CA Ramandeep Singh Bhatia
In the GST regime, tax payers have been shifted from the centralized registration (as was in service tax) to State centralized registration. There was off course option of business vertical which was allowed only on some restrictive purposes where the business line is subject to different risk and reward. There has been continuous demand from the industry especially from sectors which works in standalone environment to provide facility of separate registration within the state itself like chain restaurants, super markets, hotels etc.
The Central GST Amendment 2018 with the amendment in section 25(2) effective from 1st of February 2019 to enable the person having multiple place of business in a state or union territory to obtain separate registrations for each such place of business , if they wish so. Thus the requirement of business vertical for obtaining separate registration is dispensed with.
♦ Amendment in section 25 (2) procedure for registration:
Section 25, in sub-section (2), for the proviso, the following proviso shall be substituted, namely:––
“Provided that a person having multiple business verticals in a State or Union territory shall be granted a separate registration for each business vertical, subject to such conditions as may be prescribed”.
“Provided that a person having multiple places of business in a State or Union territory may be granted a separate registration for each such place of business, subject to such conditions as may be prescribed.”.
The word Business vertical has been removed. Meaning in case the person chooses to have branches which would not come under the scope of the definition of Business vertical can still have multiple registrations in the same state.
♦ Amendment of Rule 11 vide the Central Goods and Services Tax (Amendment) Rules, 2019
Rule .11 Separate registration for multiple places of business within a State or a Union territory.-
(1) Any person having multiple places of business within a State or a Union territory, requiring a separate registration for any such place of business under sub-section (2) of section 25 shall be granted separate registration in respect of each such place of business subject to the following conditions, namely:-
(a) Such person has more than one place of business as defined in clause (85) of section 2;
|2(85) “place of business” includes––
(a) a place from where the business is ordinarily carried on, and includes a warehouse, a god own or any other place where a taxable person stores his goods, supplies or receives goods or services or both; or
(b) a place where a taxable person maintains his books of account; or
(c) a place where a taxable person is engaged in business through an agent, by whatever name called;
(b) Such person shall not pay tax under section 10 for any of his places of business if he is paying tax under section 9 for any other place of business;
|He can opt composition scheme for all place of business or all places under normal tax payment scheme including the place of supply for which separate registration is obtained. . He cannot opt simultaneously for both for two different place of business.|
(c) all separately registered places of business of such person shall pay tax under the Act on supply of goods or services or both made to another registered place of business of such person and issue a tax invoice or a bill of supply, as the case may be, for such supply.
Explanation. – For the purposes of clause (b), it is hereby clarified that where any place of business of a registered person that has been granted a separate registration becomes ineligible to pay tax under section 10, all other registered places of business of the said person shall become ineligible to pay tax under the said section.
(2) A registered person opting to obtain separate registration for a place of business shall submit a separate application in FORM GST REG-01 in respect of such place of business.
(3) The provisions of rule 9 and rule 10 relating to the verification and the grant of registration shall, mutatis mutandis, apply to an application submitted under this rule.
♦ Inserted Rule -41A Transfer of credit on obtaining separate registration for multiple places of business within a State or Union territory
“Rule 41A. Transfer of credit on obtaining separate registration for multiple places of business within a State or Union territory.-
(1) A registered person who has obtained separate registration for multiple places of business in accordance with the provisions of rule 11 and who intends to transfer, either wholly or partly, the unutilised input tax credit lying in his electronic credit ledger to any or all of the newly registered place of business, shall furnish within a period of thirty days from obtaining such separate registrations, the details in FORM GST ITC-02A electronically on the common portal, either directly or through a Facilitation Centre notified in this behalf by the Commissioner:
Provided that the input tax credit shall be transferred to the newly registered entities in the ratio of the value of assets held by them at the time of registration.
Explanation.- For the purposes of this sub-rule, it is hereby clarified that the ‘value of assets’ means the value of the entire assets of the business whether or not input tax credit has been availed thereon.
|Key Points :
I. Filling of Form GST ITC -02A within 30 days of obtaining separate registration.
II. Formula of distribution will be based on the value of entire business assets (fixed + current etc.) of that separate place of business. It is further clarified that value will be accounted for all assets irrespective the credit on the same has been taken or not.
III. Illustration, Company ABC ltd has 2 supermarket one in Location Mumbai and another in Pune. The company supermarket in Mumbai is its principal place of supply, now company decides to obtain separate registration for Pune which was its additional place of business. Let’s say the total assets in the books of ABC Limited are INR 100.00 CR and out of those total assets in the books of branch Pune is INR. 30.00 CR. Hence the total utilised ITC to the extent of 30% can be transferred to the Pune separate registration via form GST ITC -02A which needed to be filled within 30days of separate registration.
(2) The newly registered person (transferee) shall, on the common portal, accept the details so furnished by the registered person (transferor) and, upon such acceptance, the unutilised input tax credit specified in FORM GST ITC-02A shall be credited to his electronic credit ledger.”
♦ Section 25(4) concept of distinct person
A person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act.
|Where separate registration is obtained for separate places of business the same will be treated as distinct person as per section 25(4) and all other treatment will be accordingly.|
♦ Consequence of supply of Goods or Services to distinct person (without consideration)
As per schedule –I to Section 7, the activity of supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business will be treated as supply even if made without consideration.
|When the separate places of business where spate registration is obtained will be treated is distinct person and any inter unit/place/establishment supply of goods or services will be treated as supply even without consideration.
Thus a need of cross charge for the same may arise, which was earlier required in case of interstate supply between units/business places/ establishments.
The option for the separate registration for separate place of business in same state or in same union territory is optional and it needs to be exercised with care, since it creates both the business places as distinct person. It is advisable to obtain the same where business places works as standalone without any much depended on each other. However if there is frequent supplies between the places than there could be additional compliance burden under schedule –I of section 7 of CGST act.
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