GST UPDATE ON REQUIREMENT OF REGISTRATION BY ASSESSEES EXCLUSIVELY SUPPLYING EXEMPTED GOODS

GST UPDATE ON REQUIREMENT OF REGISTRATION BY ASSESSEES EXCLUSIVELY SUPPLYING EXEMPTED GOODS:-

Maharashtra Authority for Advance Ruling in the case of M/s Jalaram Feeds has ruled that an assessee exclusively engaged in supply of exempted goods is required to take registration under section 24 of the CGST Act, 2017 if the said assessee is required to pay tax under reverse charge. It has been concluded that the contention of the assessee that the provisions of section 24 override section 22(1) and not section 23 is not proper as it would lead to non-payment of tax on GTA services under reverse charge mechanism by both GTA and the assessee which is not intended by the Law. It has been held that the section 23 is not a standalone section as stated by the assessee and rather the provisions of section 23 compliment the provisions contained in section 22 of the CGST Act, 2017. It is held that the according to the provisions of section 22 of the CGST Act, 2017, a supplier making taxable supplies of goods or services is liable to get registered if his aggregate turnover in a financial year exceeds twenty lakhs rupees and the reference of term ‘taxable supplies’ indicates that a person exclusively supplying exempted goods or services is not liable to get registered. It is concluded that since a person exclusively engaged in supply of exempted goods or services is not liable to take registration even by referring to the provisions of section 22(1) of the CGST Act, 2017 without even referring to the provisions of section 23 of the CGST Act, 2017, the provisions of section 23 are in alignment with the provisions of section 22(1) of the CGST Act, 2017. Therefore, it was pronounced that an assessee exclusively engaged in supplying exempted goods would be liable to take registration if the assessee is liable to pay tax under reverse charge mechanism by referring to the provisions of section 24 of the CGST Act, 2017.

In this context, it is pertinent to refer to similar decision given by the AAR West Bengal in the case of Joint Plant Committee wherein it was concluded that the applicant will not be liable to get registered under GST Law if the applicant is exclusively engaged in supplying exempted goods or services subject to the condition that the applicant is not liable to pay GST under reverse charge as in such case, compulsory registration would be required as per section 24(iii) of the CGST Act, 2017. Hence, in nutshell, the benefit of section 23 of the CGST Act, 2017 is subject to the provision of section 24 of the CGST Act, 2017 pertaining to compulsory registration in certain cases.

Now, the question arises is that whether the decisions given in the above cited Advance Rulings are correct in interpreting that the provisions of section 24 of the CGST Act, 2017 have overriding effect on both section 22(1) and section 23 of the CGST Act, 2017? In order to better analyse the situation, it is pertinent to refer to the provisions of section 22(1), 23 and 24 of the CGST Act, 2017.

Section 22 Persons liable for registration
22. (1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees:

Section 23 Persons not liable for registration
23. (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) The Government may, on the recommendations of the Council, by notification, specify the category of persons who may be exempted from obtaining registration under this Act.

Section 24 Compulsory registration in certain cases
24. Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act,––

(i) persons making any inter-State taxable supply;

(ii) casual taxable persons making taxable supply;

(iii) persons who are required to pay tax under reverse charge;
(iv) ................
On perusal of the above cited provisions, it is observed that section 22 and section 23 mutually exclusive sections as they pertain to totally opposite issues. Section 22 pertains to persons liable for registration while section 23 pertains to persons not liable for registration. Furthermore, section 24 pertains to compulsory registration in certain cases starting with ‘Non-obstante’ clause making reference of section 22(1) pertaining to persons liable for registration. Hence, we may infer that the provisions of section 24 describe the situation wherein compulsory registration is required even if the aggregate turnover of person supplying taxable goods or services does not exceed Rs. 20 Lakhs. It cannot be inferred that the section 24 lists out situation wherein person is liable to take registration even if there is no taxable supply of goods or services because it does not override the provisions of section 23 of the CGST Act, 2017. The interpretation taken by the learned AAR Maharashtra that the provisions of section 23 are merely expansion of the provision contained in section 22 and the provisions of section 24 are applicable for both does not appear to be correct in our opinion. If the interpretation taken by the learned AAR Maharashtra is observed, it will render the provisions contained in section 23 as otiose. Such an interpretation will make the provisions contained in section 24 as supreme and the exemption granted under section 23 as redundant as practically GTA service is usually availed by every business, be it exclusively exempted business. Moreover, section 22 and section 23 are diagonally opposite sections and when it is clearly stated in section 23 that the person exclusively engaged in supply of exempted goods or services is not liable to get registered, the said person cannot be compelled to take registration by application of provisions contained in section 24 as section 23 is specific section stating persons not liable to take registration and the specific provisions prevail over general provisions. In our opinion, the conclusion arrived by AAR requires re-consideration. GST UPDATE ON REQUIREMENT OF REGISTRATION BY ASSESSEES EXCLUSIVELY SUPPLYING EXEMPTED GOODS:-

