There is a myth about section 24(iii) for compulsory registration in respect of a person who is required to pay tax under reverse charge as if an unregistered person purchases from unregistered persons above Rs. 5000 in a day, payment of legal fees and transportation which are covered under reverse charge. In these cases unregistered person is required to take registration due to section 24(iii). The scope of this provision is not as wide as peoples are interpreting. We are mentioning here under some interesting facts and provision which are necessary to understand before studying sec 24(iii).

1. Section 9(4) of CGST– Supply of taxable goods or services or both by a supplier, who  is  not registered,  to  a  registered  person  shall  be  paid  by  such  person  on reverse charge basis as the recipient.

2. There is an exemption from reverse charge of section 9(4) if amount of purchase from unregistered person does not exceed five thousand rupees in a day. (Notification Number- 08).

3. Under Sec 24(iii) persons who are required to pay tax under reverse charge, shall be required to be registered.

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4. Section 9(4) attracts only where recipient is registered as  the GST in respect of the supply of taxable goods or services or both by a supplier, who  is  not registered, to a registered person  shall  be  paid  by  such  person  on reverse charge basis as the recipient. So Sec 24(3) does not talk about sec 9(4) as unregistered person is not required to pay tax under sec 9(4). Here (sec 24(3)) reverse charge means reverse charge under sec 9(3).

5. GTA is notified service under reverse charge (Section 9(3)) under notification number 13. But reverse charge is not applicable in all cases. As where an individual unregistered person takes service from GTA. He is not required to pay tax under reverse charge. So he is not under obligation under section 24(3) to take registration.

6. There are certain exemptions for services. Exemption (Nil rate services) is given in notification number 12 in which legal services are exempted in case of a recipient business entity having turnover below 20 Lacs. So if a business entity having turnover below 20 lacs, is not required to pay tax under reverse charge and sec 24(3) is not applicable here.

7. There are situations where registration is mandatory by virtue of sec 24(iii) as if a partnership firm pays freight exceeding the exemption limit then it is covered under reverse charge. So this firm will be required to take registration by virtue of Sec 24(3) in spite of turnover below 20 Lacs.

(Author can be reached at akgupta487@gmail.com, Mobile No. 9461869517)

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Qualification: CA in Job / Business
Company: Vijay Solvex Limited
Location: Alwar, Rajasthan, IN
Member Since: 04 Aug 2017 | Total Posts: 4

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One response to “Provision of Section 24 (iii) of CGST ACT regarding compulsory registration is not as wider as it seems”

  1. Shashikant says:

    Sir but if an unregistered person pays rent to landlord on commercial property and if landlord also is unregistered then whether the person needs to obtain registration u/s 24(iii).

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