2019 (6) TMI 1063 - AAR - GST

Registration Mandate for Reverse Charge Taxpayers under CGST Act

The Authority for Advance Ruling held that M/s. Jalaram Feeds must register under Section 24 of the CGST Act, 2017, despite dealing in exempt goods, due ... Compulsory registration where recipient is liable to pay tax under reverse charge - persons not liable to registration engaged exclusively in exempt supplies - taxable supply and aggregate turnover threshold - Goods Transport Agency services notified for reverse charge - notwithstanding clause and overriding effect - harmonious construction to avoid redundancy of statutory provisionsPersons not liable to registration engaged exclusively in exempt supplies - compulsory registration where recipient is liable to pay tax under reverse charge - Goods Transport Agency services notified for reverse charge - taxable supply and aggregate turnover threshold - notwithstanding clause and overriding effect - Applicant liable to obtain registration despite dealing exclusively in exempt supplies because it is required to pay tax under reverse charge. - HELD THAT: - Section 23 exempts persons engaged exclusively in supplying goods or services that are not liable to tax or wholly exempt. Section 24 mandates compulsory registration for specified categories, including persons required to pay tax under reverse charge, and begins with a 'notwithstanding' clause in relation to sub section (1) of section 22 (the turnover threshold). By notification, services of a Goods Transport Agency (GTA) have been specified as subject to reverse charge where the recipient falls within the notified classes; the recipient is therefore liable to pay tax under reverse charge and, by virtue of sections 9 and 24 read together, must be registered so that the provisions of the Act apply to the recipient as the person liable to pay tax. Harmonious construction of the Act requires giving effect to both sections 23 and 24; where a person otherwise exempt under section 23 becomes liable to pay tax under reverse charge (by operation of notification and section 9), that person falls within the compulsory registration category of section 24 notwithstanding the turnover threshold in section 22(1). The Authority therefore concluded that the applicant, being a recipient required to pay tax under reverse charge for GTA services, must obtain registration to discharge its reverse charge liability. [Paras 5, 6]Applicant is liable to take registration under section 24 of the GST Act, 2017.Final Conclusion: The Advance Ruling holds that a person exclusively supplying exempt goods nevertheless must obtain registration where, as recipient, it is obliged to pay tax under the reverse charge mechanism (notably for notified GTA services), and such obligation triggers compulsory registration under section 24 notwithstanding the turnover threshold in section 22. Issues Involved:1. Whether the firm is liable to take registration under section 24 or is exempted from registration under section 23 of the CGST Act, 2017.Issue-wise Detailed Analysis:1. Applicability of Section 23 (Exemption from Registration):The applicant, M/s. Jalaram Feeds, contended that since they are exclusively engaged in the supply of exempted goods (Compound Animal Feed, HSN Code: 2309), they fall under Section 23 of the CGST Act, 2017, which exempts them from registration. Section 23(1)(a) states that any person engaged exclusively in the supply of goods or services that are wholly exempt from tax is not liable for registration. The applicant argued that Section 23 is a standalone and specific provision that is not overridden by Section 24.2. Interpretation of Section 24 (Compulsory Registration):Section 24 mandates compulsory registration for certain categories of persons, including those required to pay tax under reverse charge. The applicant argued that Section 24 overrides only Section 22 (which pertains to the threshold limit for registration) and not Section 23. They maintained that if Section 24 overruled Section 23, it would render Section 23 meaningless, as most businesses dealing in exempt goods would require registration due to reverse charge liabilities.3. Government's Notification and Reverse Charge Mechanism:The concerned officer highlighted that according to Notification No. 13/2017-Central Tax (Rate), services like Goods Transport Agency (GTA) are liable to tax under reverse charge. As per Section 24(iii), persons required to pay tax under reverse charge must register under GST, irrespective of their turnover or the nature of their supply (exempt or taxable).4. Judicial Precedents and Interpretation of Law:The judgment referenced other rulings, such as Sonka Publications (India) (P) Ltd. and Joint Plant Committee, where it was held that persons dealing only in exempted products are not required to be registered under GST for reverse charge. However, the concerned officer argued that these precedents did not align with the current case, as the applicant's situation involved specific reverse charge liabilities.5. Harmonious Construction and Legislative Intent:The judgment emphasized that the law should be interpreted to give effect to all provisions harmoniously. Section 24 should not be rendered redundant by interpreting it in a way that excludes its applicability to persons covered under Section 23. The principle of harmonious construction dictates that both sections should be given effect, ensuring that persons liable for reverse charge must register, even if they deal in exempt supplies.Conclusion:The Authority for Advance Ruling concluded that M/s. Jalaram Feeds is required to take registration under Section 24 of the CGST Act, 2017. The firm’s liability to pay tax under reverse charge necessitates registration, notwithstanding the provisions of Section 23. The judgment clarified that the intention of the legislature was to ensure that all persons liable to pay tax under reverse charge must be registered to comply with GST regulations.Order:The firm is liable to take registration under Section 24 of the CGST Act, 2017, due to their obligation to pay tax under reverse charge, despite their involvement in the supply of exempt goods.