GST Threshold Exemption

[Kaustubh Karandikar]

XYZ (franchise) selling products under brand of PQR (Franchisor). PQR not taking any royalty from franchise. XYZ not allowed to sell product other than of PQR. E.g., MRP of product ‘X’ is ₹.100/-, ‘Franchisor’ charging XYZ ₹.90 + ₹.2 GST= ₹.92 by issuing a tax invoice. XYZ making payment to franchisor against this. XYZ re - selling product to customer at MRP of ₹.100/- thereby getting a profit of ₹.8 (100 – 92). Can XYZ claim exemption up to ₹ 20 Lacs or need to pay GST from day one?

AI Summary

Franchise XYZ must register and pay GST from the start due to Section 24(vii) of the CGST Act. XYZ, a franchise selling products under the PQR brand, queries whether they can claim a GST exemption up to 20 lakhs or must pay GST from the start. XYZ purchases products from PQR at 92, including GST, and resells them at 100, earning an 8 profit. The responses indicate that XYZ is not eligible for the threshold exemption due to compulsory registration requirements under Section 24 (vii) of the CGST Act, emphasizing the term 'or otherwise.' Both respondents agree that XYZ must register and pay GST from the beginning.