Maharashtra Authority for Advance Ruling in the case of M/s Jalaram Feeds has ruled that an assessee exclusively engaged in supply of exempted goods is required to take registration under section 24 of the CGST Act, 2017 if the said assessee is required to pay tax under reverse charge. It has been concluded that the contention of the assessee that the provisions of section 24 override section 22(1) and not section 23 is not proper as it would lead to non-payment of tax on GTA services under reverse charge mechanism by both GTA and the assessee which is not intended by the Law. It has been held that the section 23 is not a standalone section as stated by the assessee and rather the provisions of section 23 compliment the provisions contained in section 22 of the CGST Act, 2017. It is held that the according to the provisions of section 22 of the CGST Act, 2017, a supplier making taxable supplies of goods or services is liable to get registered if his aggregate turnover in a financial year exceeds twenty lakhs rupees and the reference of term ‘taxable supplies’ indicates that a person exclusively supplying exempted goods or services is not liable to get registered. It is concluded that since a person exclusively engaged in supply of exempted goods or services is not liable to take registration even by referring to the provisions of section 22(1) of the CGST Act, 2017 without even referring to the provisions of section 23 of the CGST Act, 2017, the provisions of section 23 are in alignment with the provisions of section 22(1) of the CGST Act, 2017. Therefore, it was pronounced that an assessee exclusively engaged in supplying exempted goods would be liable to take registration if the assessee is liable to pay tax under reverse charge mechanism by referring to the provisions of section 24 of the CGST Act, 2017.

In this context, it is pertinent to refer to similar decision given by the AAR West Bengal in the case of Joint Plant Committee wherein it was concluded that the applicant will not be liable to get registered under GST Law if the applicant is exclusively engaged in supplying exempted goods or services subject to the condition that the applicant is not liable to pay GST under reverse charge as in such case, compulsory registration would be required as per section 24(iii) of the CGST Act, 2017. Hence, in nutshell, the benefit of section 23 of the CGST Act, 2017 is subject to the provision of section 24 of the CGST Act, 2017 pertaining to compulsory registration in certain cases.

Now, the question arises is that whether the decisions given in the above cited Advance Rulings are correct in interpreting that the provisions of section 24 of the CGST Act, 2017 have overriding effect on both section 22(1) and section 23 of the CGST Act, 2017? In order to better analyse the situation, it is pertinent to refer to the provisions of section 22(1), 23 and 24 of the CGST Act, 2017.

Section 22 Persons liable for registration
22. (1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees:

Section 23 Persons not liable for registration
23. (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) The Government may, on the recommendations of the Council, by notification, specify the category of persons who may be exempted from obtaining registration under this Act.

Section 24 Compulsory registration in certain cases
24. Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act,––

(i) persons making any inter-State taxable supply;

(ii) casual taxable persons making taxable supply;

(iii) persons who are required to pay tax under reverse charge;
(iv) ................
On perusal of the above cited provisions, it is observed that section 22 and section 23 mutually exclusive sections as they pertain to totally opposite issues. Section 22 pertains to persons liable for registration while section 23 pertains to persons not liable for registration. Furthermore, section 24 pertains to compulsory registration in certain cases starting with ‘Non-obstante’ clause making reference of section 22(1) pertaining to persons liable for registration. Hence, we may infer that the provisions of section 24 describe the situation wherein compulsory registration is required even if the aggregate turnover of person supplying taxable goods or services does not exceed Rs. 20 Lakhs. It cannot be inferred that the section 24 lists out situation wherein person is liable to take registration even if there is no taxable supply of goods or services because it does not override the provisions of section 23 of the CGST Act, 2017. The interpretation taken by the learned AAR Maharashtra that the provisions of section 23 are merely expansion of the provision contained in section 22 and the provisions of section 24 are applicable for both does not appear to be correct in our opinion. If the interpretation taken by the learned AAR Maharashtra is observed, it will render the provisions contained in section 23 as otiose. Such an interpretation will make the provisions contained in section 24 as supreme and the exemption granted under section 23 as redundant as practically GTA service is usually availed by every business, be it exclusively exempted business. Moreover, section 22 and section 23 are diagonally opposite sections and when it is clearly stated in section 23 that the person exclusively engaged in supply of exempted goods or services is not liable to get registered, the said person cannot be compelled to take registration by application of provisions contained in section 24 as section 23 is specific section stating persons not liable to take registration and the specific provisions prevail over general provisions. In our opinion, the conclusion arrived by AAR requires re-consideration. GST UPDATE ON REQUIREMENT OF REGISTRATION BY ASSESSEES EXCLUSIVELY SUPPLYING EXEMPTED GOODS:-

