CA Anil Agrawal
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. There has been a lot of confusion on few aspects relating to registration more specifically with regard to the cases where person dealing in exempt supplies also liable to pay GST on reverse charge basis. An attempt has been made through this article to deal with few such situations.
Meaning Of Aggregate Turnover
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.
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 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, 3. exports of goods or services or both and 4. 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;
It is seen from the definition of Aggregate Turnover that only four categories of turnovers are included in the definition of Aggregate Turnover namely 1. Taxable supplies. 2. Exempt supplies. 3. Exports 4. Interstate supplies of persons having same PAN
Now the question than could arise here is that whether Non-taxable supply (means those supplies where GST is non leviable i.e Non-GST supply) like alcoholic liquor for human consumption, petroleum crude, high speed diesel, motor spirit, natural gas, aviation turbine fuel would be included under ‘Aggregate Turnover’.
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 clear that Aggregate Turnover also include non-taxable supplies.
Let us take an example. Turnover on account of say Petrol, Diesel is Rs.10 Crore and turnover of lubricant is Rs.15 Lakhs. Whether registration is mandatory in this case? Ans.: Yes. Non-taxable turnover which comes under ‘Exempt supply’ is 10 Crore and taxable turnover is Rs. 15 Lakhs. Hence aggregate turnover here crosses the threshold limit thereby attracting section 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.
Section 24 of CGST Act deals with compulsory registration in certain cases. Section 24 reads as under:
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) Persons 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.
Now, a question may arise as to whether a registered person dealing exclusively in making Exempt supplies and is also avail the services of GTA or Advocate, is required, under the law, to get registration? Take an example of a publisher of books who pays royalty to its authors. Supply of Printed Books is Exempt vide entry no. 119 of Notification No.2/2017 Central Tax (Rate). Whether such publisher is required, under the law, to get registration, if he pays royalty to unregistered persons thereby attracting the provisions section 9(4)? Lets us presume for a while that RCM u/s 9(4) is in force.
On a plain reading of Section 23 it appears that he is not required to get registration. Section 22(1) which talks about ‘persons liable for registration’ whose aggregate turnover crosses the threshold limit. The definition of ‘Aggregate turnover’ include Exempt supplies also. Meaning thereby registration is compulsory even in case of a person dealing exclusively exempt supplies if it exceeds threshold limit. This reasoning has been further fortified by the fact that section 23 does not have a non-obstante clause with the expression like ‘notwithstanding anything contained section 22(1) of the Act.
Hence we can safely conclude that Section 23 does not override Section 22. Both the sections are independent codes.
However section 24 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 is silent as far as its overriding effect on section 23 is concerned.
It further appears 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. That might be the intention of the legislature.
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. When a clause begins with “Notwithstanding anything contained in the Act or in some particular provision/provisions in the Act”, it is with a view to give the enacting part of the section, in case of conflict, an overriding effect over the Act or provision mentioned in the non obstante clause. It conveys that in spite of the provisions or the Act mentioned in the non-obstante clause, the enactment following such expression shall have full operation.
It is well settled that the provisions of a statute must be read harmoniously together. However, if this is not possible then it is settled law that where there is a conflict between two sections, and one cannot reconcile the two, one has to determine which the leading provision is and which the subordinate provision is, and which must give way to the other. A legislative instrument must be construed on the prima facie basis that its provisions are intended to give effect to harmonious goals. Where conflict appears to arise from the language of particular provisions, the conflict must be alleviated, so far as possible, by adjusting the meaning of the competing provisions to achieve that result which will best give effect to the purpose and language of those provisions while maintaining the unity of all the statutory provisions.
Thus by applying the ‘principle of harmonious construction’ one can safely conclude that section 22, section 23 and section 24 are independent codes. In order to draw a conclusion, we have to read all these sections concurrently.
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