Persons Not Liable for Registration: A Comprehensive Analysis

We know that Section 22 of the Central Goods and Services Tax Act, 2017 (CGST Act, 2017) lays down the general provisions relating to mandatory registration. It requires every supplier to obtain registration in the State or Union Territory from where he makes a taxable supply, if his aggregate turnover in a financial year exceeds:

• ₹ 40 lakh (in case of suppliers of goods, subject to prescribed conditions);
• ₹ 20 lakh (in case of suppliers of services);
• ₹ 10 lakh (in Special Category States).

However, Section 24 of the CGST Act, 2017 provides for compulsory registration, irrespective of the threshold limit specified under Section 22. It mandates registration for certain specified categories of persons, such as:

• Persons making inter-State taxable supplies;
• Persons required to pay tax under reverse charge;
• Persons required to deduct tax at source (TDS) or collect tax at source (TCS);
• Persons making taxable supplies through an Electronic Commerce Operator (ECO);
• Electronic Commerce Operators required to collect TCS;
• Non-resident taxable persons;
• Casual taxable persons;
• Input Service Distributors (ISD); and
• Other notified categories.

Thus, while Section 22 prescribes the general turnover-based threshold for registration, Section 24 overrides it in specified cases by making registration compulsory irrespective of turnover.

The detailed discussion on Section 22 (threshold-based registration) and Section 24 (compulsory registration), along with the meaning of aggregate turnover and the applicable threshold limits, shall be dealt with separately in the subsequent part of this article. At this stage, our discussion is confined strictly to Section 23 of the CGST Act, 2017, which specifies the categories of persons who are not liable to obtain registration, irrespective of turnover. Section 23 carves out specific exceptions to the general rule of registration and excludes certain persons from the requirement of registration under the Act. Accordingly, the focus here is limited to understanding the scope, applicability, and practical implications of persons not liable for registration under Section 23.

Person not liable for registration

Section 23 of the CGST Act, 2017 enumerates the categories of persons who are not liable to obtain GST registration. This section provides that certain classes of persons are not required to be registered, namely:

• Any person engaged exclusively in the business of supplying goods or services that are not liable to tax (non-taxable) or are wholly exempt under the CGST Act or the IGST Act;
• An agriculturist, to the extent of supply of produce arising out of cultivation of land; and
• Such other persons or class of persons as may be specified by the Government on the recommendations of the GST Council.

Thus, Section 23 carves out specific exceptions from the general registration requirement under GST law. The extract of the provisions may be read as under-

 “Section 23. Persons not liable for 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) Notwithstanding anything to the contrary contained in sub-section (1) of section 22 or section 24, the Government may, on the recommendations of the Council, by notification, subject to such conditions and restrictions as may be specified therein, specify the category of persons who may be exempted from obtaining registration under this Act.

Not GST Supply/Wholly Exempt Supply- Not Liable for Registration

Any person engaged exclusively in the business of supplying of goods or services or both that is not liable to tax or is wholly exempt from tax under CGST/IGST shall not be liable for registration.

1. Alcohol for human consumption: A trader dealing exclusively in sale of alcoholic liquor for human consumption is making a non-GST supply, since alcohol is kept outside the purview of GST. Such person is not liable to obtain GST registration, if exclusively dealing in alcohol.

2. Petroleum crude / High Speed Diesel (HSD): A person engaged exclusively in trading of petroleum crude or HSD (currently outside GST levy) is making a non-GST supply. Registration under GST is not required, if no taxable supply is made.

3. Sale of land: A person selling land (without any construction activity) is making a supply which is neither a supply of goods nor services under GST Schedule III. If exclusively engaged in sale of land, registration is not required.

4. Advocate providing services only to individuals for personal matters: If an advocate provides legal services only to individuals for personal use (not business entities), such services are generally exempt. If the advocate is exclusively engaged in such exempt services, He/She shall not be liable for GST registration under Section 23.

Agriculturist – Not Liable for Registration

An agriculturist, to the extent of supply of produce arising out of cultivation of land, is not liable to obtain registration under GST. As per Section 23(1)(b) of the CGST Act, 2017, an agriculturist is exempt from registration for the supply of produce grown out of cultivation of land. The term “agriculturist” is defined under Section 2(7) of the CGST Act, 2017 to mean an individual or a Hindu Undivided Family (HUF) who undertakes cultivation of land:

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

The exemption from registration is available only to the extent of supply of produce from cultivation of land. If the agriculturist undertakes any other taxable business activity (for example, trading of purchased goods or processing activities beyond cultivation), the registration requirement shall be determined separately based on such activities and applicable threshold limits.

Specified Category of Persons Notified by the Government Exempted from Obtaining Registration.

Section 23(2) provides that, notwithstanding anything to the contrary contained in Section 22(1) or Section 24, the Government may, on the recommendations of the GST Council, by notification and subject to such conditions and restrictions as may be specified therein, exempt certain categories of persons from obtaining registration under the Act. Thus, Section 23(2) confers power upon the Government to notify specific categories of persons who shall not be required to obtain registration under the GST law.

