Compulsory GST registration for the person making inter-state taxable supplies
Introduction:
The conditions for GST registration in case of supply of goods or services or both by any person are prescribed under section 22 of the CGST Act subject to threshold turnover limit. However, section 24 of the CGST Act, 2017 stipulates certain cases where GST registration is mandatory without taking into consideration the threshold limit. One such case is "Inter-State supply of Goods or Services". This article deals with the issue of GST registration in the case of inter-state supply of goods or services or both. Lets' start...
In accordance with clause (i) to section 24 of the CGST Act, persons making inter-state supplies of taxable goods or services or both shall be required to compulsorily obtain GST registration without taking into consideration the threshold turnover limit prescribed under GST law.
Following points are important to note in this regard:
- There should be a supply of goods or services or both
- Such supply of goods or services should be taxable. Since, the words used are ‘taxable inter-state supply’, therefore the supply made inter-state must be a taxable supply to attract provisions of compulsory registration.
- Such supply should be inter-state in terms of the IGST Act, 2017.
Note: The requirement of mandatory GST registration arises in the case of inter-state taxable supplies of goods or services. However, if a person makes inter-state purchase of goods or services, the above provision is not applicable. Thus, a person who procures goods or services from other state is not liable to take GST registration and is eligible to avail the benefit of threshold turnover limit prescribed under the law.
Exemptions from registration in case of inter-state taxable supplies
As discussed above, GST registration is mandatory in case of the inter-state supply of taxable goods or services without any threshold limit. However, there are certain exceptions to this rule as below:
Exemption from registration for inter-state supplies of services:
Vide notification no. 10/2017- integrated tax dated 13.10.2017 further amended vide notification no. 3/2019- integrated tax dated 29.01.2019, if a person makes inter-state supplies of taxable services and is having an aggregate turnover to be computed on all India basis, not exceeding an amount of INR 20 Lakhs/ 10 Lakhs (special category states/UT) shall be exempted from the requirement of obtaining registration.
This exemption will be beneficial for small service providers who are making inter-state supplies of small amount along with intra-state supplies.
Case study: Mr X a chartered accountant is based in Jaipur and having an annual turnover from consultancy services of INR 16 lakhs from clients based in Rajasthan. He obtains a consultancy assignment from a client based in Mumbai for INR 2 Lakhs.
In this example, the total annual turnover from rendering of services of Mr. X will be Rs. 18 Lakhs (below 20 Lakhs). Therefore, he will not be required to obtain GST registration even though he is providing inter-state services for INR 2 Lakhs.
Case Study: Mr X is a dealer of tea based in Jaipur and having an annual turnover from trading of tea within the state of Rajasthan of INR 16 Lakhs. He also supplies tea for INR 2 Lakhs in Mumbai (Maharashtra). Will he be required to obtain GST registration?
Answer: The exemption from GST registration is available only in the case of inter-state supply of services or handicraft goods (discussed later). The same exemption does not apply in this case. Therefore, Mr. X will be mandatorily required to obtain GST registration notwithstanding the fact that his annual aggregate turnover is below INR 20 Lakhs.
Exemption from registration for inter-state taxable supplies of handicraft goods
Vide Notification No. 03/2018- integrated tax dated 22.10.2018, if a person makes inter-state taxable supply of handicraft goods having an aggregate value of such supplies, to be computed on all India basis, not exceeding the amount of aggregate turnover above which a supplier is liable to be registered in the state or union territory as per section 22(1), shall not be required to obtain GST registration.
Please note that the turnover threshold as prescribed under section 22(1) is INR 20 lakhs/ 10 Lakhs. This implies that a supplier of handicraft goods making inter-state supply of handicraft goods is not liable to register under GST up to aggregate turnover of INR 20/10 Lakhs. Enhanced turnover threshold of INR 40 Lakhs for exclusive supplier of goods is not prescribed u/s 22(1) but under section 23(2). Thus, turnover threshold of INR 40 Lakhs does not apply for ascertaining the applicability of above exemption in the case of supply of handicraft goods.
Note: The aforesaid notification further provides that such person making inter-state taxable supplies shall be required to obtain a Permanent Account Number and generate an e-way bill in accordance with the provisions of rule 138 of the CGST Rules.
“Handicraft Goods” are those goods which are made by the craftsmen predominantly by hand even though some machinery may also be used in the process. The list of “Handicraft Goods” is given in the said notification itself.
Exemption from registration for job worker making inter-state supply of services
Vide Notification No. 07/2017- integrated tax dated 14.09.2017 as amended vide Notification No. 2/2019- integrated tax dated 29.01.2019, job-workers providing inter-state supply of services to a registered person shall not be required to obtain GST registration subject to the following conditions:
- Exemption from registration shall not be available where the job-worker is liable to be registered under section 22(1) or
- Job-worker opts voluntarily for GST registration or
- Job-worker is involved in making supply of services in relation to goods mentioned in serial no. 5 in the Annexure to the Rule 138 of the CGST Rules i.e. Jewellery, goldsmith’s and silversmith’s wares and other articles (Chapter 71) excepting imitation jewellery (7117).
Disclaimer: The above article is meant only for educational purposes. Taxwink is not responsible for any loss or damage caused to any person on the basis of use of the above information. Readers are requested to consult a professional before placing any reliance on the above article.
