GST Registration

[Ethirajan Parthasarathy]

As per sec.24 of CGST Act, persons who are required to pay tax under reverse charge are liable for compulsory registration under GST. But Sec.23 provides that registration requirement is not applicable any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act.

In the light of the above, I request the Experts to clarify whether a NGO registered u/s 12AA of the income tax Act, which is engaged in recognized charitable organization is liable to take registration when it makes any payment to an advocate which attracts GST under RCM.

[Amit Agrawal]

If concerned NGO is a business entity (i.e. “business entity” means any person carrying out 'business as defined u/s 2 (17)'), having aggregate turnover in a previous year exceeding the limit prescribed (as applicable) for taking registration under Section 22, then such NGO needs to be compulsorily registered under GST for paying GST under RCM against legal services received from an advocate.

For above proposition, it does not matter that said NGO is exclusively in the business of supplying goods or services or both which are not liable to tax or wholly exempt from tax under this Act.

P.S. Issue raised in the query is expectedly to be highly controversial & hugely debatable. And ultimately, higher court/s will settled the matter as one way or other.

These are strictly personal views of mine and the same should not be construed as professional advice / suggestion.

[KASTURI SETHI]

In this scenario, registration is compulsory. See the definition of 'charitable activities' under Serial No.2 (r) of 'Definitions' in Notification No.12/17-CT(R) dated 28.6.2017 as amended.The benefit of being registered under Section 12 AA of the Income Tax Act is not available to NGO inasmuch as Legal services are NOT included therein i.e. Charitable Activities.

 

[Amit Agrawal]

Dear Shri Kasturi Sethi Ji & my other professional colleagues,

Even though I have explained my views in earlier post above, I wish to have this discussion taken further to expand & refine my thought process and let us have alternate views / possibilities.

For this discussion and as can be seen from my earlier post, I am taking the scenario where said NGO is exclusively in the business of supplying goods or services or both which are not liable to tax or wholly exempt from tax under this Act and having aggregate turnover in a previous year exceeding the limit prescribed (as applicable) for taking registration under Section 22.

In other words, said NGO is not required to take registration as per Section 23.

Even though there are many facets to the issue raised by the querist, I think that controversy is "mainly" centered around whether said NGO is EXEMPTED from paying GST under RCM under serial number 45 (b) (iii) of Notification No. 12/2017- Central Tax (Rate) as amended till date, against legal services received from advocate OR NOT.

If said NGO is indeed exempted, then, compulsory registration under Section 24 will not come into picture at all.

Real question is the interpretation of the words 'a business entity with an aggregate turnover up to 62[such amount in the preceding financial year asmakes it eligible for exemption from registration under the Central Goods and Services Tax Act, 2017 (12 of 2017)]' used in above-said exemption entry serial number 45 (b) (iii).

In nutshell, real question - to my mind - is whether this exemption entry is dealing with non-requirement of registration as per Section 22 only (where reference to turnover/s are made) or it also covers non-requirement of registration as per Section 23 as well (where one is not required to take registration under GST in specified situations even when turnover exceeds limits set in section 22).

From my earlier post, you know my views about this. Kindly now let me know your views please.

[Shilpi Jain]

First aspect is also to see if the NGO can be called a business entity in the first place. if not, no RCM liability and no registration requirement.

Otherwise it is a chicken - egg story and a provision with lot of ambiguities as pointed out by Amitji and is sure to invoke dispute from department if not paid.

[KASTURI SETHI]

Most of NGOs earn profit (may be nominal). Hence it is commercial activity. RCM is applicable. Registration is a must.

[Amit Agrawal]

From the query, it appears that said NGO is engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax. if so, it is safe to assume that it is a business entity.

AI Summary

Reverse charge liability for legal services may compel NGO GST registration depending on exemption scope under the notification. Whether an NGO must obtain GST registration when liable to pay tax under the reverse charge mechanism depends on whether it is a 'business entity' and on interpretation of Notification No.12/2017 CT(R) serial 45(b)(iii). If the NGO's activities and turnover bring it within Section 22 thresholds or if the notification exemption does not extend to Section 23 situations, registration under Section 24 and RCM liability on legal services will apply; if the exemption covers the NGO, compulsory registration may not be triggered.