22.0 Purpose of Section 22

Question-1 [ICAI-I-Ch7-Ex9] [FAQ-D18-Ch3-2]

Can a person without GST registration collect GST and claim ITC?

Answer-1

No, a person without GST registration can neither collect GST from his customers nor can claim any input tax credit of GST paid by him.

Question-2 [ICAI-I-Ch7-Ex8] [ICMA-I-J19-6a-5]

What are the advantage of taking registration in GST?

Answer-2

Registration will confer following advantages to the business:

• Legally recognized as supplier of goods or services.
• Proper accounting of taxes paid on the input goods or services which can be utilized for payment of GST due on supply of goods or services or both by the business.
• Legally authorized to collect tax from his purchasers and pass on the credit of the taxes paid on the goods or services supplied to purchasers or recipients.
• Become eligible to avail various other benefits and privileges rendered under the GST laws.
• Registered person is eligible to apply for Government bids or contracts or assignments.
• Registered person under GST can easily gain trust from customers.

22.1.2 Meaning of Special category States

Question-1 [ICSI-E-D20-O-80-1]

Under GST regime, a category by the name “North Eastern and Special Category States” has been defined which comprise of :

(A) Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Tripura, Sikkim and Himachal Pradesh

(B) Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim and Arunachal Pradesh

(C) Assam, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland and Himachal Pradesh

(D) Assam, Manipur, Meghalaya, Nagaland, Tripura, Sikkim and Arunachal Pradesh

Question-2 [ICSI-E-D19-78-1]

Section 22 of the CGST Act, 2017 refers to the expression “Special Category States” and there are total ........................ special category States as per sub-clause (2) of Clause (4) of Article 279A of the Constitution. However, special category States for the purpose of registration under the CGST Act, 2017 out of which are ........

(A) 7, 2; (B) 7, 4; (C) 11, 4; (D) 11, 7

22.1.3 Meaning of Aggregate Turnover (AT) for Registration

Question-1 [ICMAI-I-Ch5-Example-3] [Supply by Agent on behalf of Principal]

Mr. C of Calicut is trading on his own goods and also acting as an agent of Mr. B of Bengaluru. Mr. C turnover in the financial year 2019-20 is Rs.12 lacs in his own account and Rs.9 lacs on behalf of principal. Whether Mr. C is liable to register compulsorily under GST law

Answer

As per explanation 1 in computing the total turnover, both the value of supply on his own account that is Rs.12 lacs and on behalf of principal Rs.9 lacs will be aggregated. Hence, the aggregate turnover will be Rs.21 lacs. Mr. C is liable to register compulsorily under the GST law.

Question-2 [ICAI-F-J21-4a-5] [Taxable + Exempt + NGST+ Export + Inward RCM supply]

In the month of April 2020, Z started supply of goods in his proprietary firm and also set up a one-man company named Z Ltd. He needs your assistance to work out his aggregate turnover for the purpose of GST registration. The turnover details up to the month of July, 2020 are as under:

Note: All his supplies are intra-State except export.

Answer

As person section 2(6) AT Includes

• Taxable and Exempt Supplies to outside person
• Exports of goods or services or both
• Inter-state supplies of all branches having same PAN

AT does not include Inward supplies on which tax is payable under RCM

2) Calculation of AT (Rs. in lacs)

Question-2A [ICSI-E-D22-89-1] [Taxable + Exempt + Export + Inward RCM supply]

Karishma Ltd. has provided following information for the month of Sep 2021 :

Calculate the aggregate turnover of Karishma Ltd.

(A) Rs.18,00,000; (B) Rs.24,00,000; (C) Rs.22,00,000; (D) Rs.16,00,000

Answer

As person section 2(6) AT Includes

• Taxable and Exempt Supplies to outside person
• Exports of goods or services or both
• Inter-state supplies of all branches having same PAN

AT does not include Inward supplies on which tax is payable under RCM

2) Calculation of AT (Rs. in lacs)

Question-3 [ICAI-I-Jul21-7a-5] [Taxable + Exempt + Export + Inward RCM supply + Custom Duty]

P Ltd, a registered person provided following information for the month of October, 2020

GST is payable on Reverse Charge for GTA services.

Explain the meaning of aggregate turnover u/s 2(6) of the CGST Act and compute the aggregate turnover of P Ltd. for the month of October, 2020. All amounts are exclusive of GST.

Answer

As person section 2(6) AT Includes

• Taxable and Exempt Supplies to outside person
• Exports of goods or services or both
• Inter-state supplies of all branches having same PAN

AT does not include Inward supplies on which tax is payable under RCM

Calculation of AT

22.1.5 Summary of Threshold Limit for Registration

Example-1 [Threshold limit as per section 22 read with Notification No. 10/2019 CT dated 07.03.2019]

Question-1 [ICMAI-I-J19-1(d)(v)-1] [Threshold limit]

R has started business of supplying toys in J&K. He is required to obtain registration if his aggregate turnover during a financial year exceeds _______.

Question-1A [ICSI-E-J22-71-1]

In which out of the following states/UTs, the threshold limit is Rs.20 lakhs instead of Rs.10 Lakhs (Supplies of Goods and Services), as per section 22(1) of CGST Act, 2017 :

(A) Manipur; (B) Meghalaya; (C) Mizoram; (D) Nagaland

Question-1B [ICSI-E-D19-77-1]

77. Every supplier as per section 22 of the CGST Act, 2017 shall be liable to be registered under this Act in the State where he makes taxable supplies of goods or services or both, if his aggregate turnover in the Financial Year exceeds.....................

(A) Rs.20,00,000; (B) Rs.40,00,000; (C) Rs.30,00,000; (D) Rs.60,00,000

Question-2 [ICAI-I-Ch7-Ex7] [Taxable Supply of Services or Both from one State]

Examine whether the supplier is liable to get registered in the following independent cases:-

(i) Ankit of Assam is exclusively engaged in intra-State supply of taxable services. His aggregate turnover in the current financial year is Rs.25 lakh.

(ii) Sanchit of Assam is engaged in intra-State supply of both taxable goods and services. His aggregate turnover in the current financial year is Rs.30 lakh.

Answer

1) Statutory Provision

Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged in “supply of services” or both “goods and services”

2) Advice

(i) Ankit is engaged in intrastate supply of taxable services in Assam and his AT is Rs.25 lacs, i.e. more than Rs.20 lakh hence, Ankit is liable to get registered under GST.

(ii) Sanchit is engaged in supply of both taxable goods and services, the applicable threshold limit for registration in his case is Rs.20 lakh. Thus, Sanchit is liable to get registered under GST as his turnover is more than the threshold limit.

Question-3 [ICAI-I-N18-O-10a(i)-2] [Taxable + Exempt supply from one state]

There is a dairy farm selling milk and milk products in Delhi. The turnover of his dairy farm is as below:

Milk (Exempted): Rs.19,90,000

Butter (Taxable): Rs.50,000

What is the registration liability under GST for the above mentioned person assuming he has same PAN?

