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2019

Rules related to Threshold Limit for GST Registration

Rules related to Threshold Limit for GST Registration

Due to continuous amendments in GST Act since it came in force in July 2017, there is lot of confusion regarding threshold limit for registration under the Act. A dealer can charge GST on the outward supply only if he is registered under GST. There are certain provisions under GST which makes it compulsory for the dealer to register under GST in certain cases. The most important criterion for registration under GST is threshold limit of the turnover. However, due to amendments in rules related to threshold limit, there has been lot of confusion. In this article we will zero-in on this matter.

Requirement of Registration under GST:

The provisions for requirement of registration under GST have been given under Section 22 of CGST Act, 2017, which is interpreted as follows:

  • Registration is required if the aggregate turnover in a financial year exceeds rupees twenty lakhs.
  • This threshold limit will be rupees ten lakhs if a taxable person conducts his business in any of the special category States as specified in sub-clause (g) of clause (4) of Article 279A of the Constitution.

Aggregate Turnover:

  • “Aggregate Turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-state supplies of persons having the same Permanent Account Number, to be computed on an all-India basis but excludes Central tax, State tax, Union territory tax, Integrated tax and cess.

Special Note:

  • Vide CGST (Amendment) Act, 2018 second proviso to section 22(1) has been inserted to provide that 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 10 lakh to such amount, not exceeding 20 lakh and subject to such conditions and limitations, as may be so notified.
  • Accordingly, threshold limit remains rupees twenty lakhs for the States of Jammu and Kashmir, Arunachal Pradesh, Assam, Himachal Pradesh, Meghalaya, Sikkim and Uttarakhand w.e.f. 1-Feb-2019 and rupees ten lakhs for the States of Manipur, Mizoram, Nagaland and Tripura.

Examples:

  • In the below table, cases have been provided to understand how aggregate turnover is calculated and what will be the requirement of registration in each of these cases:

Case 1:

State Turnover (in Rs.) Registration Requirement
Maharashtra 15,00,000 As the turnover of the entire entity exceeds 20,00,000 (15,00,000 + 7,00,000) registration will be required in both the States.
Tamil Nadu 7,00,000

Case 2:

State Turnover (in Rs.) Registration Requirement
Maharashtra 9,00,000 Since the entity has presence in special category state, the threshold limit is only Rs. 10,00,000. Since, the entity crosses such limit, registration will be required in both the states.
Manipur Tripura 2,00,000

  

Note: Please note that the proviso to section 22(1) appearing in CGST Act also appears in SGST Act(s). As a result, for a taxable person in a non-Special Category State, who has a branch in Special Category State, the threshold becomes 10 lacs and not 20 lacs.

Exemption from Registration:

The following notified persons may also be granted an exemption from registration. In this regard, the Government has exempted the following persons from obtaining registration:

  1. Persons engaged in rendering taxable services which are liable to GST under reverse charges are not required to take registration.
  2. Job-workers engaged in making inter-State supply of services to a registered person except those who are liable to be registered under section 22(1) of the CGST Act, 2017 or persons opting for voluntary registration or persons engaged in making supply of services in relation to jewellery, goldsmiths’ and silversmiths’ wares and other articles.
  3. Persons effecting inter-State supplies of taxable services – where the aggregate value of supplies on PAN-India basis does not exceed 20 Lakhs in a year (10 Lakhs for special category States- Manipur, Mizoram, Nagaland and Tripura).
  4. Categories of persons effecting inter-State taxable supplies of handicraft goods – where the aggregate value of supplies on PAN-India basis does not exceed 20 Lakhs in a year (10 Lakhs for special category States- Manipur, Mizoram, Nagaland and Tripura).
  5. Persons providing services through an e-commerce who is required to collect tax at source, provided their aggregate turnover does not exceed 20 lakh (10 lakh in special category States-Manipur, Mizoram, Nagaland and Tripura).
  6. Categories of casual taxable persons making taxable supplies of handicraft goods- where the aggregate value of supplies on PAN-India basis does not exceed 20 Lakhs in a year (10 Lakhs for special category States-Manipur, Mizoram, Nagaland and Tripura).


Increase in Threshold Limit in Certain Cases:

  • From 01.04.2019 the basic limit beyond which obtaining registration becomes mandatory is increased from 20 lakhs to 40 lakhs for certain categories of persons vide notification No. 10/2019-Central Tax, dated 07.03.2019.
  • As per the said notification, any person, who is engaged in exclusive supply of goods and whose aggregate turnover in the financial year does not exceed forty lakh rupees, except:

a. Persons required to take compulsory registration under section 24 of the said Act;
b. Persons engaged in making supplies of the following goods:

Sr. No. Tariff Item, Heading or Chapter Description
1 2105 00 000 Ice Cream and other edible ice, whether or not containing cocoa
2 2106 90 20 Pan Masala
3 24 All goods i.e. Tobacoo and manufactured tobacoo substitutes

c. Persons engaged in making intra-State supplies in the States of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, Puducherry, Sikkim, Telangana, Tripura, Uttarakhand; and

d. Persons exercising option under the provisions of sub-section (3) of section 25 [voluntary registration], or such registered persons who intend to continue with their registration under the said Act.

Note:

  • The new exemption from registration (w.e.f. 01.04.2019) up till 40 lakhs is applicable only for those taxable persons, who are engaged in exclusive supply of goods.
  • Therefore, in case a person in supplying goods but also earns a nominal amount of service income (whether taxable or not) such as commission income, or interest income say from bank (which is exempt), then he shall be liable to take registration above 20 lakhs and not 40 lakhs.

Conclusion:

By analyzing various provisions and relevant notifications under GST Act, we can conclude that:

Nature of Supply 

Threshold Limit
Exclusive intra state supply of goods 40 Lakhs
Exclusive supply of services on PAN-India basis 20 Lakhs
Exclusive supply of handicraft goods either by normal taxpayer or casual tax payer on PAN-India basis 20 Lakhs
Person providing services through an e-commerce 20 Lakhs
Job worker providing services on PAN-India bases 20 Lakhs

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