Section 24 of CGST Act-Compulsory Registration under GST

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Provision

Section 24 of CGST Act:-Compulsory registration in certain cases

(1) 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) person who are required to pay tax under sub-section (5) of section 9;

(v) non-resident taxable persons making taxable supply;

(vi) persons who are required to deduct tax under section 51, whether or not separately registered under this Act;

(vii) persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise;

(viii) Input Service Distributor, whether or not separately registered under this Act;

(ix) persons who supply goods or services or both, other than supplies specified under sub-section (5) of section 9, through such electronic commerce operator who is required to collect tax at source under section 52;

(x) every electronic commerce operator 4 [who is required to collect tax at source under section 52];

(xi) every person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered person; and

(xii) such other person or class of persons as may be notified by the Government on the recommendations of the Council.

Analysis of Section 24 of CGST Act

Section 24 starts with a ‘non obstante’ clause which is limited to section 22(1) and NOT to ‘subject to’ section 23. This has surprised many professionals (discussed ‘why’ shortly).

Section 24 dictates that in the ‘twelve’ situations listed, even though ‘exemption threshold’ may still be available to the person, GST registration WILL BE applicable to such person. Registration is always under section 22 and once registration is obtained, then such person will forfeit the ‘exemption threshold’. Registration is ‘unqualified’ whether it is due to exceeding exemption threshold under section 22(1) or voluntarily registered under section 25(1) or compulsorily registered under section 24.

Once registered, all supplies will be subject to tax ‘as if’ generally liable to be registered. Person whose entire turnover is comprised of exempt turnover; such person may still be liable to be registered if any of the situations listed in section 24 are applicable.

Categories of persons who shall be required to be registered under this Act irrespective of the threshold limit:

The following categories of persons are required to obtain registration compulsorily under this Act:

  • Persons making any inter-State taxable supply;
  • Casual taxable persons making taxable supply;
  • Persons who are required to pay tax under reverse charge;
  • Persons who are required to pay tax under sub-section (5) of section 9 (electronic commerce operator)
  • Non-resident taxable persons making taxable supply;
  • Persons who are required to deduct tax under section 51 (Tax Deduction at Source);
  • Persons who supply goods or services or both on behalf of other registered taxable persons whether as an agent or otherwise;
  • input service distributor;
  • persons who supply goods and/or services, other than supplies specified under subsection (5) of section 9, through such electronic commerce operator who is required to collect tax at source under section 52,
  • Every electronic commerce operator who is required to collect tax at source under section 52;
  • every person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered taxable person; and
  • Such other person or class of persons as may be notified by the Central Government or a State Government on the recommendations of the Council.

It may be noted that vide Notification No. 10/2017–Integrated Tax, dated 13th October 2017, persons making inter-State supply of services and having turnover not exceeding Rs. 20 lakhs have been exempted (u/s. 23 as discussed in the above paragraphs) from obtaining registration.

Accordingly, only persons who make inter-State supply of goods have to compulsorily obtain registration irrespective of the aggregate turnover.

Please refer the variations in ‘exemption threshold’, ‘extended exemption threshold’ and ‘reduced exemption threshold’ to special category States (and its effect in non-special category States) including deviations from 1st Apr 2019.

The Government has issued notifications under section 23(2) to provide exemption from registration to certain category of persons who are mentioned in the aforementioned list. Details of such exemption are provided under sections 23(2) and implications of such exemption to those persons requiring compulsory registration is tabulated below:

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Category of PersonsExemption Granted
i) Persons making any inter-State
taxable supply
Inter State supplies of taxable services (Notification No. 10/2017–Integrated Tax, dated 13.10.2017 amended vide Notification No. 3/2019-Integrated Tax, dated 29-Jan 2019, w.e.f. 1-Feb-2019) and handicraft goods except when their turnover exceeds threshold limit (Notification No.3/2018– Integrated Tax, dated 22.10.2018 which superseded Notification No. 8/ 2017- Integrated Tax, dated 14.9.2017)
ii) Casual taxable persons making
taxable supply
Casual taxable persons making taxable supplies of handicraft goods if the aggregate turnover does not exceed Rs. 20 lakhs (Notification No. 56/2018-Central Tax, dated 23.10.2018 which superseded Notification No. 32/ 2017–Central Tax, dated 15.9.2017)
iii) Persons who are required to pay tax
under reverse charge
Note that ‘reverse charge’ is defined to include sections 9(3) and 9(4) in section 2(98). Person eligible to ‘exemption threshold’ under section 22(1) may forfeit benefit if even one payment made attracts RCM.
iv) Persons who are required to pay tax
under sub-section (5) of section 9
(electronic commerce operator)
Experts advise that Suppliers (in respect of whose turnover ECO would pay tax under 9(5)) would NOT be required to pay tax. And hence, they would NOT be required to be registered (if there were no other turnover liable to tax payment). Note also exclusion of such Suppliers under clause (ix).
v) Non-resident taxable persons making
taxable supply
vi) Persons who are required to deduct
tax under section 51 (Tax Deduction at Source)
Refer relaxation provided under RCM notification (entries 1 and 14 of Notification No. 13/2017-CT(R) dated 28 Jun 2017) who have ‘nil’ taxable supplies and are registered only to comply with section 51
and hence, section 24.
vii) Persons who supply goods or services or both on behalf of other registered taxable persons whether as an agent or otherwiseAlthough not expressly stated, ‘agents’ will become liable to compulsory registration only if their transactions attract schedule I.
viii) Input Service DistributorsRemember, ISD registration is voluntary option and its mention in section 24 only makes ‘facility’ of ISD available on the condition of obtaining registered.
ix) Persons who supply goods and/or services, other than supplies specified
under sub-section (5) of section 9, through such electronic commerce
operator who is required to collect tax at source under section 52
Supplier providing services through an ecommerce operator if the aggregate turnover does not exceed Rs. 20 Lakhs (Notification No. 65/2017–Central Tax, dated 15.11.2017 amended vide Notification No. 6/2019-Central Tax, dated 29-Jan-2019, w.e.f. 1-Feb-2019)
x) Every electronic commerce operator
who is required to collect tax at source under section 52
No ‘exemption threshold’ to ECO for own outward supplies if liable to TCS under 52.
xi) Every person supplying online information and database access or
retrieval services from a place outside India to a person in India, other than a
registered taxable person
Exempt from filing Annual Return and Reconciliation Statement prescribed in section 44(1) and 44(2).
xii) Such other person or class of persons as may be notified by the Central
Government or a State Government on the recommendations of the
Council
Not yet notified

