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 the GST Act. The ruling concluded that PATRATOR must register for GST under Section 24(vii) as it was deemed to supply goods and services on behalf of the franchisor. Additionally, as PATRATOR engaged in taxable supplies according to the agreement terms, it was obligated to pay GST on its supplies under the GST Act.

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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.

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