2020 (9) TMI 687 - AAR - GST

Franchisee's GST Registration Obligation Upheld Under Section 24(vii)

The case involved determining whether PATRATOR, a partnership firm acting as a franchisee, was required to obtain GSTIN registration and pay taxes under ... Requirement to take GSTIN - Agents - Requirement to take registration under GST - Supply of goods or services on behalf of other taxable person - Section 22 of CGST Act, 2017 - Section 24 of CGST Act, 2017 - HELD THAT:- The applicant is required to fulfill the requirements of infrastructure and manpower before commencement of operations of the Centre as per the instructions of the Company and will continue to possess it during the whole tenure and it’s renewal of this contract; the applicant shall permit the representatives of the Company to conduct spot checks in order to ensure that the applicant is functioning in compliance to the Company’s instructions rules & regulations and as per the directions of the Company; shall not use any other course material other than those supplied by the company; the applicant undertakes to conduct only the Company’s courses and utilize only the materials provided by the Company at its course center and shall not conduct any unauthorized or similar type of course that Company [Xplore Knowledge Resources LLP] has; the applicant also undertakes not to conduct, run and engage in any other courses or activities else than licensed in this agreement, that the company possess and franchisees; the applicant shall only use the application forms, receipt books, fees lists etc. supplied by the Company and shall not attempt to print its own material. All the payments from the students are collected in name of the applicant on receipts printed by the Company. The applicant also collects Student Registration fee from every student on behalf of the Company and remits the same to the Company. Thus, the applicant is only authorized to supply the goods and service under the brand name of “ALOHA” and cannot supply the other goods and service. Hence applicant is supplying the goods and service on behalf of the taxable person i.e. Xplore Knowledge Resources LLP - applicant covers under the Sr. No. (vii) of the Section 24 of CGST Act, 2017. Therefore, applicant is liable for taking GST registration. Since applicant is liable for GST registration, he is required to pay GST on supply of goods and services. Issues Involved:1. Whether PATRATOR is required to take GSTIN.2. Whether PATRATOR is required to pay tax under GST Act.Issue-Wise Detailed Analysis:1. Requirement for GSTIN Registration:The applicant, PATRATOR, a partnership firm and franchisee of EXPLORE KNOWLEDGE RESOURCES LLP, sought an advance ruling on whether it is required to take GSTIN. The applicant operates under the brand name 'ALOHA,' selling products and services without exceeding the annual threshold of Rs. 20 lacs, which typically exempts them from mandatory registration under Section 22 of the CGST Act, 2017.Section 22 Analysis:Section 22(1) of the CGST Act mandates registration for suppliers whose aggregate turnover exceeds Rs. 20 lacs. The applicant's turnover does not exceed this threshold, suggesting no requirement for registration under this section.Section 24 Analysis:Section 24 lists categories of persons who must register for GST regardless of turnover. Notably, Section 24(vii) includes persons supplying goods or services on behalf of other taxable persons. The agreement between PATRATOR and EXPLORE KNOWLEDGE RESOURCES LLP specifies that PATRATOR must use materials supplied by the franchisor, collect fees on behalf of the franchisor, and adhere to strict operational guidelines set by the franchisor.Conclusion on GSTIN Requirement:Given the contractual obligations and operational control by the franchisor, PATRATOR is deemed to supply goods and services on behalf of EXPLORE KNOWLEDGE RESOURCES LLP. Therefore, under Section 24(vii), PATRATOR must register for GST.2. Requirement to Pay Tax under GST Act:Since PATRATOR is required to register for GST, the next question is whether it must pay GST on its supplies.Legal Provisions and Agreement Terms:The agreement details that PATRATOR collects fees from students, remits registration fees to the franchisor, and uses only franchisor-approved materials. These activities constitute taxable supplies under GST law.Conclusion on Tax Payment:As PATRATOR is liable for GST registration, it must also comply with the tax payment obligations under the GST Act. Therefore, PATRATOR is required to pay GST on its supplies.RULING:1. Is PATRATOR required to take GSTINRs.- Answer: Yes, in terms of Sr. No. (vii) of Section 24 of CGST Act, 2017.2. Is PATRATOR required to pay tax under GST ActRs.- Answer: Yes.