Answer

1) Statutory Provision

a) Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged exclusively in “supply of goods”

b) As person section 2(6) AT Includes

• Taxable and Exempt and non gst supplies to outside person
• Exports of goods or services or both
• Inter-state supplies of all branches having same PAN

2) Advice

Thus, in the given case, aggregate turnover = Rs.19,90,000 + Rs.50,000 = Rs.20,40,000

Since aggregate turnover of the dairy farm in Delhi does not exceeds Rs.40 lakh, it is not liable to get registered.

Question-3A [ICMAI-F-J19-3(a)(iii)-2]

Mr. Rajesh is a farmer with an annual turnover in relation to agriculture of Rs.18,00,000 which is exempt. However Mr. Rajesh also supplies plastic bags worth of Rs,2,50,000 (taxable goods) along with his crop and charges separately for this. Is Mr. Rajesh required to register under GST? Advice.

Question-3B [ICSI-P-J18-5a-3]

Vinod, a supplier of goods in Vadodara furnishes the following particulars pertaining to supplies likely to be effected by him during the third and fourth quarters of the FY 2017-18 :

Value of supply of goods chargeable to GST Rs.18 lakhs

Goods to be supplied to World Health Organization, Ahmedabad office Rs.4 lakhs

All supplies will be within the State only. He desires to know whether he should get himself registered for GST purposes. Advise him suitably.

Answer

1) Statutory Provision

a) Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged exclusively in “supply of goods”

b) As person section 2(6) AT Includes

• Taxable and Exempt and non gst supplies to outside person
• Exports of goods or services or both
• Inter-state supplies of all branches having same PAN

2) Advice

Thus, in the given case, aggregate turnover = Rs.18,00,000 + Rs.4,00,000 = Rs.22,00,000

Since aggregate turnover of the Vinod in Gujrat does not exceeds Rs.40 lakh, it is not liable to get registered.

Answer as per old Provision

However during the year FY 2017-18, Notification No. 10/2019 CT dated 07.03.2019 was not applicable and threshold limit was Rs.20 lacs, in that case Mr Vinod was liable to be registered.

Question-4 [ICAI-I-N21-6b-4] [Lower threshold limit shall apply if more than one state]

Q Ltd. is engaged exclusively in supply of taxable goods from the following states. The particulars of intra-state supplies for the month of May 2021 are as follows:

(i) Q Ltd. seeks to know whether it is liable for registration under GST. Give your explanation.

(ii) Will your answer be different if Q Ltd. supplies only petrol & diesel from Tripura instead of any other taxable goods?

Answer

Answer

1) Statutory Provision

a) Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged exclusively in “supply of goods”

b) As person section 2(6) AT Includes

• Taxable and Exempt and non gst supplies to outside person
• Exports of goods or services or both
• Inter-state supplies of all branches having same PAN

2) Calculation of AT

If RP is engaged in supply from more than one states, the lower threshold limit shall apply. In given case, threshold limit of Tripura of Rs.10 lacs shall apply.

(i) Aggregate turnover of Q Ltd. is Rs.31,00,000 lacs which is more than threshold limit, hence he is liable to be registered.

(ii) In case Q Ltd. is making supply of non-taxable goods [petrol and diesel] from Tripura, the applicable threshold limit will not be reduced to Rs.10 lakh; enhanced threshold limit of ` 40 lakh will be applicable.

Thus, it is not liable to be registered under GST as its aggregate turnover [Rs.31 lakh] does not exceed the said threshold limit

Question-4A [ICSI-E-D22-77-1]

A dealer who is a resident of Manipur has business place both at Manipur and Himachal Pradesh. His taxable supply of goods in the state of Manipur is Rs.12 lakh and in the state of Himachal Pradesh is Rs.6 lakh. From where he has to take GST Registration ?

(A) From Manipur only

(B) From Himachal Pradesh only

(C) Registration required in both the state of Manipur and Himachal Pradesh

(D) Not required to take compulsory registration

Question-5 [ICAI-F-N20-6(b)(ii)-2] [Taxable + Exempt supply from more than one state]

Decide with reason whether the registration is required under CGST Act, 2017 in the following case:

Mr. Bantu of Delhi doing trading business across India and his intra-State turnover details are as below

Taxable supplies made from Delhi - Rs.18 lakh.

(2) Exempt supplies made from Andhra Pradesh - Rs.10 lakh.

(3) Both taxable and exempt supplies made from Tamilnadu - Rs.5,00,000 and Rs.6,00,000 respectively.

Answer

1) Statutory Provision

a) Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged exclusively in “supply of goods”

b) As person section 2(6) AT Includes

• Taxable and Exempt and non gst supplies to outside person
• Exports of goods or services or both
• Inter-state supplies of all branches having same PAN

2) Calculation of AT

If RP is engaged in supply from more than one states, the lower threshold limit shall apply. In given case, threshold limit of other states of Rs.40 lacs shall apply.

(i) Aggregate turnover of Mr Bantu is Rs.39,00,000 lacs which is less than threshold limit, hence he is not liable to be registered.

Question-6 [ICAI-I-Ch7-Ex6] [Supply of Notified Goods]

Examine whether the supplier of goods is liable to get registered in the following independent cases:-

(i) Raghav of Assam is exclusively engaged in intra-State taxable supply of readymade garments. His turnover in the current financial year (FY) from Assam showroom is Rs.33 lakh. He has another showroom in Tripura with a turnover of Rs.11 lakh in the current FY.

(ii) Pulkit of Panjim, Goa is exclusively engaged in intra-State taxable supply of shoes. His aggregate turnover in the current financial year is Rs.22 lakh.

(iii) Harshit of Himachal Pradesh is exclusively engaged in intra-State supply of pan masala. His aggregate turnover in the current financial year is Rs.24 lakh.

Answer

1) Statutory Provision

Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged exclusively in “supply of goods”

2) Advice

(i) Raghav is eligible for higher threshold limit of turnover for registration, i.e. Rs.40 lakh as he is exclusively engaged in intra-State supply of goods in other states.

However, since Raghav is engaged in supplying readymade garments from a Special Category State i.e. Tripura, the threshold limit gets reduced to Rs.10 lakh.

Thus, Raghav is liable to get registered under GST as his turnover exceeds Rs.10 lakh. Further, he is required to obtain registration in both Assam and Tripura as he is making taxable supplies from both the States.

(ii) The applicable threshold limit for registration for Pulkit in the given case is Rs.40 lakh as he is exclusively engaged in intra-State taxable supply of goods in Goa. Thus, he is not liable to get registered under GST as his turnover is less than the threshold limit.

(iii) Harshit being exclusively engaged in supply of pan masala is not eligible for higher threshold limit of Rs.40 lakh. The applicable threshold limit for registration in this case is Rs.20 lakh. Thus, Harshit is liable to get registered under GST.

Question-6A [ICAI-I-Jul21-8b-5]

Examine the following cases and explain with reasons whether the supplier of goods is liable to get registered in GST:

Krishna of Himachal Pradesh is exclusively engaged in intra-State taxable supply of readymade suits. His turnover in the current financial year from Himachal Pradesh showroom is Rs.25 lakh. He has two more showrooms one in Manipur & another in Sikkim with a turnover of Rs.15 lakh and Rs.18 lakh respectively in the current financial year.

(ii) Ankit of Telangana is exclusively engaged in intra-State taxable supply of footwears. His aggregate turnover in the current financial year is Rs.25 lakh:

(iii) Aakash of Uttar Pradesh is exclusively engaged in intra-State supply of pan masala. His aggregate turnover in the current financial year is Rs.30 lakh.

