 from bare act:
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;
(xii) and such other person or class of persons as may be notified by the Government on the recommendations of the Council.
ADDITIONAL SUBMISSIONS ON 11.03.2019
Background of the firm:
1. Jalaram Feeds is registered partnership firm having its registered office at K-31/2A, MIDC, Hingna road, Nagpur-16.
2. Jalaram Feeds is engaged exclusively in manufacturing and sale of only Compound Animal feeds (HSN code: 2309) which is an exempted supply as per Notification No. 2/2017 – Central Tax (Rate) New Delhi, 28th June 2017
3. Apart from the aforesaid, no other supply of any kind of goods or services are made by the firm which in anyway is chargeable to tax under CGST Act, 2017
4. 99% customer base of Jalaram Feeds is farmers.
Facts of the case and Contention of the Firm :
Chapter VI of The Central Goods and Services Act 2017(CGST Act) deals with Registration. Section 22 deals with Person liable for registration, Section 23 deals with Persons not liable for registration and Section 24 deals with Compulsory registration in certain cases, Let us first understand the interpretation/ intention of the law maker:
Section 22(1) of the CGST Act says:
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.
Provide that where such person makes taxable supplies of goods or services or both from any of the special categary States, he shall be liable to be registered if his aggregate turnover in a financial year axceeds ten lakh rupees.
Section 2(6) defines Aggregate Turnover as: –
“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;
Section 2(47) defines Exempt Supply as: –
“exempt supply” means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply;
To sum-up now, it is a clear interpretation that if a person is in the business of supply of Exempt Goods irrespective of Turnover (INR 50 lakhs) exceeding the Limits specified in the section he is not liable to take registration because the turnover criteria is only applicable for taxable supply:
Suppose for an instance, if the supplier in addition to the above supplies a Taxable Good or Service for say INR 10 Lakhs, he would be liable for registration as the Aggregate Turnover would exceed the specified limit.
Which is not the case of Jalaram Feeds, as the firm is exclusively into supply of Cattle Feed (HSN: 2309)
which is an Exempted Supply. Hence Jalaram Feeds is not liable to take registration under sec 22(1).
Dealing Exclusively in Exempt Supplies
Section 23 of CGST Act deals with persons not liable for registration is reproduced here for ready reference.
The following persons shall not be liable to registration, namely:
(a) Any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act;
(b) An agriculturist, to the extent of supply of produce out of cultivation of land.
As per sec 23 (a), Jalaram Feeds engaged exclusively in the business of supply of Cattle Feed (HSN: 2309) wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act, and hence liable for registration.
Section 24 of CGST Act deals with compulsory registration in certain cases.
24 reads as under:
Not with standing anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act,
(i) Person 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.
It is fairly common in tax laws to use the expression “Notwithstanding anything contained in this Act or other Acts” or “Subject to other provisions of this Act or Other Acts”. Ordinarily, it is a legislative device to give such a clause an overriding effect over the law or provision that qualifies such clause,
On the clear reading of section 24 it has been devised to override sec 22(1) as it starts with the expression Notwithstanding anything contained in sub-section (1) of section 22″. Thus section 24 specifically overrides the provisions of Section 22(1). However section 24 does not mention anything about sec 23 as it is a specific section.
Applying the interpretation rules of Law, it can be very well concluded that the legislation has chosen consciously section 24 to override the provisions of section 22(1) and has deliberately left-out section 23 from section 24 as sec. 23(Exempted Supplies) is a specific section. Let us understand the intention of the Legislature using the Example:
As per this Section, if a person obtains a service of a GTA, or a Lawyer, or any goods or service with reverse charge liability, irrespective of the turnover is liable to obtain registration. If this section overrules sec 23 (which is not mentioned anywhere), then majority of the persons in the business of exempted goods will be liable for registration as they obtain GTA services for transportation of these goods. Hence drafting of sec 23 in GST Act has no relevance since each and every person doing any commercial activity even for one Rupee becomes liable to take registration under GST including a Farmer who supplies Fruits/ Vegetables/ Maize from his fields to the market. He requires to obtain Services of GTA as he himself doesn’t have any vehicle to transport, Despite the fact that he supplies exempted goods, he will be liable to register.
Also, as per sec 23 (b) An agriculturist, to the extent of supply of produce out of cultivation of land shall not be liable to registration under GST. But looking substance over form even this agriculturist producing cultivation of Land requires GTA service to transport its produce from his farms to the market and will also require registration under GST if sec 24 overrules sec 23, which questions the reasonability of Economic Tax Laws & intentions of the Legislature/ Lawmaker.
Article Compiles list of 149 Type of Goods which are exempt from Tax under GST with respective HSN Code and Description of Goods as per Notification No. 2/2017-Central Tax (Rate) New Delhi, the 28th June, 2017
GOODS AND SERVICES TAX
List of Exempted Goods under GST
