Whether GST Registration is Mandatory for a Person Exclusively Engaged in Export of Services Exceeding the Threshold Limit - Applicability of Section 23 of the CGST Act

[vaibhav agrawal]

A person located in India is engaged exclusively in the export of services to a client located outside India. The services qualify as 'export of services' under Section 2(6) of the IGST Act, 2017 and are zero-rated supplies under Section 16 of the IGST Act. The aggregate annual turnover exceeds the threshold limit prescribed under Section 22 of the CGST Act.

The exporter does not have any domestic outward supplies, does not intend to avail or claim refund of unutilized Input Tax Credit, and is willing to bear the GST paid on inward supplies as a cost of business. Accordingly, there is no requirement to furnish an LUT or claim any refund under Section 16 of the IGST Act.

In the above factual background, the following issues arise:

1. Whether GST registration is mandatory merely because the aggregate turnover exceeds the threshold limit under Section 22, even though the person is engaged exclusively in export of services?
2. Whether Section 23 of the CGST Act can be invoked to contend that registration is not required, considering that no tax is payable on the outward supplies and no refund of input tax credit is proposed to be claimed?
3. Whether the expression 'persons exclusively engaged in supplying goods or services that are not liable to tax or are wholly exempt from tax' occurring in Section 23 can, in any manner, be interpreted to include zero-rated supplies such as exports?
4. Whether export of services, though zero-rated under Section 16 of the IGST Act, can be treated at par with exempt supplies solely for the limited purpose of determining the liability to obtain registration under Section 23?

Though exports are generally treated as zero-rated and not exempt supplies, can Section 23 of the CGST Act be invoked to contend that GST registration is not required where the exporter has no domestic supplies, claims no ITC/refund, and turnover exceeds the threshold?

AI Summary

GST registration for exclusive service exports raises whether zero-rated supplies qualify for the exemption applicable to exempt supplies. GST registration liability is considered for an exclusive exporter of services whose aggregate turnover exceeds the registration threshold but who has no domestic outward supplies. The issue is whether the registration exemption for persons exclusively supplying non-taxable or wholly exempt supplies can apply to zero-rated export supplies, particularly where no input tax credit refund is sought, no letter of undertaking is furnished, and tax on inward supplies is borne as a business cost.