GST applicability

[Ethirajan Parthasarathy]

A service provider whose annual turnover does not exceed ₹ 15,00,000/- gets himself registered under GST in view of GST liability under RCM on one time payment of fee to a Advocate.

Once he becomes a registered person under GST Law, I feel he is liable for tax on out word supplies even though the turnover does not exceeds ₹ 20,00,000/-

[KASTURI SETHI]

Sh.Ethirajan Parthasarathy Ji,

Your view is correct. Once registered voluntarily or by virtue of working under RCM, tax must be paid and legal formalities are to be complied with. . The issue is crystal clear under Section 25(3) of CGST Act read with FAQs dated 26.6.17 (Serial No.18 refers).

[ABHISHEK TRIPATHI]

"a business entity with an aggregate turnover up to such amount in the preceding financial year as makes it eligible for exemption from registration under the Central Goods and Services Tax Act, 2017 (12 of 2017)"

So according to the notification, if you're not registered/required to register in the preceding FY then such business entity is exempted.

Two possibilities:

1. They business entity was registered in the preceding FY and this year they canceled the registration and thereafter again registered just to discharge RCM. [Very unlikely]

2. The business entity was not registered/required to register in the preceding FY and register itself in this FY just to discharge RCM (if this is the situation, then they are registered under mistake). If this is the situation, then in my view, approach Hon'ble HC and give a shot. Imagine unnecessarily the business entity will discharge GST liability now.

[ABHISHEK TRIPATHI]

*Correction:

Notification means - Entry 45 to the NN. 12/2017

[Ganeshan Kalyani]

I agree with the views of Sri Kasturi Sir. Once the registration is obtained either by way of threshold limit or because of RCM, the tax payer has to start collecting GST on taxable outward supplies and pay GST to the Govt.

[Ganeshan Kalyani]

In my view, with the online system the compliance have become simple in the sense that physical submission of return with the department is not required, manually preparing the return is also done away with. Many of the taxpayers are filing the return by themself without reaching out to their tax consultant.

[Krishna Murthy]

The service provider should not have obtained registration just because he was liable to pay RCM in terms of NN 12/2017 CTR entry 45. However, since he has obtained registration voluntarily he has to comply with the provisions of GST law and pay taxes even for turnover below threshold limits.

[KASTURI SETHI]

Sh. Krishna Murthy Ji,

Sir, Do you want to say that the service provider in question has not availed exemption for which that person was eligible (as pointed out by you) ? Pl. confirm.

[Ganeshan Kalyani]

Sir, if the inward supply falls under RCM then it becomes compulsory for a person to get himself registered under GST and pay tax.

AI Summary

GST registration obligation: voluntary or reverse-charge registration obliges a person to levy and remit GST on outward supplies. Once a person is registered under GST-whether voluntarily or because of a reverse charge obligation-the person must comply with GST law and account for tax on taxable outward supplies; if registration was obtained solely to discharge reverse charge and the person was otherwise exempt in the preceding year, the registration may be contestable to avoid unnecessary ongoing tax collection and compliance.