Answer

1) Statutory Provision

Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged exclusively in “supply of goods”

2) Advice

(i) Krishna is eligible for higher threshold limit of turnover for registration, i.e. Rs.40 lakh as he is exclusively engaged in intra-State supply of goods in other states.

However, since Krishna is engaged in supplying readymade garments from a Special Category State i.e. Manipur, the threshold limit gets reduced to Rs.10 lakh.

Thus, Krishna is liable to get registered under GST as his turnover exceeds Rs.10 lakh. Further, he is required to obtain registration in all states HP, Manipur and Sikkim as he is making taxable supplies from all States.

(ii) The applicable threshold limit for registration for Ankit in the given case is Rs.20 lakh as he is exclusively engaged in intra-State taxable supply of goods in Telangana. Thus, he is liable to get registered under GST as his turnover is more than the threshold limit.

(iii) Akash being exclusively engaged in supply of pan masala is not eligible for higher threshold limit of Rs.40 lakh. The applicable threshold limit for registration in this case is Rs.20 lakh. Thus, Akash is liable to get registered under GST.

Question-7 [ICAI-I-N19-7a-5]

Explain the registration requirements under GST law in the following independent cases:

(i) Mr. Ahmad of Jammu engaged in the business of supplying tobacco based Pan Masala with an aggregate turnover of Rs.24 lacs.

(ii) Mr. Lepcha of Mizoram is engaged in the supply of papers with an aggregate turnover of Rs.13 lacs. Will your answer be different if Mr. Lepcha is located in Meghalaya?

Answer

1) Statutory Provision

a) Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged exclusively in “supply of goods”

2) Advice

(i) A person is eligible for enhanced threshold limit of Rs.40 lakh in the State of Jammu and Kashmir if he is engaged exclusively in intra-State supply of goods.

However, the enhanced threshold limit is not applicable if the person is engaged, inter alia, in the supply of pan masala and all goods of chapter 24 i.e. Tobacco and manufactured tobacco substitutes. In that case, the normal threshold limit of Rs.20 lakh will be applicable.

In view of said provisions, in the given case, Mr. Ahmad is liable to register since his aggregate turnover (Rs.24 lakh) exceeds the applicable threshold limit for registration of Rs.20 lakh.

(ii)(a) The enhanced threshold limit of Rs.40 lakh as applicable to a person engaged exclusively in intra-State supply of goods, is not applicable to Mizoram [a specified Special Category State]. Instead, a lower threshold limit of Rs.10 lakh for registration is applicable for Mizoram.

Thus, in the given case, Mr. Lepcha of Mizoram is liable to register since his aggregate turnover (Rs.13 lakh) exceeds the applicable threshold limit for registration of Rs.10 lakh.

(ii)(b) The enhanced threshold limit of Rs.40 lakh is also specifically not applicable in the State of Meghalaya. Instead, the normal threshold limit of Rs.20 lakh for registration is applicable to it.

Therefore, if Mr. Lepcha is located in Meghalaya, he is not liable to register since his aggregate turnover (Rs.13 lakh) does not exceed the applicable threshold limit for registration of Rs.20 lakh.

22.1.5.1 There must be at least one taxable supply for person to be liable for registration

Question-1 [ICAI-I-N22-6b(ii)-2] [No Registration if Exempt supply > Threshold]

Answer the following, after reading the below given two paragraphs:

(i) Briefly discuss the relevant provision.

(ii) Decide the correct conclusion and

(iii) Determine the validity of the given advice (Correct /Incorrect)

Dharun provides services as a business facilitator to Zio Bank Ltd by facilitating in opening of bank accounts to villagers in its rural branches in Punjab and earned a commission of Rs.22 lakh in the month of April 2022. So far he is not registered under GST. Dharun’s consultant advised him that he is liable for registration under GST as his gross receipts exceeded Rs.20 lacs. Dharun has no other receipts/ business activity other than the above.

Answer

1) Statutory Provision

a) Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged in “supply of services” or both “goods and services”

b) Exempt Supply - Services by a business facilitator to a banking company with respect to accounts in its rural area branch is exempt from GST.

Advice

Since in the given case, Dharun is engaged exclusively in providing the exempt services, it is not liable to obtain registration even though his aggregate turnover exceeds Rs.20 lakh.

Thus, the advice given by his tax consultant is not correct.

22.1.5.2 Registration is not required in state where from only exempt/ Non GST supply is made

Question-1 [ICAI-F-Ch9-Ex1] [Taxable + Exempt from more than one state + NGST from other state]

Mahadev Enterprises, a sole proprietorship firm, opened a shopping complex dealing in supply of ready-made garments at multiple locations, i.e. in Himachal Pradesh, Uttarakhand and Tripura in the month of June.

It has furnished the following details relating to the supply made at such multiple locations for the month of June:-

* excluding GST

With the help of the above mentioned information, answer the following questions giving reasons:-

(i) Determine whether Mahadev Enterprises is liable to be registered under GST law and what is the threshold limit of taking registration in this case assuming that it is not required to pay any tax on inward supplies under reverse charge.

(ii) Explain with reasons whether your answer in (i) will change in the following independent cases:

(a) If Mahadev Enterprises is dealing exclusively in taxable supply of goods only from Himachal Pradesh;

(b) If Mahadev Enterprises is dealing in taxable supply of goods and services only from Himachal Pradesh;

(c) If Mahadev Enterprises is dealing in taxable supply of goods only from Himachal Pradesh and has also effected inter-State supplies of taxable goods (other than notified handicraft goods) amounting to Rs.4,00,000.

Answer

1) Statutory Provision

a) Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged exclusively in “supply of goods”

b) As person section 2(6) AT Includes

• Taxable and exempt and non gst supplies to outside person
• Exports of goods or services or both
• Inter-state supplies of all branches having same PAN

2) Calculation of AT (Rs.)

3) Advice

(i) For Tripura State, threshold limit is Rs.10 lacs. It will not be eligible for the higher threshold limit of Rs.40 lakh; instead, the threshold limit for registration will be reduced to Rs.10 lakh.

In view of the above-mentioned provisions, Mahadev Enterprises is liable to be registered under GST law with the AT amounting to Rs.56,90,000 (computed on all India basis).

Further, he is not liable to be registered in Uttarakhand since he is not making any taxable supply from Uttarakhand.

(ii)(a)

If Mahadev Enterprises is dealing in supply of goods only from Himachal Pradesh, the applicable threshold limit of registration would be Rs.40 lakh. Thus, Mahadev Enterprises will not be liable for registration as its AT would be Rs.22,50,000.

(ii)(b)

If Mahadev Enterprises is dealing in taxable supply of goods and services only from Himachal Pradesh then applicable threshold limit will be Rs.20 lakh and hence, Mahadev Enterprises will be liable to registration as his AT is Rs.22,50,000 in HP.

(ii)(c)

1. Statutory Provisions

a) Section 24(i) requires compulsory registration, i.e. if any person is making any inter-state taxable supplies, then he must be registered, even if his aggregate turnover does not exceed threshold limit.

