Here’s When You Needn’t Register Under GST Act
In any developing country, it is the prime responsibility of the Government to fulfill the increasing developmental needs of the country and its people by way of public expenditure. India, being a developing economy, has been striving to fulfill the obligations of a Welfare State with its limited resources; the primary source of revenue being the levy of taxes. The real purpose of collection of tax is to augment as much revenue as possible to the Government to provide public services, but over the years it has been used as an instrument of fiscal policy to stimulate economic growth. Thus, taxes are collected to fulfill the socio-economic objectives of the Government.
There are two ways in which the government fulfils its socio-economic needs, one is by Direct Tax revenue collection which is still continued to be as even after the introduction of GST and the other by indirect tax revenue collection. It is the indirect taxes which is now mostly been replaced by GST.
How to define indirect taxes : If the taxpayer is just a conduit and at every stage the tax incidence is passed on till it finally reaches the consumer, who really bears the brunt of it, such tax is indirect tax. An indirect tax is one that can be shifted by the taxpayer to someone else. Its incidence is borne by the consumers who ultimately consume the product or the service, while the immediate liability to pay the tax may fall upon another person such as a manufacturer or provider of service or seller of goods.
Why GST and why to register for GST : GST being a value added tax levy on manufacture, sale and consumption of goods and services, offers comprehensive and continuous chain of tax credits from the producer’s point/service provider’s point upto the retailer’s level/consumer’s level thereby taxing only the value added at each stage of supply chain. The registered supplier at each stage is permitted to avail credit of GST paid on the purchase of goods and/or services and can set off this credit against the GST payable on the supply of goods and services to be made by him. And finally only the consumer bears the GST charged by the last supplier in the supply chain, with set-off benefits at all the previous stages.
Since, only the value added at each stage is taxed under Goods and Service Tax (GST full form) , there is no tax on tax or cascading of taxes under GST system. GST is a conglomerate of Goods and services and it does not differentiate between goods and services and thus, the two are taxed at a single rate. So GST is an perfect referee to dismiss cascading effects in the taxation system which was spoiling the tax revenue collection game play of the government. And with seamless flow of credits every dealer or registered person in the chain gets a chance to set off the tax credits against his tax liability thereby making the Taxation gameplay a win- win situation for both government and taxpayers.
Who is not required to get registered under GST : The provisions under the GST Act says that the following persons are not liable to get registered under GST viz.,
a) any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act;
b) an agriculturist, to the extent of supply of produce out of cultivation of land.
c) The Government may, on the recommendations of the Council, by notification, specify the category of persons who may be exempted from obtaining registration under this Act.
[*Central Government vide Notification No. 05/2017-Central Tax, Dt. 19-06-2017 has w.e.f 22nd June 2017 amended the corresponding section of CGST Act, 2017 to include the persons who are only engaged in making supplies of taxable goods or services or both, the total tax on which is liable to be paid on reverse charge basis by the recipient of such goods or services or both under the respective section of the CGST Act, 2017 in the category of persons exempted from obtaining gst registration under the aforesaid Act.]
Finer Point Study : The main criterion to remain out of the purview of registration is to exclusively engage in the supply of exempted goods or services or both. The term exclusive indicates engaging in only those supplies which are exempted. If a supplier is supplying both exempt and non exempted goods and/or services, then this provision is not applicable and he is required to take registration under the Act.
An agriculturist means an individual or HUF who undertakes cultivation of land: (a) By own labour or (b) By the labour of family, or (c) By servants on wages payable in cash or kind or by hired labour under personal supervision of any member of the family. Thus, an agriculturist is not liable for registration only to the extent of supply of produce out of cultivation of land. If an agriculturist undertakes supplies which are not linked to the cultivation of land, then he may have to take registration in respect of such supplies. It is important to consider the nature of activities undertaken by the agriculturist. If the process deviates from ‘cultivation’ it will travel outside the scope of this exclusion from registration. The exclusion states – to the extent of supply of ‘produce out of cultivation’ of land – any further processing of the primary produce from cultivation will continue topple not avail this exclusion. Cultivation of land does not include pisciculture on inland water body or cattle rearing that graze the produce of land. The produce that emerge from land for it is be ‘cultivation of land’. For example, harvesting paddy is cultivation but production of rice is not. Please note that the exclusion from the requirement to be registered does not result in non collection of tax on agricultural produce. Where the supplier is not registered (for any reason) and the recipient is registered, then tax is payable by such registered recipient as per relevant provisions under the Act.
Further, this section (Prevalent to registration) also permits any person whose ‘entire’ supply consists of ‘exempt supplies’, then such person is excluded from obtaining registration. However, care should be taken to validate the premises about (a) entire supply (b) exempt supply. Even if small value of supplies is taxable, then even exempt supplies will be included to determine if aggregate turnover has exceeded the threshold limit under section 22 for attracting registration. Also, if inward supplies liable to reverse charge under CGST Act is attracted, then notwithstanding the exclusion under section 23, registration will need to be obtained compulsorily under section 24, If a person remains outside the requirements of registration due to this section, he would not be liable to pay tax under relevant section of CGST Act as it does not apply to an unregistered-recipient. Any other persons, as may be notified, may also be granted this exclusion from registration by the Government. In this regard, the Government has excluded certain persons under this provision.
[*Central Government vide Notification No. 65/2017-Central Tax, Dt: 15-11-2017 w.e.f 15th November 2017 has amended section 23(2), of CGST Act, 2017. the Central Government, on the recommendations of the Council, hereby specifies the persons making supplies of services, other than supplies specified under subsection (5) of section 9 of the said Act through an electronic commerce operator who is required to collect tax at source under section 52 of the said Act, and having an aggregate turnover, to be computed on all India basis, not exceeding an amount of twenty lakh rupees in a financial year, as the category of persons exempted from obtaining registration under the said Act, Provided that the aggregate value of such supplies, to be computed on all India basis, should not exceed an amount of ten lakh rupees in case of “special category States” as specified in the Constitution, other than the State of Jammu and Kashmir.]
GST is a win-win situation for the entire country. It brings benefits to all the stakeholders of industry, Government and the consumer. It will lower the cost of goods and services, give a boost to the economy and make the products and services globally competitive. To me it’s a marathon race for cause of humanity and well being at large in a country like India where rich gets undue benefits and poor get more poorer. And in order to participate in this marathon one must get his entry registered by way of obtaining a GSTIN number. And from where one should get his entry registered its by accessing the GSTN portal one can get himself registered for GST.