At the outset, I would like to put forth before the readers of this series of “GSTUpdates” that these updates would be covering subject matters under the Draft GST Law. These updates would be covering the matter at length and effort would be made to cover the subject in as much detail as possible. If the subject would require detailed analysis, then the updates would be divided into two-three short but comprehensive updates.
In this update, I have taken the simplest of examples for registration requirements under draft GST Law, of a person who is only making local or within State supplies of Goods and/or Services. The conditions regarding person making Inter-State Supplies of goods and/or services is different and as we would go forward we would be taking other categories of persons and other complicated situations as well.
- Aggregate Turnover: Section 2(6) of Draft GST Law defines “aggregate turnover” as follows:
“aggregate turnover” means the aggregate value of all taxable and non-taxable supplies, exempt supplies and exports of goods and/or services of a person having the same PAN, to be computed on all India basis and excludes taxes, if any, charged under the CGST Act, SGST Act and the IGST Act, as the case may be;
The definition can be better understood as follows:
- What are the values which have to be aggregated: Aggregate value of all taxable and non-taxable supplies, exempt supplies and exports of goods and/or services,
- Whether aggregation of all the entities of a person under a common PAN has to be made: Yes
- Whether the aggregation has to be made state-wise or on an All India Basis: All India basis.
- Definition of turnover would exclude taxes if any charged under CGST Act, SGST Act and IGST Act.
Thus, aggregate turnover can be summarized as All India Turnover of a person and would consist of aggregate value of all taxable and non-taxable supplies, exempt supplies and exports of goods and/or services falling under common PAN.
- Schedule III of the Draft GST law: This schedule mandates condition for registration under GST. The heading of the Schedule provides “Liability to be registered”.
- Schedule III provides that if a person is only making exempted supply of Goods and/or Services, then he would not be required to be registered under GST.
- Para 1 of Schedule III provides that in case of states (other than NE States), supplier shall be required to be registered as follows:
“Every supplier shall be liable to be registered under this Act in the State from where he makes a taxable supply of goods and/or services if his aggregate turnover in a financial year exceeds Rs nine lakh:”
“Aggregate turnover” referred to in the above condition would take its meaning from provision of section 2(6) of the Draft GST Law as discussed above which defines the word “aggregate turnover”. Thus, if the aggregate turnover of the supplier consisting of all taxable and non-taxable supplies, exempt supplies and exports of goods and/or services computed on an All India basis and under same PAN exceeds Rs 9 Lakh in a financial Year (for states other than NE states), then the supplier would be required to be registered under GST.
The most important thing to be considered is a person whether he is a manufacturer, trader or service provider, he would be required to take registration if his aggregate turnover in India under same PAN exceeds Rs 9 Lakh.
- Examples for registration requirements of a person who is only making local or within State supplies of Goods and/or Services
- A person is having only one office which is situated in Rajasthan and he is supplying goods and/or services within the State of Rajasthan only. He would be liable to take registration if his turnover exceeds Rs 9 Lakh.
- A person has two branches in Rajasthan and Delhi. Both the Branches are only making local supplies in Rajasthan and Delhi respectively and none of them are making any Inter State Taxable Supplies. Then they would be liable to take registration if aggregate turnover of both the branches exceeds Rs 9 Lakh.
- Relevant extract of the Business Process report on registration released in the month of October 2015:-
This extract is being reproduced from the Business Process Report on Registration in GST just to highlight that why aggregate turnover of a person under common PAN and on an All India basis is being considered for the purpose of threshold limit. Annexure- 8 to the report provided that
“It was felt that the threshold, both for SGST and CGST should be common except for North-eastern States where the threshold could be prescribed at lower level.”
The threshold for SGST and CGST was suggested to be calculated on an All India Basis and not state-wise. There was one very interesting discussion provided in the Annexure-8 to the report of the joint committee which stated as follows:
“While the State representatives felt that turnover should be State-wise of a legal entity, the representatives of Government of India strongly felt that it should be All India turnover of a legal entity, otherwise it may lead to tax evasion. It was pointed out by the Centre‟s representatives that if the turnover of an entity is considered State-wise, the threshold for CGST would increase steeply when calculating the turnover of the entity on an All India basis. This would adversely affect the revenue of the Centre. What would happen is that an entity will open office in States and Union Territories (which are 37 in number) for availing of State-wise threshold for SGST purposes. In such a scenario, the threshold for CGST purposes would work out to Rs. 9.25 Crores (Rs. 25 Lacs * 37). Similar impact would be there for the compounding scheme as well as for the issue relating to dual control. The suggestion of the Central Board of Excise and Customs (CBEC) that legal entity on all India basis should be taken was considered by the Committee and after due deliberations the suggestion was agreed to avoid tax evasion by the manufacturers/traders/dealers.”
The report provided in Para 2.2 that
“For each State the taxable person will have to take a separate registration, even though the taxable person may be supplying goods or services or both from more than one State as a single legal entity.”
In the next update, I would be taking example of person having office in single state or offices in multiple states and making both Intra State and Inter State Supplies.
By CA Dr Arpit Haldia