Facts & Comments

Since, Mahadev Enterprises has also effected inter-State supplies of taxable goods (other than notified handicraft goods) amounting to Rs.4,00,000, Thus, Mahadev Enterprises will be liable to registration.

Question-2 [ICAI-F-Ch9-4] [Taxable + Exempt from one state + NGST from other state]

Rishabh Enterprises – a sole proprietorship firm – started an air-conditioned restaurant in Virar, Maharashtra in the month of February wherein the customers are served cooked food as well as cold drinks/non-alcoholic beverages. In March, the firm opened a liquor shop in Raipur, Uttarakhand for trading of alcoholic liquor for human consumption.

Determine whether Rishabh Enterprises is liable to be registered under GST law with the help of the following information:

excluding GST

You are required to provide reasons for treatment of various items given above.

Answer

1) Statutory Provision

a) Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged exclusively in “supply of goods”

b) As person section 2(6) AT Includes

• Taxable and Exempt Supplies to outside person
• Exports of goods or services or both
• Inter-state supplies of all branches having same PAN

2) Facts & Advice

Rishabh Enterprises was not liable to be registered in the month of Feb since its aggregate turnover did not exceed Rs.20 lakh in that month.

In March, it started business from Uttrakhand, hence threshold limit of Rs.20 lacs will be applicable from March onwards.

From uttrakhand, he is only making non gst supply, therefore he is required to get registration in Maharashtra but not required registration in Uttrakhand.

Question-3 [ICAI-F-N20-6b(ii)-2]

Decide with reason whether the registration is required under CGST Act, 2017 in the following independent cases:

Mr. Bantu of Delhi doing trading business across India and his intra-State turnover details are as below,

(1) Taxable supplies made from Delhi - Rs.18 lakh.

(2) Exempt supplies made from Andhra Pradesh - Rs.10 lakh.

(3) Both taxable and exempt supplies made from Tamilnadu - Rs.5,00,000 and Rs.6,00,000 respectively.

Answer

1) Statutory Provision

a) Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged exclusively in “supply of goods”

b) As person section 2(6) AT Includes

• Taxable and exempt and non gst supplies to outside person
• Exports of goods or services or both
• Inter-state supplies of all branches having same PAN

2) Calculation of AT

Advice

For a supplier exclusively engaged in intra-State supply of goods, the threshold limit of turnover to obtain registration in the States of Delhi, Andhra Pradesh and Tamil Nadu is Rs.40 lakh.

Therefore, Mr. Bantu is not liable for registration as his turnover does not exceed Rs.40 lakh.

22.1.6.1 Compulsory registration of Persons making inter-State taxable supply of goods

Question-1 [ICMAI-F-J18-1(ii)-2] [Taxable + Exempt + Export]

Choose correct answer

A new supplier has taxable intra-State sales, exempt intra-State sales and export sales of goods. He should get himself registered under GST law, where

(a) the aggregate value of taxable intra-State goods exceeds Rs. 20 lakhs.

(b) the aggregate value of taxable as well as exempt intra-State goods exceeds Rs. 20 lakhs.

(c) the aggregate value of all the three items exceeds Rs. 20 lakhs.

(d) the aggregate value of taxable intra-State goods as well as export sales exceeds Rs. 20 lakhs.

Question-2 [ICSI-P-J19-O-4c-5] [Taxable + Exempt + Export]

You are required to determine in the context of the provisions contained in the CGST Act, 2017 whether the company ABC Pvt. Ltd., incorporated in Karnataka is liable to be registered under GST Act, when the company has effected following supplies within the state of Karnataka :

Answer

Aggregate Turnover

Note

1) As person section 2(6) AT Includes

• Taxable and exempt and non gst supplies to outside person
• Exports of goods or services or both
• Inter-state supplies of all branches having same PAN

2) Registration requirment

a) Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged exclusively in “supply of goods”

Advice

ABC Pvt. Ltd is carrying on business from Karnatka and threshold limit of karnatka is Rs.40 lacs while aggregate turnover of ABC Ltd is Rs.24 lacs which is less than threshold limit. Hence as per section 22, ABC Ltd is not liable to be registered.

However as per section 24(i) person making interstate supply of goods shall be liable to be registered without crossing threshold limit. Since ABC Ltd is engaged in export, hence it is liable to be registered in terms of section 24(i).

22.1.6.3 Compulsory registration of Persons who are required to pay tax under RCM on inward supplies

Question-1 [ICSI-E-D21-79-1]

Tax payers who are required to pay tax for the supply of goods or services or both on the basis of reverse charge (RCM) under GST have to get registered themselves when they cross the threshold limit of turnover of..........................

(A) Rs.20 lacs; (B) Rs.10 lacs; (C) Rs.40 lacs; (D) None of the above

Question-2 [ICAI-F-M18-O-4a-4] [ICAI-F-Ch9-9] [Taxable + NGST + Inward RCM Supply + Inter-state Branch Supply]

Rajesh Dynamics, having its head office in Chennai, Tamil Nadu carries on the following activities with respective turnovers in a financial year.

It argues that it does not have taxable turnover crossing threshold limit of Rs.40,00,000 either at Chennai, Tamil Nadu or Bengaluru, Karnataka and including turnover at Manipur branch. It believes that the determination of aggregate turnover is not required for the purpose of obtaining registration, but is required for determining composition levy.

Decide based on the above facts:

(i) The aggregate turnover of Rajesh Dynamics.

(ii) All conditions that fulfil the requirements for registration under CGST Act in the given circumstances.

Answer

1) Statutory Provision

a) Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged exclusively in “supply of goods”

b) As person section 2(6) AT Includes

• Taxable and exempt and non gst supplies to outside person
• Exports of goods or services or both
• Inter-state supplies of all branches having same PAN

AT does not includes inward supplies taxable under RCM

2) Calculation of AT

Rajesh Dynamics is not liable to be registered in Chennai, Tamil Nadu, if his aggregate turnover in a financial year does not exceeds Rs.40 lakh.

However, since Rajesh Dynamics also makes taxable supplies from Manipur, a specified Special Category State, the threshold exemption gets reduced to Rs.10 lakh

Rajesh Dynamics’ argument that it is not liable to registration since the threshold exemption of Rs.40 lakh is not being crossed either at Chennai, Tamil Nadu, Bengaluru, Karnataka or Manipur is not correct as firstly, the aggregate turnover to be considered in its case is Rs.10 lakh and not Rs.40 lakh and secondly, the same is computed on all India basis and not State-wise.

Further, Rajesh Dynamics is also wrong in believing that aggregate turnover is computed only for the purpose of determining the eligibility limit for composition levy since the aggregate turnover is required for determining the eligibility for both registration and composition levy.

Further, Rajesh Dynamics is compulsorily required to register under section 24 irrespective of the turnover limit as it is liable to pay tax on inward supplies under reverse charge and it also makes inter-State taxable supply.

Question-2A [ICAI-F-N22-4b-4]

Khurania Filling Station, having its head office in Faridabad, Haryana has given details of transactions as under in a financial year

It argues that it does not have taxable turnover crossing threshold limit of Rs.40,00,000 either at Faridabad, Haryana or Ludhiana, Punjab and including turnover at Mizoram branch. Therefore, there is no need to take registration. Decide based on the above facts:

Compute the aggregate turnover of Khurania Filling Station and indicate whether the firm is required to take registration. Give reasons for your conclusion.