Inter-State supplies

Exports are inter-State supplies under section 7 of IGST Act. Hence, persons NOT liable to payment of tax on their outward supplies on account of exports, would STILL be required to obtain GST registration and make all compliance.

Trade has objected to the seemingly unnecessary compliance burden on exporters, especially, freelance journalists working as international correspondents, IT professionals retained by foreign technology companies, international musicians, international insurance loss surveyors, visiting faculty to foreign universities, etc., who operate from home-office and their services are not location-dependent.

But the requirement to register allows opportunity for Government to examine the correctness of the claim to zero-rated exemption from tax on their turnover. All exporters, regardless of turnover limit, MUST obtain registration, file LUT, file returns, repatriate forex (not INR) and demonstrate correctness of their claim to zero-rated benefits.

Casual Taxable Person

Traders (especially Jewellers) registered in one State carry goods to another State and upon receipt of approval from the customers, sell the goods to such customers. The issue that arises for consideration is whether such jewellers are required to register as casual taxable persons in the State of the buyer.

In this context, Circular No.10/10/2017-GST, dated 18.10.2017 has been issued to clarify that in the given case, Supplier is not able to ascertain the actual supplies beforehand and ascertainment of tax liability is a mandatory requirement for registration as a casual taxable person and hence, he is not required to get registered as a casual taxable person. Refer detailed discussion on the concept and application of casual taxable person under section 27.

Agent

Section 24 clause (vii) provides that an agent who makes taxable supply of goods or services on behalf of other person, is compulsorily required to obtain registration independent of the aggregate turnover threshold limit provided under section 22.

The term “agent” here refers to the “agent” who supplies goods to the customers under his invoice on behalf of the principal (linked to Para 3 of Schedule I of the CGST Act which refers to deemed supply of goods by principal to agent where the agent undertakes to supply goods on behalf of the principal) and it does not cover within its ambit, all types of agents like those who act as intermediary.

This matter has also been clarified in the Circular No. 57/31/2018-GST dated September 4, 2018 and also Circular No. 73/47/2018-GST, dated November 5, 2018. Refer detailed discussion under section 2(13) of IGST Act and under schedule I regarding extent of this fictional treatment of ‘agency’ in GST.

Issues / Concerns

Section 23 v. Section 24:

Section 24 overrides sections 22(1) and accordingly persons enumerated under sections 24 are required to obtain compulsory registration irrespective of whether their turnover exceeds the threshold limit specified under sections 22(1).

However, section 24 does not specifically override sections 23. In case there is a conflict between sections 23 and sections 24, the issue is which provision will prevail. Consider a scenario where a hospital is providing health care services which are exempt from GST. The turnover of the hospital is Rs. 10 Crores. The hospital has imported certain services from outside India worth Rs. 5 Lakhs. The impact of sections 22, 23 and 24 are provided below:

ProvisionImpact
Section 22Not Liable to register since they are NOT providing any taxable supply and it is a pre-requisite u/s. 22(1) to take registration in that State from where a person makes TAXABLE SUPPLY of goods or services, provided aggregate turnover exceeds Rs. 20/10 lakhs.
Section 23Not required to register since they deal exclusively in exempt supplies
Section 24Mandates registration since liable to pay tax under reverse charge on import of services.

Further, since section 24 only overrides section 22(1) and not section 23, a logical view enumerates that registration is not required in the above case.

However, in the absence of any clarification on the issue by the department, there are possibilities of department litigating the matter but the same needs to be defended based on merits.

In this context, it would be interesting to note that section 23(2) of the CGST Act empowers the Government to issue notification exempting category of persons from obtaining registration. The Central Government has issued various notifications under the said provision to exempt persons who were otherwise required to register based on section 24.

Examples

1.State which of the following suppliers are liable to be registered:

(a) Agent supplying goods on behalf of some other taxable person and its aggregate turnover does not exceed Rs. 20 lakh during the financial year.

(b) An agriculturist who is only engaged in supply of produce out of cultivation of land.

Ans.

(a)Section 22 stipulates that every supplier becomes liable to registration in the State or UT if his aggregate turnover exceeds Rs. 20 lakh in a State/UT [Rs. 10 lakh in Special Category States, except J&K] in a financial year.

However, as per section 24, a person supplying goods/services or both on behalf of other taxable persons whether as an agent or not is liable to be compulsorily registered even if its aggregate turnover does not exceed Rs. 20 lakh during the financial year.

(b)As per section 23, an agriculturist who is only engaged in supply of produce out of cultivation of land is not required to obtain registration.

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