A. Persons Making Only Reverse Charge Supplies [Notification No. 5/2017–Central Tax dated 19.06.2017]

Vide Notification No. 5/2017–Central Tax dated 19.06.2017 , the Central Government specifies the persons who are only engaged in making supplies of taxable goods or services or both, the total tax on which is liable to be paid on reverse charge basis by the recipient of such goods or services or both under sub-section (3) of section 9, as the category of persons exempted from obtaining registration under this act.

Persons who are exclusively engaged in making supplies of taxable goods or services or both, where the entire tax is payable by the recipient under the reverse charge mechanism in terms of Section 9(3) of the CGST Act, have been exempted from obtaining registration.

However, it is important to note that although tax on the supply of metal scrap (falling under Chapters 72 to 81 of the First Schedule to the Customs Tariff Act, 1975) is payable by the recipient under reverse charge, the exemption from registration is not applicable in such cases. Therefore, any person exclusively engaged in the supply of metal scrap is not exempted from obtaining registration. [Notification No. 24/2024-Central Tax, dated 09.10.2024 amends Notification No. 5/2017–Central Tax dated 19.06.2017]

B. Persons Making Inter-State Supplies of Taxable Services up to ₹20 Lakh [Notification No. 10/2017–Integrated Tax dated 13.10.2017]

It is pertinent to note that Section 24 of the CGST Act, 2017, which deals with compulsory registration in certain cases, overrides Section 22(1) and mandates registration for specified categories of persons, notwithstanding that their aggregate turnover is below the threshold limit prescribed under Section 22. Clause (i) of Section 24 provides that persons making any inter-State taxable supply are required to obtain compulsory registration. Therefore, any person making inter-State taxable supplies is mandatorily required to obtain registration under GST, irrespective of the turnover involved.

However, in pursuance of Section 23(2), the Government, on the recommendations of the GST Council, issued Notification No. 10/2017–Integrated Tax, dated 13.10.2017, whereby persons making inter-State supplies of taxable services and having an aggregate turnover, computed on an all-India basis, not exceeding ₹20 lakh in a financial year, have been exempted from obtaining compulsory registration. In the case of Special Category States, such exemption is available only where the aggregate turnover does not exceed ₹10 lakh.

C. Persons Making Inter-State Taxable Supplies of Notified Handicraft Goods and Notified Handmade Goods up to ₹20 Lakh [Notification No. 3/2018-Integrated Tax dated 22.10.2018]

As discussed earlier, under Section 24 of the CGST Act, 2017, read with Notification No. 10/2017–Integrated Tax dated 13.10.2017, a person making inter-State supplies of goods is ordinarily required to obtain compulsory registration under GST, irrespective of the threshold limit. However, in exercise of the powers conferred under Section 23(2), the Government issued Notification No. 3/2018–Integrated Tax dated 22.10.2018, whereby exemption from compulsory registration has been granted in the following cases, subject to prescribed conditions:

(a) Persons making inter-State taxable supplies of notified handicraft goods;

(b) Persons making inter-State taxable supplies of notified products manufactured predominantly by craftsmen by hand, even though some machinery may also be used in the process.

Conditions to be Fulfilled- The exemption from compulsory registration shall be available subject to the following conditions:

1. The aggregate turnover of the person, computed on an all-India basis, does not exceed ₹20 lakh in a financial year (₹10 lakh in the case of Special Category States);

2. The person has obtained a Permanent Account Number (PAN); and

3. The person generates an e-way bill in accordance with the provisions of the GST law.

D. Causal Taxable Person (CTPs) Making Inter-State Taxable Supplies of Notified Handicraft Goods and Notified Handmade Goods up to ₹20 Lakh [Notification 56/2018 –Central Tax, dated 23.10.2018 suppressed Notification No. 32/2017-Central Tax dated 15.09.2017]

As discussed earlier, under Section 24 of the CGST Act, 2017, read with Notification No. 10/2017–Integrated Tax dated 13.10.201, a person making inter-State supplies of goods is ordinarily required to obtain compulsory registration under GST, irrespective of the threshold limit. However, in exercise of the powers conferred under Section 23(2), the Government issued Notification No. 56/2018–Central Tax dated 23.10.2018, whereby exemption from compulsory registration has been granted in the following cases, subject to prescribed conditions:

(a) CTPs making inter-State taxable supplies of notified handicraft goods;

(b) CTPs making inter-State taxable supplies of notified products manufactured predominantly by craftsmen by hand, even though some machinery may also be used in the process.

Conditions to be Fulfilled- The exemption from compulsory registration shall be available subject to the following conditions:

1. CTPs are availing benefit of Notification No. 3/2018-IT- dated 22.10.2018 (as discussed above)

2. The aggregate turnover of the person, computed on an all-India basis, does not exceed ₹20 lakh in a financial year (₹10 lakh in the case of Special Category States);

3. The person has obtained a Permanent Account Number (PAN); and

4. The person generates an e-way bill in accordance with the provisions of the GST law.

E. Persons Supplying Services through an Electronic Commerce Operator (ECO) [Notification No. 65/2017 – Central Tax dated 15.11.2017]

Persons making supplies of services through an ECO, who is required to collect tax at source under Section 52 of the CGST Act, are exempt from obtaining GST registration, provided the following conditions are satisfied:

• The supplies are other than services specified under Section 9(5) of the CGST Act; and
• The aggregate turnover, computed on an all-India basis, does not exceed 20 lakh in a financial year (₹ 10 lakh in Special Category States).