Answer

1) Calculation of AT

Notes

1) As person section 2(6) AT Includes

• Taxable and exempt and non gst supplies to outside person
• Exports of goods or services or both
• Inter-state supplies of all branches having same PAN

AT does not includes inward supplies taxable under RCM

2) Registration requirement

a) Statutory Provision

Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged exclusively in “supply of goods”

Advice

Khurania Filling Station is carrying business from 3 states i.e. Haryana, Punjab and Mizoram. Lower threshold limit of Rs.10 lacs will apply in this case. Aggregate turnover of Khurania Filling Station is Rs.31,90,000 more than Rs.10,00,000, hence it must be registered.

Khurania Filling Station’ argument that it is not liable to registration since the threshold exemption of Rs.40 lakh is not being crossed either at Haryana, Punjab and Mizoram is not correct as firstly, the aggregate turnover to be considered in its case is Rs.10 lakh and not Rs.40 lakh and secondly, the same is computed on all India basis and not State-wise.

Further, Khurania Filling Station is compulsorily required to register u/s 24 irrespective of the turnover limit as it is liable to pay tax on inward supplies under reverse charge and it also makes inter-State taxable supply.

Question-3 [ICAI-I-N22-7a-5] [Taxable + NGST + Inward RCM Supply + Inter-state Branch Supply + Outward RCM supply]

Nesamani started his business activities in the month of Feb 2022 in the State of Orissa. He provided the following details

From the information given above, compute the aggregate turnover of Nesamani and also
decide whether he is required to get registration under GST. Assume that the amounts
given above are exclusive of taxes.

Answer

1) Statutory Provision

a) Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged exclusively in “supply of goods”

b) As person section 2(6) AT Includes

• Taxable and exempt and non gst supplies to outside person
• Exports of goods or services or both
• Inter-state supplies of all branches having same PAN

AT does not includes inward supplies taxable under RCM

Advice

Nesamani has principal place of business in Orisa, Rajasthan and UP. Threshold limit of all these states are Rs.40,00,000. AT of Nesamani is Rs.17,00,000, hence he is not liable for registration

22.1.6.4 Compulsory registration of agent who make taxable supplies on behalf of other taxable persons

Quesiton-1 [ICMAI-F-J18-3a-7] [Taxable + Exempt + Export + Supply by Agent]

Mr. X a dealer dealing with intra-State supply of goods and services has place of business in India furnished the following information in the financial year 2017-18:

Advice Mr. X whether he is required to register himself under GST law.

Answer

1) Statutory Provision

a) Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged in “supply of services” or both “goods and services”

2) Advice

Calculation of Aggregate Turnover

Aggregate turnover of Mr X is Rs.20.10 lacs which us more that threshold limit of Rs.20 lacs, hence he is required to get registration.

However, no threshold limit shall be applicable in following cases

(i) For interstate supply of goods and

(ii) Agent who make taxable supplies on behalf of other taxable persons

Question-2 [ICMAI-I-J18-4a-7] [Taxable + Exempt + Export + Supply by an agent]

Mrs. Lakshmi, intending to start a new business in January, 2018, furnishes the following information pertaining to the period upto 31.03.2018:

Ascertain the aggregate turnover. She wants to know whether she should get herself registered for GST purposes. You are required to help her. Further, what will be the GST payable by her, if the GST rate for taxable goods supplied is 18%?

Answer

1) Computation of Aggregate Turnovr

Notes:

(1) As person section 2(6) AT Includes

• Taxable and exempt and non gst supplies to outside person
• Exports of goods or services or both
• Inter-state supplies of all branches having same PAN

AT does not includes inward supplies taxable under RCM

(2) Explanation to Section 22

(i) AT shall include all supplies made by the taxable person, whether on his own account or made on behalf of all his principals;

(2) Registration requirement

(a) Section 24(vii) provides that persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise must be compulsorily registered.

In the given case, Mrs Lakshmi is engaged in supply as agent on behalf of principal, hence she must be registered without applying threshold limit.

(3) GST Payable @ 18%

Question-3 [ICAI-I-Ch7-Ex4 &5] [Taxable + NGST + Exempt Supply by Agent]

Pure Oils, Delhi has supplied machine oil and high-speed diesel in the month of April as per the details given in table below. Pure Oils is not yet registered.

*excluding GST

(i) Determine whether Pure Oils is liable for registration.

(ii) What will be your answer if in question above, in S.No. (i), Pure Oils supplies the high speed diesel in Delhi in the capacity of an agent of Mixed Oils Ltd.?

Answer

1) Statutory Provision

a) Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged exclusively in “supply of goods”

b) As per section 2(6), “aggregate turnover (AT)” means

Aggregate value of all  (i) taxable suppllies, (ii) exempt and non GST supplie, (iii) exports of goods or services or both and (iv) inter-State supplies of persons having same PAN, to be computed on all India basis

(c) Section 9(2) provides that CGST is not leviable on five petroleum products i.e. petroleum crude, motor spirit (petrol), high speed diesel, natural gas and aviation turbine fuel.

2) Advice

(i) On the basis of above provisions, the aggregate turnover of Pure Oils for the month of April is computed as under:

Pure Oils is making exclusive supply of goods and hence the threshold limit for registration would be Rs.40,00,000. Since the aggregate turnover does not exceed Rs.40,00,000, Pure Oils is not liable to be registered.

(ii) In case Pure Oils makes the supply in capacity of an agent of Mixed Oils Ltd.

Section 24(vii) provides that persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise must be compulsorily registered.

However, in the present case, if Pure Oils supply high speed diesel on behalf of Mixed Oil Ltd. in Delhi as its agent, it shall still not be liable to obtain registration in Delhi since section 24 comes into play only when agent is making taxable supply of goods on behalf of principal whereas in the given case, Pure Oils is supplying non-taxable goods on behalf of Mixed Oils Ltd.

Question-4 [ICMA-I-J19-6c-7] [Taxable + Non GST + Supply by Principal’s Agent]

Pure Oils, Delhi has started the supply of machine oils and high-speed diesel in the month of April, 20XX. The following details have been furnished by it for the said month:

* excluding GST

Determine whether Pure Oils is liable for registration. Will your Answer change, if Pure Oils supplies machine oils amounting to ` 2,50,000 from its branch located in Himachal Pradesh in addition to the above-mentioned supplies?

Answer

1) Calculation of AT

Notes:

(1) As person section 2(6) AT includes

• Taxable and exempt and non gst supplies to outside person
• Exports of goods or services or both
• Inter-state supplies of all branches having same PAN

AT does not includes inward supplies taxable under RCM

(2) Explanation to Section 22

(i) AT shall include all supplies made by the taxable person, whether on his own account or made on behalf of all his principals. In given case, supply made through agent of Pure oils shall be included in supply of agent but not in supply of Pure Oils.

(2) Registration requirement

a) Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged in “supply of services” or both “goods and services”

Threshold limit of Delhi and Punjab is Rs.40 lacs and AT of Pure oils is less than Rs.40 lacs, hence it is not liable for registration.

