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.

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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 19-6-2017Persons 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.

 The author can be approached at caanitabhadra@gmail.com.

 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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Disclaimer: The contents of this article are for information purposes only and does not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

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17 Comments

  1. Ronald Rodrigues says:

    Anita Madam,
    I am running spectacle shop as a proprietor and taken composition scheme. Our turn over per annum is around 22lakhs. I would like to cancel the gst registration. Can i go ahead.

  2. CHINTAPALLI MANIKANTA says:

    what is the meaning of words “not liable to tax”
    I mean does it includes both non taxable and nil rated
    or only non taxable?

  3. CHINTAPALLI MANIKANTA says:

    what is meaning of “not liable to tax” used in 23(1)(a)
    does it means “non taxable supply” only or it means
    both non taxable and nil rated also.
    Wholly exempt is already there.
    If “not liable to tax” means both “non taxable supply” and “nil rated” then why not use the
    word “exempt supply” in place of “not liable to tax and wholly exempt”

    1. Anita Bhadra says:

      Not liable to tax means the supply does not come under the purview of GST.
      For example Alcohol for human consumption.
      Exempted supplies mean where supply is being exempted from GST by way of notification e.g advocate services etc

      1. CHINTAPALLI MANIKANTA says:

        Then if a person exclusively supplies nil rated goods
        is he liable to get registered or exempted as per
        section 23(1)(a)

        1. Anita Bhadra says:

          A person supplying exclusively NIL Rated or Exempted goods are not required to take registration provided that they are not a recipient for goods/services which make them liable under RCM.
          For Example – a person supplying exclusively NIL rated goods avails GTA services, he is required to take registration.

          1. CHINTAPALLI MANIKANTA says:

            But mam my question is the word NIL RATED Supply is not used anywhere in section 23(1)(a) and it does not include in NOT LIABLE TO TAX or Exemptions
            Is it a drafting error?.

  4. PARDEEP KAPIL says:

    DEAR SIRS ::: PLEASE LET ME KNOW :: (ONE) WHETHER 1) SALES / COMMISSION AGENT 2) TECHNICAL CONSULTANT ARE COVERED UNDER RCM IF THEY GIVE SERVICES WITHIN STATE AND INTERSTATE or THEY HAVE TO OBTAIN INDIVIDUAL GST REGISTRATION AND CHARGE ACCORDINGLY (TWO) IS TRANSPORTER IS REQUIRED TO BE REGISTERED UNDER GST AND UNDER WHAT CIRCUMSTANCES HE IS EXEMPTED TO “NOT TO CHARGE” GST ON INVOICES REGARDS

    1. Anita Bhadra says:

      All the Sales / Commission Agents or technical agents are not covered under RCM. Specific agents like Insurance agent, agents for banking services are covered under RCM

      .
      Compulsory registration is required by C&F agents who stock and sell goods on behalf of the Principal. The threshold limit condition for registration does not apply to such agents
      Registration is not required by ordinarily commission agents who do not deal in goods or services themselves if their annual turnover is less than Rs 20/10 lakhs

      the services of transportation of goods by road, except services of GTA, are exempted under the GST regime.

      The transporter is not required to pay GST for transportation of goods if he is not issuing consignment note, means he is not a Goods Transport Agency

      For GTA services, there is an option, he can charges on 5% under RCM or 12% under Forward charges. Registration is required In case, he opted for 12%

  5. JUGRAJ BHANDARI says:

    cold storage industry keeping only agricultural products of farmers and traders like chillies. coriander seeds, turmeric, black gram and receiving cold charges more than 20 lakhs exempted whether liable for GST Registration

  6. M.G.Puranik says:

    It is very good analysis of Sec. 23 of CGST Act. Trust our understanding is correct that if a person is having both taxable and exempted supplies and if his aggregate turnover is more than Rs.20 Lakhs he is required to take GST Registration even though his prime business is supply of exempted services and very few other services are taxable.

  7. M.G.Puranik says:

    It is very good analysis of Sec. 23 of CGST Act. Trust our understanding is correct that if a person is having both taxable and exempted supplies and if his aggregate turnover is more than Rs.20 Lakhs he is required to take GST Registration even though his prime business is supply of exempted services and very few other supplies are taxable. Kindly confirm.

    1. Anita Bhadra says:

      Your understanding is absolutely correct. A person is not required to take registration if he is EXCLUSIVELY engaged in exempted supply.

      He is required to take registration if he makes even a few taxable supplies and aggregate turnover exceeds 20 Lakhs. ( 40 lakhs if he is engaged exclusively in supplies of goods)

  8. Sreenivasa Rao Manepalli says:

    If an Individual doing a business with an exempt product under GST Law also with an annual turnover below the limit of 40 Lacs, need to pay freight charges to a GTA for receiving taxable capital goods like furniture, computers etc., for his business. In this case is the Individual liable to pay GST on RCM by taking Registration?.

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