Maharashtra Authority for Advance Ruling in the case of M/s Jalaram Feeds has ruled that an assessee exclusively engaged in supply of exempted goods is required to take registration under section 24 of the CGST Act, 2017 if the said assessee is required to pay tax under reverse charge. It has been concluded that the contention of the assessee that the provisions of section 24 override section 22(1) and not section 23 is not proper as it would lead to non-payment of tax on GTA services under reverse charge mechanism by both GTA and the assessee which is not intended by the Law. It has been held that the section 23 is not a standalone section as stated by the assessee and rather the provisions of section 23 compliment the provisions contained in section 22 of the CGST Act, 2017. It is held that the according to the provisions of section 22 of the CGST Act, 2017, a supplier making taxable supplies of goods or services is liable to get registered if his aggregate turnover in a financial year exceeds twenty lakhs rupees and the reference of term ‘taxable supplies’ indicates that a person exclusively supplying exempted goods or services is not liable to get registered. It is concluded that since a person exclusively engaged in supply of exempted goods or services is not liable to take registration even by referring to the provisions of section 22(1) of the CGST Act, 2017 without even referring to the provisions of section 23 of the CGST Act, 2017, the provisions of section 23 are in alignment with the provisions of section 22(1) of the CGST Act, 2017. Therefore, it was pronounced that an assessee exclusively engaged in supplying exempted goods would be liable to take registration if the assessee is liable to pay tax under reverse charge mechanism by referring to the provisions of section 24 of the CGST Act, 2017.

In this context, it is pertinent to refer to similar decision given by the AAR West Bengal in the case of Joint Plant Committee wherein it was concluded that the applicant will not be liable to get registered under GST Law if the applicant is exclusively engaged in supplying exempted goods or services subject to the condition that the applicant is not liable to pay GST under reverse charge as in such case, compulsory registration would be required as per section 24(iii) of the CGST Act, 2017. Hence, in nutshell, the benefit of section 23 of the CGST Act, 2017 is subject to the provision of section 24 of the CGST Act, 2017 pertaining to compulsory registration in certain cases.

Now, the question arises is that whether the decisions given in the above cited Advance Rulings are correct in interpreting that the provisions of section 24 of the CGST Act, 2017 have overriding effect on both section 22(1) and section 23 of the CGST Act, 2017? In order to better analyse the situation, it is pertinent to refer to the provisions of section 22(1), 23 and 24 of the CGST Act, 2017.

Section 22 Persons liable for registration
22. (1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees:

Section 23 Persons not liable for registration
23. (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) The Government may, on the recommendations of the Council, by notification, specify the category of persons who may be exempted from obtaining registration under this Act.

Section 24 Compulsory registration in certain cases
24. Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act,––

(i) persons making any inter-State taxable supply;

(ii) casual taxable persons making taxable supply;

(iii) persons who are required to pay tax under reverse charge;
(iv) ................
On perusal of the above cited provisions, it is observed that section 22 and section 23 mutually exclusive sections as they pertain to totally opposite issues. Section 22 pertains to persons liable for registration while section 23 pertains to persons not liable for registration. Furthermore, section 24 pertains to compulsory registration in certain cases starting with ‘Non-obstante’ clause making reference of section 22(1) pertaining to persons liable for registration. Hence, we may infer that the provisions of section 24 describe the situation wherein compulsory registration is required even if the aggregate turnover of person supplying taxable goods or services does not exceed Rs. 20 Lakhs. It cannot be inferred that the section 24 lists out situation wherein person is liable to take registration even if there is no taxable supply of goods or services because it does not override the provisions of section 23 of the CGST Act, 2017. The interpretation taken by the learned AAR Maharashtra that the provisions of section 23 are merely expansion of the provision contained in section 22 and the provisions of section 24 are applicable for both does not appear to be correct in our opinion. If the interpretation taken by the learned AAR Maharashtra is observed, it will render the provisions contained in section 23 as otiose. Such an interpretation will make the provisions contained in section 24 as supreme and the exemption granted under section 23 as redundant as practically GTA service is usually availed by every business, be it exclusively exempted business. Moreover, section 22 and section 23 are diagonally opposite sections and when it is clearly stated in section 23 that the person exclusively engaged in supply of exempted goods or services is not liable to get registered, the said person cannot be compelled to take registration by application of provisions contained in section 24 as section 23 is specific section stating persons not liable to take registration and the specific provisions prevail over general provisions. In our opinion, the conclusion arrived by AAR requires re-consideration.

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GST UPDATE ON REQUIREMENT OF REGISTRATION BY ASSESSEES EXCLUSIVELY SUPPLYING EXEMPTED GOODS

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