(3) Pure Oils supplies machine oils amounting to ` 2,50,000 from its branch located in Himachal Pradesh in addition to the above-mentioned supplies?

New At = Rs.7,80,000 + Rs.2,50,000 = Rs.10,30,000

Threshold limit of Delhi, Punjab and HP is Rs.40 lacs and AT of Pure oils is less than Rs.40 lacs, hence it is not liable for registration.

Question-5 [ICSI-P-J21-O-3c-5] [Taxable + Exempt + Export + Supply by Agent + Inward RCM supply]

Mr. Humpty, a supplier in Kerala, dealing with Intra-State supply of goods and services, has furnished the following information in the financial year 2020-21 :

Compute aggregate turnover of Humpty for the Assessment Year 2021-22 and comment on whether Humpty is required to register under GST Law.

Answer

(1) Calculation of AT

Note

(1) As person section 2(6) AT Includes

• Taxable and exempt and non gst supplies to outside person
• Exports of goods or services or both
• Inter-state supplies of all branches having same PAN

AT does not includes inward supplies taxable under RCM

(2) Explanation (i) to Section 22 - AT shall include all supplies made by the taxable person, whether on his own account or made on behalf of all his principals;

(2) Whether registration is required

Advice

In the present case, Mr. Humpty is compulsorily required to register under GST Law without recourse to the minimum threshold as it falls within the following situations listed in Section 24 of Central Goods and Services Tax Act, 2017 -

a. He is engaged in the supply of inter-state supply of goods and services. [section 24(i)]

b. He is engaged in supply of goods as agent on behalf of principal. [section 24(vii)]

c. He is liable to pay tax under reverse charge. [section 24(iii)]

22.2 Person registered under existing law is liable to be registered under GST

Question-1 [FAQ-D18-Ch3-34]

Whether all assesses / dealers who are already registered under existing central excise/service tax/ vat laws will have to obtain fresh registration?

Ans. No, GSTN shall migrate all such assessees/dealers to the GSTN network and shall issue a provisional registration certificate with GSTIN number on the appointed day, which after due verification by the departmental officers within six months, will be converted into final registration certificate. For converting the provisional registration to final registration the registrants will be asked to submit all requisite documents and information required for registration in a prescribed period of time. Failure to do so will result in cancellation of the provisional GSTIN number.

The service tax assesses having centralized registration will have to apply afresh in the respective states wherever they have their businesses.

22.3.1 Registration liability of the transferee / successor

Question-1 [ICAI-I-CH7-Ex20] [FAQ-D18-Ch3-33]

What could be the liabilities (in so far as registration is concerned) on transfer of a business?

Answer

The transferee or the successor shall be liable to be registered with effect from such transfer or succession and he will have to obtain a fresh registration with effect from the date of such transfer or succession [Section 22(3)].

Question-2 [ICSI-E-D21-90-1]

Kuber, a registered person under GST as the proprietor of M/s Natraj Restaurant died on 15.07.2020 and left behind his wife & son. His son wants to continue the business of the deceased father and therefore consulted the tax consultant to complete the formalities under the CGST Act, 2017. The consultant had given which out of the following advices to the son for carrying the business of Natraj Restaurant after the death of his father.

(A) The son should get himself registered by filing application in GST–REG – 01 under the name of M/s Natraj Restaurant, in his own PAN and should also file form GST–ITC – 02.

(B) The son can get the authorized signatory changed by filing an application to the proper officer and can continue the same business in the capacity of legal heir.

(C) The son should close the old firm and start new business under different name or in the same name by filing application for registration.

(D) The son should do business in the capacity of a Manager and by making the wife of deceased (his mother) as the proprietor of M/s Natraj Restaurant.

22.5 Miscellaneous Questions

Question-1 [ICAI-F-M18-4b-5] [ICAI-F-Ch9-8] [Export, NGST, Supply from Job Worker, Supply to Additional Place, Outward RCM Supply]

With the help of the following information in the case of M/s Jayant Enterprises, Jaipur (Rajasthan) for the financial year, determine the aggregate turnover for the purpose of registration under the CGST Act.

All the above amounts are excluding GST.

You are required to provide reasons for treatment of various items given above.

Answer

Computation of aggregate turnover of M/s Jayant Enterprises for the FY

Notes:

(1) As person section 2(6) AT Includes

• Taxable, exempt and non gst supplies to outside person
• Exports of goods or services or both
• Inter-state supplies of all branches having same PAN

AT does not includes inward supplies taxable under RCM

(2) Explanation (ii) to Section 22 - Supply of goods, after completion of job work, by a registered job worker shall be treated as the supply of goods by the principal referred to in section 143, and value of such goods shall not be included in the AT of the registered job worker;

(3) Supply made without consideration to units within the same State (under same registration) is a not a supply and hence not includible in aggregate turnover.

(4) Outward supplies taxable under reverse charge would be part of the “aggregate turnover” of the supplier of such supplies. Such turnover is not included as turnover in the hands of recipient.

(ii)

a) Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged in “supply of services” or both “goods and services”

Although, the aggregate turnover of M/s Jayant Enterprises does not exceed Rs.20 lakh, it is compulsorily required to register in terms of section 24(i) irrespective of the turnover limit as it is engaged in making inter-State supply of goods in the form of exports to England.

Question-2 [ICMA-I-D18-5a-7] [Export, Exempt, NGST, Supply from Job Worker, Supply to Additional Place]

Mr Vishnu who has started a business for supply of goods and services in Tamil Nadu, furnishes the following information pertaining to the period commencing on 01-07-2017 and ended on 310-03-2018

You are required to help him in deciding whether he has to go for registration under CGST Law.

Answer

Computation of aggregate turnover of Mr. Vishanu

Notes:

(1) As person section 2(6) AT Includes

• Taxable, exempt and non gst supplies to outside person
• Exports of goods or services or both
• Inter-state supplies of all branches having same PAN

AT does not includes inward supplies taxable under RCM

(2) Explanation (ii) to Section 22 - Supply of goods, after completion of job work, by a registered job worker shall be treated as the supply of goods by the principal referred to in section 143, and value of such goods shall not be included in the AT of the registered job worker;

(3) Supply made to units within the same State (under same registration) is a not a supply and hence not includible in aggregate turnover.

(ii)

a) Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged in “supply of services” or both “goods and services”

Aggregate turnover of Mr Vishnu exceed Rs.20 lakh and also it is compulsorily required to register in terms of section 24(i) irrespective of the turnover limit as it is engaged in making inter-State supply of goods in the form of exports to Dubai. Hence Mr Vishnu must be registered.

Question-3 [ICSI-P-J19-2A(ii)-5] [Taxable, NGST, Supply from Job Worker, Outward & Inward RCM Supply]

Jayant Pvt. Ltd. of Jaipur (Rajasthan) provides the following information of the supplies made for the year 2017-18:

Calculate the aggregate turnover for the purpose of registration under CGST Act, 2017 and state whether Jayant Pvt. Ltd. is liable for registration or not.

Also provide brief reasons for the treatment of various items given above in the context of provisions of CGST Act, 2017.

Note : All the above amount are exclusive of taxes of any nature.

