Liability to take Registration

[Pradeep Singhi]

Individual not registered under GST (unregistered person) providing service of renting of immovable property (commercial) to registered person and having interest income (from unsecured loan).

Aggregate Turnover from aforesaid services cross threshold limit of Rs.20 Lakh. Query with regards to aforesaid situation are as mentioned below.

1. Whether that unregistered person is required to take registration under GST as per S.22 of CGST Act ?

2. Whether that unregistered person can take benefit of S.23(2) of CGST Act read with Notification no. 5/2017-CT dated 19.06.2017 and Entry no. 5AB inserted in Not. No. 13/2017- CT(Rate) ?

3. Will answer to point no. 2 differ. if interest income is 'Zero' and rent income cross threshold limit of Rs. 20 Lakh ?

[KASTURI SETHI]

Are you talking of 5 AA or 5 AB in Notification No.13/17-CT (R) ?  It should be 5 AA.

[VENU K]

Authority for Advance Ruling (AAR), Gujarat in Re: Shree Sawai Manoharlal Rathi (2020) 6 TMI 449; 

The Applicant is required to aggregate the value of exempted interest income earned by way of extending deposits in PPF & bank saving accounts and loans and advances given to his family/friends along with the value of the taxable supply i.e. ‘renting of immovable property’ for the purpose of calculating the threshold limit of Rs. 20.00 lakh for obtaining registration under GST law. The questions are answered in affirmation and against the applicant.

A similar view was taken by AAR, Karnataka in Re: Anil Kumar Agarwal (2020) 5 TMI 221 (AAR, Karnataka). It can therefore, be concluded on the basis of Advance Ruling that interest, irrespective of nature is part of aggregate turnover and therefore, to be considered for the purpose of registration.

Both these AARs didn't accept the argument that personal investments were not in course or furtherance of business and as such were not part of supply. This  surely is a debatable question.

[Pradeep Singhi]

Thank you experts for recognizing the query and replies.

Renting of commercial property by unregistered person to registered person is under RCM vide insertion of new entry no.5AB in notification no. 13/2017- CT(Rate).

Now as per Notification no. 5/2017-CT dated 19.06.2017 persons who are only engaged in supply of service, tax on which is under RCM, than that person are exempted from obtaining registration. 

So my questions are in context to whether i am able to take benefit of above exemption even if my turnover is above Rs. 20 Lakh or i need to take registration on crossing threshold limit.

[VENU K]

There are subtle differences between RCM under Sec 9(3) and Sec 9(4)

Sec 9(3) exempts category of supply of goods or services where RCM is applicable. Here the entire supply is liable for RCM regardless of who the supplier is. So the recipient is liable to pay tax. Notification 5/2017 exempts only such suppliers from registration because the entire tax would be paid by the recipient and thus there is no need to compel the supplier to take registration if his entire supply belongs to such category.

Sec 9(4) notifies a class of registered persons who shall in respect of supply of specified categories of goods or services or both received from unregistered supplier liable to pay tax on RCM. Notification 5/2017 is not applicable to such suppliers and they are liable to get registered once they cross threshold. If notification 5/2017 is made applicable to this category it will make Sec 22  otiose.

[Shilpi Jain]

1. Whether that unregistered person is required to take registration under GST as per S.22 of CGST Act ?

YES

2. Whether that unregistered person can take benefit of S.23(2) of CGST Act read with Notification no. 5/2017-CT dated 19.06.2017 and Entry no. 5AB inserted in Not. No. 13/2017- CT(Rate) ?

NO. SINCE THE CONDITION IN THE RCM NOTIFICATION IS THAT ONCE THRESHOLD IS CROSSED, REGISTRATION HAS TO BE TAKEN BY SUPPLIER

3. Will answer to point no. 2 differ. if interest income is "Zero" and rent income cross threshold limit of Rs.20 Lakh ?

NO

AI Summary

GST registration requirement: suppliers under reverse charge must register if aggregate turnover exceeds the statutory threshold. An unregistered supplier of commercial immovable property supplied under the reverse charge mechanism must take GST registration when aggregate turnover exceeds the threshold; interest income is to be included in aggregate turnover for this purpose, and the notification exempting certain RCM suppliers from registration applies only where the entire category of supply is subject to RCM and the recipient is invariably liable, not to suppliers captured by the alternate RCM category.