Person’s liable to register under GST:
In this article we are trying to give you an brief analysis of various provisions of Central Goods & Services (CGST) Act, 2017 that mandates Registration under GST Law. The provisions related to registration have been discussed in the Chapter VI of the CGST Act, 2017 and Section 22 talks about persons liable to take registration.
We shall discuss Sub-section (1) of Section 22 of the CGST Act, 2017 (herewith after called Act) states that:
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.
Exception to the above sub-section has been provided in sub-section (1) of Section 23 of the Act as follows:
23(1) The following persons shall not be liable to registration, namely:–
- 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;..
We now begin with the meanings & analysis of the different terms used mentioned in above Section 22(1).
The Word Aggregate turnover has been defined in Section 2(6) of the Act as follows:
2(6) “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess;
Therefore a person whose aggregate turnover exceeds 20 lakhs during a financial year shall become compulsorily liable for registration. However, if a person is solely engaged in the non-taxable supply or exempt supply, he shall not be required to take registration.
“Supply”- This is the core term under the Act and the entire GST Act functions around this term.
The scope of term Supply has been given in sub-section (1) of Section 7 of the Act:
7(1) For the purposes of this Act, the expression “supply” includes––
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
(b) import of services for a consideration whether or not in the course or furtherance of business;
(c) the activities specified in Schedule I, made or agreed to be made without a consideration; and
Whereas sub-section (2) of Section 7 of the Act read with Schedule III contains negative list of certain activities which is neither treated as supply of service nor supply of goods:
7(2) Notwithstanding anything contained in sub-section (1),––
(a) activities or transactions specified in Schedule III; or
(b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council,
shall be treated neither as a supply of goods nor a supply of services.
Goods & Services has been defined in Section 2(52) & Section 2(102) of the Act respectively:
2(52) “goods” means every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply;
2(102) “services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged;
In simple terms, the supply for the purpose of this Act is the activities or transaction involving all forms of supply of goods or services or both for a consideration in the course of business & activities made without consideration specified in Schedule I. However, activities specifically mentioned in Schedule III are to be excluded from the preview of supply for any purpose under this Act.
For Schedule III, please click here
We now discuss the term “Exempt Supply” as mentioned in the definition of Aggregate Turnover as discussed above.
Section 2(47) of the Act defines the term exempt supply:
2(47) “exempt supply” means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply;
Section 11 grants exempts goods and services from payment of tax. Sub-section (1) of Section 11 is relevant for our purpose which has been discussed below:
11(1) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by notification, exempt generally, either absolutely or subject to such conditions as may be specified therein, goods or services or both of any specified description from the whole or any part of the tax leviable thereon with effect from such date as may be specified in such notification.
For, this purpose, the Central Government has issued Notification No. 2/2017 Central Tax (Rate) dated 28.06.2017 that provides exemption to goods & Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 that provides exemption to services. The notifications have been amended with times. For the above Notifications, please click here (updated upto 10th Dec, 2019)
We now discuss the term “Non- Taxable Supply” as mentioned in the definition of Exempt Supply as discussed above.
Section 2(78) of the Act defines the term non-taxable supply:
2(78) “non-taxable supply” means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act;
Non-taxable supply includes supply of: Alcoholic liquor for human consumption and petroleum & other fuel products.
In a nutshell, a person is required to registered under GST if during the financial year aggregate turnover i.e. total value of all supplies (taxable supply, nil rated supply, exempt supply or even non-taxable supply) is more than Rs. 20,00,000, so the essential aspect to get in the preview for requirement of registration is checking whether the goods or services falls under “Supply”. However, if aggregate turnover only incudes non-taxable or exempt supplies then registration is not required in terms of Section 23(1).
- FDR Interest
- Serial No. 27 of Notification No. 12/2017- Central Tax (Rate) dated 28.06.2017 issued in the exercise of powers conferred under Section 11(1) of the Act (herewith after called Notification) wholly exempts the:
Services by way of—
“extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services);”
- Therefore the interest received from FDR is exempt supply & exempted from the GST.
- However it has to be included in determining the Aggregate Turnover.
- Serial No. 12 of the Notification exempts the Services by way of renting of residential dwelling for use as residence.
- Therefore the renting of Commercial Property or Residential Property for commercial purposes is taxable supply for the purpose of GST & applicable GST is leviable.
- However for the purpose of determining the Aggregate Turnover both types of rental income is included.
- Securities have been specifically excluded from the definition of Goods [Section 2(52) of the Act] & Services [Section 2(102 of the Act)] in GST Regime.
- Only the activities related to securities is chargeable to tax under GST such as Brokerage or Commission.
- Therefore the sale of securities is outside the ambit of GST i.e. neither taxable nor included for purpose of calculating Aggregate Turnover.
- Section 7(2)(a) of the Act read with Schedule III specifies the certain activities or transactions which shall be treated neither as a supply of goods nor a supply of services. Point 1 of Schedule III is:
- Services by an employee to the employer in the course of or in relation to his employment.
- Therefore services of employee are outside the ambit of GST & not to be treated as supply for any purpose including in the calculation of Aggregate Turnover.
- Also, the Ministry of Finance (15.11.2019) rejects the media reports which states that Govt. is planning to impose GST on salaries in near future.
5.Hospital or Medical Profession
- Serial No. 74 of the Notification exempts the:
Services by way of-
(a) health care services by a clinical establishment, an authorised medical practitioner or para-medics;
(b) services provided by way of transportation of a patient in an ambulance, other than those specified in (a) above.
- Therefore the receipts of hospital from hospitalization charges and fees charged by practicing Medical professional are exempted from the GST. However included in determining the Aggregate Turnover.
- However sale of medicines by the hospital or professional is chargeable to tax.
Suppose Mr. A receive 5,00,000 as director remuneration, 10,00,000 as interest income on FD and 7,00,000 as rent from commercial property . Whether he is liable to pay GST on rent? Also what is aggregate turnover for the purpose of GST Registration?
In the given case Mr. A:
i) Receives a salary of Rs. 5,00,000
As services of employer are not supply for any purpose under GST Act therefore it is not included in the calculation of Aggregate Turnover.
ii) Receives Rs. 10,00,000 as FDR Interest
As interest income is exempted from GST, therefore FDR interest is not leviable to GST but included in the calculation of Aggregate Turnover.
iii) Rs. 7,00,000 Rent from Commercial Property
Exemption is to renting of residential property for residential purposes. Therefore renting of commercial property is taxable supply & included in the calculation of Aggregate Turnover.
Therefore Aggregate Turnover= 17,00,000 & Mr. A is not required to registered under GST and is not liable to pay Tax on rent.
We have taken every care to present the article in an easy to explain manner.
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