Answer

Computation of aggregate turnover of M/s Jayant Enterprises for the FY

Notes:

(1) As person section 2(6) AT Includes

• Taxable, exempt and non gst supplies to outside person
• Exports of goods or services or both
• Inter-state supplies of all branches having same PAN

AT does not includes inward supplies taxable under RCM

(2) Explanation (ii) to Section 22 - Supply of goods, after completion of job work, by a registered job worker shall be treated as the supply of goods by the principal referred to in section 143, and value of such goods shall not be included in the AT of the registered job worker;

(3) Outward supplies taxable under reverse charge would be part of the “aggregate turnover” of the supplier of such supplies. Such turnover is not included as turnover in the hands of recipient.

(ii)

a) Section 22 read with Notification No. 10/2019 CT dated 07.03.2019 - A supplier is liable to be registered in the State/UT from where he makes a taxable supply of goods and/or services, if his aggregate turnover in a financial year exceeds the threshold limit.

Threshold limit for supplier engaged exclusively in “supply of goods”

Although, the aggregate turnover of M/s Jayant Enterprises does not exceed Rs.40 lakh, it is compulsorily required to register in terms of section 24(iii) irrespective of the turnover limit as it is liable to pay tax on inward supply under RCM.

Question-4 [ICAI-I-N20-7a-4] [Exempt later becomes taxable]

BBD Pvt. Ltd. Of Gujarat exclusively manufactures and sells product 'Z' which is exempt from GST vide notifications issued under relevant GST legislations. The company sells 'Z' only within Gujarat and is not registered under GST laws. The turnover of the company in the previous year 2018-19 was Rs.50 lakh. The company expects the sales to grow by 10% in the current year 2019-20.

However, effective 01.01.2020, exemption available on 'Z' was withdrawn by the Central Government and GST @ 5% was imposed thereon. The turnover of the company for the nine months ended on 31.12.2019 was Rs.42 lakh.

BBD Pvt. Ltd. is of the opinion that it is not required to get registered under GST for current financial year 2019-20

Answer

For a supplier exclusively engaged in intra-State supply of goods, the threshold limit of turnover to obtain registration in the State of Gujarat is Rs.40 lakh. However, a person exclusively engaged in the business of supplying goods and/or services that are not liable to tax or are wholly exempt from tax is not liable to registration.

Therefore, since BBD Pvt. Ltd. was engaged exclusively in supplying exempted goods till 31.12.2019, it was not required to be registered till that day; though voluntary registration was allowed.

The position, however, will change from 01.01.2020 as the supply of goods become taxable from that day and the turnover of BBD Pvt. Ltd. is more than Rs.40 lakh.

Since the aggregate turnover limit of Rs.40 lakh includes exempt turnover also, turnover of ‘Z’ till 31.12.2019 will be considered for determining the threshold limit even though the same was exempt from GST. Therefore, BBD Pvt. Ltd. needs to register within 30 days from 01.01.2020.

Quesiton-5 [ICAI-F-Ch9-Ex2] [Exempt later becomes taxable + ITC on Capital Goods]

LMN Pvt. Ltd., Coimbatore exclusively manufactures and sells product ‘X’ which is exempt from GST vide notifications issued under relevant GST legislations. The company sells product ‘X’ only within Tamil Nadu and is not registered under GST.

Further, all the inward supply of the company are taxable under forward charge. The turnover of the company in the previous year was Rs.45 lakh.

The company expects the sales to grow by 30% in the current year. The company purchased additional machinery for manufacturing ‘X’ on 1st July.

The purchase price of the capital goods was Rs.30 lakh exclusive of GST @ 18%.

However, effective from 1st Nov, exemption available on ‘X’ was withdrawn by the Central Government and GST @ 12% was imposed thereon.

The turnover of the company for the half year ended on 30th September was Rs.45 lakh.

(a) Examine the above scenario and advise LMN Pvt Ltd. whether it needs to get registered under GST.

(b) If the answer to the above question is in affirmative, advise LMN Pvt. Ltd. whether it can avail input tax credit on the additional machinery purchased exclusively for manufacturing “X”?

Answer

1. Statutory Provision

a) As per section 22 read with Notification No. 10/2019 CT dated 07.03.2019, a supplier is liable to be registered in the State/UTs from where he makes a taxable supply of goods and/or services, if his aggregate turnover (AT) in a FY exceeds the threshold limit.

b) As per Section 23(1)(a), Person who is 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 IGST Tax Act shall not be liable to registration.

Facts & Comments

In the given case, the turnover of the company for the half year ended on 30th Sep is Rs.45 lakh which is more than the applicable threshold limit of Rs.40 lakh. Therefore, as per above mentioned provisions, the company should be liable to registration.

However, since LMN Pvt. Ltd. supplied exempted goods till 31st Oct, it was not required to be registered till that day; though voluntary registration was allowed u/s 25(3).

However, the position will change from 1st Nov as the supply of goods become taxable from that day and the turnover of company is above Rs.40 lakh. In terms of section 2(6), the aggregate turnover limit of Rs.40 lakh includes exempt turnover also.

Therefore, turnover of ‘X’ prior to 1st Nov will also be considered for determining the limit of Rs.40 lakh even though the same was exempt from GST. Therefore, the company needs to register within 30 days from 1st Nov (the date on which it becomes liable to registration) in terms of section 25(1).

(b) Eligibility of ITC on Capital Goods

Section 18(1)(a) provides that a person who has applied for registration within 30 days from the date on which he becomes liable to registration and has been granted such registration shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this Act.

Thus, LMN Pvt. Ltd. cannot avail credit for additional machinery purchased exclusively for manufacturing X as ITC of only inputs is allowed when a person gets registered for the first time.

Quesition-5A [ICAI-F-N18-4a-5]

Happy Ltd. located at Alwar (Rajasthan), exclusively manufactures and sells the product "Shine & Shine", which is exempt from GST. Happy Ltd. sells "Shine & Shine" only within Rajasthan. The turnover of Happy Ltd. in the previous year was Rs.60 lakhs. Happy Ltd. purchased additional machinery (Capital Goods) for manufacturing "Shine & Shine" on 1^st April, 2018. The invoice for supply of machinery also was issued on 1^st April, 2018. The purchase price of the machinery was Rs.25 lakh exclusive of CGST and SGST @ 12% (6% + 6%). On 1^st December, 2018 exemption available on the product "Shine & Shine" was withdrawn by the Central Government and CGST and SGST @18% (9% + 9%) was imposed thereon. The turnover of Happy Ltd. on 30^th September, 2018 was Rs.45 lakh.

Examine the issue and provide the answers (with supporting explanatory note for each answer) to the following:

(i) Does Happy Ltd. have to register under CGST Act, 2017?

(ii) Can Happy Ltd. take Credit of tax paid on the machinery purchased? If yes, what is the amount of Input Tax Credit (ITC) that can be availed?

Answer

As per section 22 of the CGST Act, 2017, a supplier is liable to be registered under GST in the State/ UT from where he makes the taxable supply if his aggregate turnover in a financial year(FY)exceeds Rs.20 lakh in such State/UT (Rs.10 lakh in a Special Category State other than Jammu and Kashmir). The term ‘aggregate turnover’ includes exempt turnover also.

However, a person exclusively engaged in making exempt supplies is not liable to registration in terms of section 23(1) of CGST Act, 2017.

