Who Must Register Under GST
Chapter Fifteen
Syllabus topic 5, "Business Registration under Goods and Service Tax Laws."
Pages 32 to 34 of 80
Three sections decide it
Section 22 says who is liable to register on turnover. Section 23 says who is not liable. Section 24 says who must register whatever their turnover.
Read them in that order, and read section 24 last, because it overrides the other two.
Section 22: liability on turnover
22. Persons liable for registration.- (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:
Provided that where such person makes taxable supplies of goods or services or both from any of the special category States, he shall be liable to be registered if his aggregate turnover in a financial year exceeds ten lakh rupees:
Provided further that the Government may, at the request of a special category State and on the recommendations of the Council, enhance the aggregate turnover referred to in the first proviso from ten lakh rupees to such amount, not exceeding twenty lakh rupees and subject to such conditions and limitations, as may be so notified:
Provided also that the Government may, at the request of a State and on the recommendations of the Council, enhance the aggregate turnover from twenty lakh rupees to such amount not exceeding forty lakh rupees in case of supplier who is engaged exclusively in the supply of goods, subject to such conditions and limitations, as may be notified
Four figures in one sub-section, and each has a condition on it.
| Supplier | Threshold |
|---|---|
| Services, or goods and services, in an ordinary State | Rs. 20 lakh |
| Services, or goods and services, in a special category State | Rs. 10 lakh, raisable to Rs. 20 lakh at that State's request |
| Exclusively goods, in a State that has asked for the higher figure | Rs. 40 lakh, under the third proviso |
The Government has exercised the third proviso, so a supplier dealing exclusively in goods, including one in Maharashtra, has a threshold of Rs. 40 lakh. A supplier of services, or of goods and services together, stays at Rs. 20 lakh.
Two things a candidate must not confuse. The threshold is on aggregate turnover, which is all-India and includes exempt supplies, exports and inter-State supplies of persons having the same PAN, and it is computed on an all-India basis. And it is turnover, not profit.
Section 22(2), (3) and (4)
Sub-section (2) carries forward a person already registered under an earlier law.
Sub-section (3) deals with a transfer of a business as a going concern: the transferee is liable to be registered from the date of transfer.
Who Must Register Under GST
Sub-section (4) deals with a transfer under a scheme of amalgamation or demerger sanctioned by a court: the transferee is liable from the date the Registrar of Companies issues the certificate.
Section 23: who is not liable
The section takes two classes out of section 22 altogether:
- a person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or are wholly exempt; and
- an agriculturist, to the extent of supply of produce out of cultivation of land.
The Government may also, on the Council's recommendations, notify further categories of persons exempted from obtaining registration.
The word "exclusively" governs the first. A person supplying exempt goods and one taxable item is not covered.
Section 24: compulsory registration, whatever the turnover
Section 24 opens with "Notwithstanding anything contained in sub-section (1) of section 22", so it overrides the threshold entirely. A person in any of these categories registers on day one, at a turnover of one rupee.
- persons making any inter-State taxable supply;
- casual taxable persons making taxable supply;
- persons required to pay tax under reverse charge;
- persons required to pay tax under section 9(5), the electronic commerce operator liable for notified services;
- non-resident taxable persons making taxable supply;
- persons required to deduct tax under section 51;
- persons who make taxable supply on behalf of other taxable persons, whether as agent or otherwise;
- input service distributors;
- persons who supply through an electronic commerce operator required to collect tax at source;
- every electronic commerce operator required to collect tax at source;
- persons supplying online information and database access or retrieval services from outside India to an unregistered person in India;
- such other person or class of persons as the Government may notify.
The first item is the one that catches an ordinary small firm. A Pune firm with a turnover of Rs. 6 lakh that sells to one customer in Gujarat is making an inter-State taxable supply, and section 24 requires it to register even though section 22 would not.
Voluntary registration
Section 25(3) allows a person not liable to register to register voluntarily, and all the provisions of the Act then apply to him as they apply to a registered person.
Why anybody would. Input tax credit cannot be taken by an unregistered person, and a registered buyer generally will not buy from an unregistered supplier because it breaks the credit chain. A small supplier selling to businesses usually registers voluntarily for that reason alone.
The decision, as a sequence
- Is the person in section 23? Exclusively exempt supplies, or an agriculturist supplying his own produce. If yes, no registration.
- Is the person in section 24? If yes, register, whatever the turnover.
- Does aggregate turnover exceed the section 22 threshold? Rs. 40 lakh for exclusively goods where the State has adopted it, Rs. 20 lakh otherwise, Rs. 10 lakh in a special category State that has not raised it. If yes, register.
- Otherwise registration is voluntary under section 25(3).
Who Must Register Under GST
Four short cases
| The firm | Register? | Why |
|---|---|---|
| A Pune trader, goods only, turnover Rs. 32 lakh, sells only in Maharashtra | No, but may voluntarily | Under the Rs. 40 lakh threshold for exclusively goods |
| The same trader, one sale to a buyer in Gujarat | Yes | Inter-State taxable supply, section 24 |
| A Pune consultant, services only, turnover Rs. 26 lakh, only in Maharashtra | Yes | Services carry the Rs. 20 lakh threshold |
| A farmer selling his own wheat | No | Section 23, an agriculturist supplying produce out of cultivation of land |
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.