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GST UPDATE ON NOTIFICATION NO. 40/2017-CT DATED 13.10.2017

GST UPDATE ON NOTIFICATION NO. 40/2017-CT DATED 13.10.2017

GST UPDATE ON NOTIFICATION NO. 40/2017-CT DATED 13.10.2017

In the 22nd meeting of GST Council held on 6.10.2017, it was decided to give special benefits to small and medium enterprises. To implement this decision, notification no. 40/2017-CT dated 13.10.2017 has been issued which reads as follows:-
"In exercise of the powers conferred by section 148 of the Central Goods and Services Tax Act, 2017 (12 of 2017) (hereafter in this notification referred to as the ‘said Act’), the Central Government, on the recommendations of the Council, hereby notifies the registered person whose aggregate turnover in the preceding financial year did not exceed one crore and fifty lakh rupees or the registered person whose aggregate turnover in the year in which such person has obtained registration is likely to be less than one crore and fifty lakh rupees and who did not opt for the composition levy under section 10 of the said Act as the class of persons who shall pay the central tax on the outward supply of goods at the time of supply as specified in clause (a) of sub-section (2) of section 12 of the said Act including in the situations attracting the provisions of section 14 of the said Act, and shall accordingly furnish the details and returns as mentioned in Chapter IX of the said Act and the rules made thereunder and the period prescribed for the payment of tax by such class of registered persons shall be such as specified in the said Act."
The analysis of this notification is given as follows:-
1. The benefit of this notification is available only to the supplier of goods. This is clarified by the following language of this notification:-
• Registered person whose aggregate turnover in the preceding financial year did not exceed one crore and fifty lakh rupees; OR
• The registered person whose aggregate turnover in the year in which such person has obtained registration is likely to be less than one crore and fifty lakh rupees;
AND
• Who did not opt for the composition levy under section 10 of the said Act.
Since the language of this notifications uses the word "AND" after prescribing the limits of aggregate turnover, it is clear that there should be an option available with the registered person to opt for composition scheme. Since the service providers (except suppliers of food and beverages) does not have OPTION of composition scheme, we can conclude that this notification is clearly meant for suppliers of goods only. Therefore, supplier of services shall continue to pay tax on advances and shall be governed by normal scheme of return filing.
2. Further, both the benefits extended by this notification, i.e. the payment of tax on billed basis and furnishing of returns; are so extended by using the word "AND". It means that both the benefits are available to the category of persons who fall in the category of persons as specified in this notification. Therefore, we cannot say that the benefit of quarterly return filing is available to all the suppliers and only the payment of tax on billed basis (i.e. no payment of tax on advances) is restricted to supplier of goods. Therefore, in our view, both the facilities will be available only to the supplier of goods.
3. The benefit of quarterly filing of return that was decided in the meeting of GST council is not yet notified. This notification also indicates that it shall be as specified in the Act.
4. A doubt has also arisen as to what will be the meaning of "registered person" as used in the above notification. For the sake of convenience, the respective language is produced as follows:-
• Registered person whose aggregate turnover in the preceding financial year did not exceed one crore and fifty lakh rupees; OR
• The registered person whose aggregate turnover in the year in which such person has obtained registration is likely to be less than one crore and fifty lakh rupees;
At the first sight, it appears that it means the person registered under GST. However, if we go by this view, it will make the first clause above as redundant as the second clause is to be read independently and every person will fall in the second clause only. Therefore, it is possible that all the persons will be eligible for exemption under this notification from the payment of tax on advances till their turnover reaches one crore and fifty lakh rupees.
5. However, assuming that the registered person means registered under Central excise or VAT does not sound feasible as wherever the Act uses the words "registered person", it is referring as registered under GST as indicated at almost all the places.
Therefore, the language of notification does not seem to be clear and unambiguous. Further clarity may be brought once the notification for extending the facility of quarterly return is issued. Till then, we can just analyze, assume and interpret.

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