In view of combined reading of above provisions, although the ‘aggregate turnover’ of Happy Ltd. exceeds the applicable threshold limit of Rs.20 lakh on 30.09.2018 [Rs.45 lakh], it was not required to be registered till 30.11.2018 as it supplied only exempted goods till that day. Therefore, Happy Ltd. needs to register within 30 days from 01.12.2018 (the date on which its supplies became taxable) as its turnover had already exceeded the threshold limit of Rs.20 lakh on 01.12.2018.

(b) Eligibility of ITC on Capital Goods

Section 18(1)(a) provides that a person who has applied for registration within 30 days from the date on which he becomes liable to registration and has been granted such registration shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date from which he becomes liable to pay tax under the provisions of this Act.

Thus, Happy Ltd. cannot avail credit for additional machinery purchased exclusively for manufacturing Shine & Shine as ITC of only inputs is allowed when a person gets registered for the first time.

Quesiton-6 [ICAI-F-Ch9-3] [Exempt later becomes taxable + Inward RCM supply + ITC on Capital Goods]

SNP Pvt. Ltd., Coimbatore exclusively manufactures and sells product ‘Z’ which is exempt from GST vide notifications issued under relevant GST legislations. The company sells product ‘Z’ only within Tamil Nadu and it not registered under GST. Further, all the inward supply of the company are taxable under forward charge. The turnover of the company in the previous year was Rs.55 lakh. The company expects the sales to grow by 20% in the current year. Owing to the growing demand for the product, the company decided to increase its production capacity and purchased additional machinery for manufacturing ‘Z’ on 1st July. The purchase price of the capital goods was Rs.20 lakh exclusive of GST @ 18%.

However, effective from 1st November, exemption available on ‘Z’ was withdrawn by the Central Government and GST @ 12% was imposed thereon. The turnover of the company for the half year ended on 30th September was Rs.50 lakh.

(a) The Board of Directors of SNP Pvt. Ltd. wants to know whether they have to register under GST?

(b) In case in the above question, SNP Pvt. Ltd. is already registered with respect to certain taxable supplies being made by it along with manufacture of exempt product ‘Z’, other facts remaining the same, can it take input tax credit on additional machinery purchased exclusively for manufacturing ‘Z’? If yes, then how much credit can be availed?

Advice SNP Pvt. Ltd. on the above issues with reference to the provisions of GST law.

Answer

(a)

Section 22(1) read with Notification No. 10/2019 CT dated 07.03.2019 inter alia provides that every supplier who is exclusively engaged in intra-State supply of goods is liable to be registered under GST in the State/ Union territory from where he makes the taxable supply of goods only when aggregate turnover in a financial year exceeds Rs.40,00,000.

However, the above provisions are not applicable to few specified States, i.e. States of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura, Uttarakhand.

However, a person exclusively engaged in the business of supplying goods and/or services that are not liable to tax or are wholly exempt from tax is not liable to registration in terms of section 23(1)(a).

In the given case, the turnover of the company for the half year ended on 30th Sep is Rs.50 lakh which is more than the applicable threshold limit of Rs.40 lakh. Therefore, as per section 22, the company will be liable to registration. However, since SNP Pvt. Ltd. supplied exempted goods till 31st Oct, it was not required to be registered till that day; though voluntary registration was allowed under section 25(3).

However, the position will change from 1st Nov as the supply of goods become taxable from that day and the turnover of company is above Rs.4 0 lakh. It is important to note here that in terms of section 2(6), the aggregate turnover limit of Rs.40 lakh includes exempt turnover also.

Therefore, turnover of ‘Z’ will be considered for determining the threshold limit even though the same was exempt from GST. Therefore, the company needs to register within 30 days from 1st November (the date on which it becomes liable to registration) in terms of section 25(1).

Further, the company cannot avail exemption of Rs.40 lakh from 1^st Nov as the GST law does not provide any threshold exemption from payment of tax but threshold exemption from obtaining registration (which in this case had been crossed).

(b)

Rule 43(1)(a) of the CGST Rules, 2017 disallows input tax credit on capital goods used or intended to be used exclusively for effecting exempt supplies.

However, as per section 18(1)(d), where an exempt supply of goods and/or services by a registered person becomes a taxable supply, such person gets entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock relatable to such exempt supply and on capital goods exclusively used for such exempt supply on the day immediately preceding the date from which such supply becomes taxable.

Rule 40(1)(a) of the CGST Rules, 2017 lays down that the credit on capital goods can be claimed after reducing the tax paid on such capital goods by 5% per quarter of a year or part thereof from the date of the invoice.

Therefore, in the given case, SNP Pvt. Ltd. could not claim credit on machinery till the time the supply of product ‘Z’ for which said machinery was being used was exempt. However, it can claim credit from 31st October - the day immediately preceding the date from which the supply of product ‘Z’ became taxable (1st November).

The credit will be available for the remaining useful life of the machinery and will be computed as follows:        

Question-7 [ICAI-F-D21-4b-4]

Comment on the liability to get registered under the GST law in the given independent situations for the financial year 2020-21. Your answer should also include relevant provisions of law, notifications or circulars.

(ii) Ajanta Enterprises is exclusively engaged in the trading of exempt goods under GST in the State of Haryana and has not taken the GST registration. During the year, its turnover from exempt supplies is Rs.47 lakh and Ajanta Enterprises also sold old generator for Rs.1.25 lakh during the year.

(iii) Mr. P has presence in two States, one in Haryana and other in Rajasthan. He is registered in the State of Rajasthan even without crossing the threshold limit. His turnover during the year in Rajasthan is Rs.32 lakh and in Haryana is Rs.5 lakh. Is he mandatorily required to get registered in the State of Haryana also?

(iv) Mr. John is engaged in the business of buying and selling of shares on his own account from the secondary market and his income from this activity is assessed as business income under the Income-tax Act 1961. During the year his total sales turnover from shares was Rs.90 lakh.

Answer

(ii) Any person engaged exclusively in making exempt supplies is not liable to registration. However, Ajanta Enterprises is liable to get registered as it has also made a taxable supply along with exempt supplies during the year and its aggregate turnover (Rs.48.25 lakh) exceeds the threshold limit for registration.

(iii) Since registration in GST is PAN based, once a supplier is liable to register, he has to obtain registration in each of the States/UTs in which he operates under the same PAN. Therefore, Mr. P is liable to get registered in Haryana also, provided he is not engaged exclusively in making exempt supplies from Haryana. However, it is also possible to take a view that a person who is voluntarily registered in one State needs to obtain registration in other States from where he makes a taxable supply only if his aggregate turnover exceeds applicable threshold limit for registration. In that case, Mr P is not liable to obtain registration from Haryana since the aggregate turnover does not exceed the threshold limit for registration.

(iv) A supplier is liable to obtain registration in a State/UT from where he makes a taxable supply of goods and/or services. Shares are excluded from the definition of goods as well as services. Hence, buying and selling of shares is not a supply of goods and/or services under GST law. Thus, Mr. John is not liable to obtain registration since he is not engaged in making a taxable supply of goods and/or services.

Question-8 [ICMAI-I-J19-1(c)(ii)-1]

State whether true of false

GST is payable once registered even if the turnover is less than the prescribed limit.