Person not liable to register under GST | Section 23

Person not liable to register under GST | Section 23 | CGST Act 2017 | GST series part 15

1. Section 23 of the CGST Act 2017 explains about the person not liable to be registered under GST. The article covers the statutory provisions under sec 23 and its simplified analysis along with relevant notifications.

2. Section 23(1)(a) of CGST Act – Statutory Provision:- Any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or are wholly exempt from tax under this Act or under IGST Act does not require registration.

2.1  For example, Mr. X is engaged exclusively in the supply of alcohol for human consumption. He is not liable to obtain registration as per sec. 23(1)(a) even if his turnover exceeds Rs 20 Lakhs

2.2 Analysis: – Section 23 is specifically granting exemption from registration to persons exclusively engaged in exempt supplies or supplies not liable to tax even if the aggregate turnover is more than Rs. 20 Lakhs whereas section 22 mandates to take registration if the aggregate turnover in a financial year exceeds Rs. 20 Lakhs Irrespective of the fact whether such turnover includes taxable supplies or exempt supplies.

2.3  Section 23 overrides section 22, wherein section 22 is concerned about the persons whose aggregate turnover is more than Rs 20 Lakhs while section 23 is exempting entities engaged exclusively in making exempt supplies.

2.4  From the above discussion, it is clearly understood that the person who is engaged exclusively in making exempt supplies is not liable for registration even if his aggregate turnover exceeds Rs 20   Lakhs.

3. Section 23(1)(b) of CGST Act – Statutory Provision: An agriculturist, to the extent of supply of produce out of cultivation of land, does not require registration.

3.1 “Agriculturist” means an individual or a Hindu Undivided Family who undertakes cultivation of land – (a) by own labour, or (b) by the labour of family, or (c) 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 – section 2(7) of CGST Act.

3.2 Only those who are directly engaged in the cultivation of land are eligible for the exemption.

4. Section 23(2) of the CGST Act – Statutory Provision: The government can grant an exemption to other categories of persons on the recommendation of the GST Council by issuing the notification. CBIC has issued following notifications for granting exemptions to other categories of persons:-

4.1 Notification No. 5/2017-CT dated 19-6-2017– Persons providing services where the service recipient is liable to pay GST under reverse charge Persons who are making supplies of taxable goods or services or both, where total tax is payable on the recipient of goods or services ( under Reverse Charge Mechanism) are exempt from registration under GST Act.

4.2 Notification No. 7/2017-IT dated 14-9-2017  –  Job worker making Inter-State supplies: A job worker with turnover less than 20/10 lakhs is exempt from registration, even if he makes inter-State supplies to the registered person. This exemption is not available to Jewellery, goldsmiths’ and silversmiths’ wares and other articles manufactured on job work basis

4.3 Notification No. 10/2017-IT dated 13-10-2017 – Interstate supply of taxable services if the aggregate turnover of supplier of service, including inter-state supplies is less than Rs 20/10 lakhs, he is not required to register under GST under section 23(2) of CGST Act.

4.4 Notification No. 65/2017-CT dated 15-11-2017 – Persons supplying services through e-commerce operator Persons who are suppliers of service and supplying services through e-commerce operator are not required to register under GST if their aggregate turnover is less than Rs 20 lakhs per annum (Rs 10 lakhs in case of specified States)

4.5  Notification No. 3/2018-IT dated 22-10-2018 – Interstate supply of handicraft goods: Persons engaged in the supply of handicraft goods making inter-state supply are exempt from registration. They are also not required to obtain casual registration if they supply goods outside the State where they are having their fixed establishment – They are required to have income tax PAN and are required to generate e-way bill –

 4.5.1  E-way bill even if the value of consignment is much below Rs 50,000  – e-way bill should be generated irrespective of the value of consignment i.e. even if the value of consignment is below Rs 50,000 in case of handicraft goods transported inter-state under the exemption if the turnover of the person below 20/10 lakhs and enjoying exemption under Notification No. 32/2017-CT dated 15-9-2017

5. Notification No. 10/2019-IT dated 07.03.2019: Exclusive supply of goods: person engaged in the exclusive supply of goods and whose aggregate turnover in the financial year does not exceed Rs 40 lakhs is not required to take registration

6. Section 24(1) of CGST specified the persons requiring registration without a threshold limit of 20/10 lakhs. However, Section 24(1) of CGST is not applicable to persons who are not liable for registration under section 23 of Act. However, if he is liable under reverse charge, registration under GST will be required.

6.1 Section 24 of the CGST Act is not subject to section 23 of the CGST Act. Hence, a person dealing only in exempted products is not required to be registered under GST, if he is not liable under reverse charge.

6.2 In case the person is liable under reverse charge, he needs to take GST registration even if engaged in exempted supplies.

6.3 AAR MAHARASHTRA held it in  Jalaram Feeds that person engaged exclusively in the manufacture of exempted product receiving GTA service which is under reverse charge would require registration under CGST Act to discharge his duty liability under reverse charge.

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 Part 16 of the series will cover the topic ” Persons requiring registration without threshold limit under  GST Sec 24 of CGST Act.

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