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 Actcan 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?

[Raam Srinivasan Swaminathan Kalpathi]

Dear querist

This correspondent's opinion

1. A resounding 'Yes' - registration is mandatory. Reason - it is not for the exporter of services to decide if the said service would fall within the ambit of Sec.2(6) of IGST Act, but that of the GST department. Let not the service provider also take the role of an adjudicator.

2. Sec. 23 will not be applicable in this case - reason - Exports do not fall under the category of 'exempt supplies' but under 'taxable supplies'.

3. An export supply will take the status of zero-rated supply only upon the upload of LUT in Form RFD-11, else, export of services would also taxable. Eligibility of availing refund u/s.54 thereon is an altogether distinguishing proposition.

4. Based on the details provided hereinabove, this argument is tenuous and bereft of logic.

REGISTRATION IS MANDATORY. TO AVAIL BENEFIT OF ZERO RATING FORM RFD-11 WILL HAVE TO BE UPLOADED.

Thanks

3.

[Sadanand Bulbule]

Registration is mandatory under Section 22, as export of services is a zero-rated taxable supply-not an exempt or non-taxable supply-and the absence of any intention to claim ITC, refund, or furnish an LUT does not attract the exemption under Section 23.

[KASTURI SETHI]

You are yourself saying that exports are zero rated and not exempt supplies.

Registration is required. Exports are inter-state supply. So no benefit of threshold limit is available. Zero rate is also a rate of tax. Hence not exempt supply. Section 23 is not applicable. Section 24 (i) is applicable.

[Shilpi Jain]

Exports cannot be regarded as exempt supply. It is inter-State supply and GST registration will berequired.

Though I do not understand why would you not take a GST registration.

AI Summary

Zero-rated export services remain taxable inter-State supplies, so exempt-supply registration exclusion does not apply to exclusive exporters.
Export of services is discussed as a zero-rated taxable supply, not an exempt or non-taxable supply. Accordingly, the registration exclusion for persons exclusively supplying exempt or non-taxable goods or services is stated not to cover exporters solely because they have no domestic supplies, do not claim input tax credit or refund, and do not furnish a letter of undertaking. The replies characterise exports as inter-State supplies and state that registration is required where the applicable turnover conditions are met.