Article Simplifies Provisions of Section 22 and Section 23 of CGST Act 2017 which deals prescribes Persons liable for GST registration  and Persons not liable for registration.

Section 22 – Persons liable for GST 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 notified1

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.

GST Registration

Analysis-  1. Every supplier shall be liable to be registered under the Act in the State from which he makes a taxable supply of goods or services or both.

2. It is important to note that registration is required ‘in’ the State ‘from which’ taxable supplies are made.GST is destination based tax but registration required in state from which taxable supplies are made.

3. Section 22(1) prescribes an ‘exemption threshold’ from obtaining registration. In other words, even if a person makes taxable supplies attracting levy of tax under section 9(1), such person will NOT be required to neither to obtain registration nor pay any GST.

4. Registration is required if the aggregate turnover in a financial year exceeds rupees twenty lakhs. This threshold limit will be rupees ten lakhs if a taxable person conducts his business in any of the special category States. Effect of this ‘reduced exemption threshold’ on ‘exemption threshold’ in other non-special category States will have to be understood as first proviso to section 22(1) also appears in SGST Act. For example -Karnataka has a branch in any of special category States, say, Mizoram, then the threshold for registration in Mizoram which is Rs.10 lacs makes the threshold for Karnataka also.

5. CGST Amendment Act, 2018 inserted second proviso to section 22(1) to provide that Government may, at the request of a special category State and on the recommendations of the Council, enhance aggregate turnover referred to in the first proviso from Rs.10 lakh to such amount, not exceeding Rs.20 lakh and subject to such conditions and limitations, as may be so notified. Accordingly, ‘reduced exemption threshold’ has been revised and ‘enhanced’ to Rs.20 lacs in respect of States of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Pondicherry, Sikkim, Telangana, Tripura and Uttarakhand w.e.f. 1-April-2019.

6. Further, in case of a person engaged exclusively in supply of goods, as per the third proviso to section 22(1) inserted by Finance (No. 2) Act, 2019 w.e.f. 1st August 2019, the Central Government may enhance the aggregate turnover from 20 lakh to 40 lakh, subject to certain conditions and restrictions as may be prescribed. Similar to the second proviso, this benefit is granted at the request of the State after the same is duly recommended by the GST Council.

7. Going back to the ‘enhanced exemption threshold’ will apply if the person is exclusively engaged in supply of “goods”. That is, this ‘enhanced exemption threshold’ will NOT apply if “goods and services” are both supplied by such person. Exclusively engaged in supply of goods excuses any ‘interest income’ received from loans, deposits or advances given by such person.

(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.

Analysis- 1. Every person who, on the day immediately preceding the appointed day, is registered or holds a license under an earlier law, shall be liable to be registered under this Act with effect from the appointed day and thereafter apply for cancellation if not liable.

2. If a registered taxable person transfers business 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.

This means that the Registration Certificate issued under sections 22 of the Act is not transferable to any other person

3. In a case of transfer pursuant to sanction of a scheme or an arrangement for amalgamation or, as the case may be, de-merger of two or more companies by an Order of a High Court, 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.

Obligations after Registration-As per rule 18, every registered person shall display his Certificate of Registration in a prominent location at his principal place of business and at every additional place or places of business.

Every registered person shall display his Goods and Services Tax Identification Number on the name board exhibited at the entry of his principal place of business and at every additional place or places of business

Section 23- Persons not liable for GST registration

(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 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.

(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.

Analysis- 1. Section 23 provides relaxation from the requirement of obtaining registration to two categories of persons

  • Agriculturist;
  • Persons engaged exclusively in the supply of exempted goods or services or both.

Thus, the aforementioned persons would not be required to obtain registration even if their turnover exceeds ` 20 Lakhs.

Agriculturist-As per section 2(7), agriculturist means an individual or HUF who undertakes cultivation of land:

  • By own labour, or
  • By labour of family
  • By servants on wages payable in cash or kind or by hired labour under personal supervision or the personal supervision of any member of the family.

Thus, an agriculturist is not liable for registration only to the extent of supply of produce out of cultivation of land

  • Exclusively engaged in Exempt Supplies-The term exclusive indicates engaging in only those supplies which are exempted. Therefore, if a supplier is supplying both exempted and taxable goods and/or services, then this provision is not applicable, and he is required to obtain registration under section 22. Even if small value of supplies is taxable, then exempt supplies will be included to determine if aggregate turnover has exceeded the exemption threshold under section 22 for attracting registration

Issues regarding inclusion of non-operational income for threshold limit- You all must have read recent AAR Ruling-Bank Interest, Interest on PPF Deposit / Personal Loans & Advances are included in aggregate turnover for GST Registration-I want to discuss some findings related to this and my view-point related to this as today article related to this advance ruling-

The applicant is seeking an advance ruling in respect of following question-

Whether interest received in form of PPF, ON PERSONAL LOANS AND ADVANCES to family /friends and also on saving bank deposits would be considered for purpose of calculating threshold limit of Rs 20 lakh for registration under GST LAW…

According to AAR  Applicant is required to aggregate the value of exempted interest income earned by way of extending deposits in PPF & Bank Saving accounts and loans and advances given to his family/friends along with the value of the taxable supply i.e. “Renting of immovable property” for the purpose of calculating the threshold limit of Rs.20.00 Lakh for obtaining registration under GST law.

Now my views on above ruling 1.The applicant is not engaged in any business. His taxable Income includes –Rent receipts Rs 984000 and Interest received on PPF, SAVING ACCOUNT, Loan and advances given Rs 1028000. Rent receipts below threshold limit …

2. Threshold exemption limit applicable to him Rs 20 lacs as he is engaged in supplying services only But He is not engaged in any business and Interest receipts is not supply does not attract GST  and also as per Section 7 OF CGST ACT –Scope of supply -Receipts should be in course of business.

3. Interest received by applicant is income on personal investment so how can Personal Investment be included for threshold limit…

4. Further while amendment made in CGST AMENDMENT ACT 2018-clearly said that enhanced exemption limit does not include interest on deposits , loans and advances .

When Government also considers Interest on deposits loans and advances outside limit for taking GST REGISTRATION in CGST AMENDMENT ACT 2018 and also applicant not earning income out of business funds  …Interest received out of personal investment…How can such income be included in threshold limit ???

Any doubts/queries related to above can be mailed at mamta0581@gmail.com. Have a nice day ..

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