It is pertinent to mention that the exemption applies only to service providers (not suppliers of goods). It does not apply to services notified under Section 9(5), where the ECO is liable to pay GST (e.g., certain transport, accommodation, and restaurant services notified from time to time). Aggregate turnover must be calculated on an all-India basis.

Example – Registration Not Required

Mr. A provides graphic designing services through an online platform (ECO). His total turnover during the financial year is ₹ 18,00,000. Since turnover is below ₹ 20 lakh and the services are not covered under Section 9(5), He is not required to obtain GST registration.

F. Persons Supplying Goods through an Electronic Commerce Operator (ECO) [Notification No. 34/2023 – Central Tax dated 31.07.2023]

The Government has exempted certain persons making supplies of goods through an ECO, who is required to collect tax at source under Section 52 of the CGST Act, from obtaining GST registration, subject to specified conditions.

Eligibility Condition (Turnover Limit)

The supplier must have an aggregate turnover (on an all-India basis) in the preceding financial year and the current financial year not exceeding the threshold limit prescribed under Section 22(1) of the CGST Act, i.e.:

• ₹ 40 lakh (for goods, in normal category States, subject to conditions), or
• ₹ 20 lakh / ₹ 10 lakh, as applicable for the State/UT concerned.

Conditions to be Fulfilled: The exemption is subject to the following conditions:

1. The supplier shall not make any inter-State supply of goods.

2. The supplier shall not supply goods through ECO in more than one State or Union Territory.

3. The supplier must possess a Permanent Account Number (PAN) under the Income-tax Act, 1961.

4. Before making supplies, the supplier must declare PAN, place of business, and the State/UT of supply on the common portal for validation.

5. Upon successful validation, an Enrolment Number shall be granted on the common portal.

6. Only one enrolment number per State/UT shall be granted.

7. No supply of goods through ECO shall be made unless the Enrolment Number is obtained.

8. If the supplier subsequently obtains GST registration under Section 25, the Enrolment Number shall cease to be valid from the effective date of registration.

Example 1 – Registration Not Required

Mr. A sells handmade home décor items through an online marketplace in Haryana.

• Turnover in preceding FY – ₹ 18,00,000
• Turnover in current FY – ₹ 22,00,000
• Supplies made only within Haryana
• Enrolment number obtained

Since turnover does not exceed the applicable threshold limit and all conditions are satisfied, GST registration is not required.

Earlier, persons supplying goods through ECO were mandatorily required to obtain registration under Section 24. However, Notification No. 34/2023 provides relaxation up to the threshold limit, subject to strict compliance with prescribed conditions.

Comparison: Services vs Goods supplied through ECO 

Person Making Exempt Supply and Supply Covered Under RCM

It is pertinent to note that under Section 23(1)(a) of the CGST Act, 2017, a person who is exclusively engaged in making exempt supplies is not liable to obtain registration under GST.

Further, vide Notification No. 5/2017–Central Tax dated 19.06.2017, the Central Government has specified that persons who are exclusively engaged in making supplies of taxable goods or services, the entire tax on which is payable by the recipient under reverse charge mechanism (RCM) under Section 9(3), shall also be exempt from obtaining registration.

Issue for Consideration

If a person is engaged in making exempt supplies as well as taxable supplies covered under RCM, whether such person is required to obtain GST registration?

Legal Analysis

• Section 23(1)(a) grants exemption only where the person is exclusively engaged in exempt supplies.
• Notification No. 5/2017 grants exemption where the person is exclusively engaged in supplies on which tax is payable under RCM by the recipient.

The key word in both cases is “exclusively.” If a person makes:

• Exempt supplies; and
• Supplies taxable under RCM (where recipient pays tax),

then such person is still engaged only in supplies:

• On which he himself is not liable to pay tax, and
• Which are either exempt or covered under RCM.

Since both categories are independently covered under Section 23 and Notification No. 5/2017, and there is no taxable supply on which the supplier is liable to pay tax, such person shall not be required to obtain registration, provided no other taxable supply is made.

Practical Illustration

An advocate:

• Provides legal services to business entities (covered under RCM), and
• Provides certain exempt advisory services to individuals.

In this case:

• Tax on legal services is payable by the recipient under RCM.
• Other services are exempt.

The advocate is not liable to obtain GST registration, as he is not making any taxable supply on which he himself is liable to pay tax.

Conclusion: Where a person is engaged only in:

• Exempt supplies; and/or
• Supplies taxable under RCM (where tax is payable by the recipient),

such person is not liable to obtain registration, as long as no taxable supply on forward charge basis is made.

Notifications Issued under Section 23(2) – Exemption from GST Registration