Introduction
One of the fundamental principles of the Goods and Services Tax (GST) is that GST is levied only when a taxable supply of goods or services is made by a taxable person. Therefore, before determining the tax liability on a transaction, it is important to understand who qualifies as a Taxable Person under GST.
This article explains the concept of a taxable person, situations where registration is not required, mandatory registration requirements, threshold limits, and other important provisions under Sections 22, 23, and 24 of the CGST Act.
What is a Taxable Person?
Under GST law, a Taxable Person means a person who:
- Is registered under GST; or
- Is liable to be registered under GST.
In simple words, if a person is either already registered or is required by law to obtain registration, that person becomes a taxable person and GST provisions become applicable.
The next question naturally arises:
When is a person required to obtain GST registration?
The answer is found in Sections 22, 23, and 24 of the CGST Act.
Section 23: Persons Not Required to Obtain Registration
Certain persons are specifically exempted from GST registration and are treated as non-taxable persons.
1. Agriculturists
An agriculturist engaged in cultivation of land is not required to obtain GST registration.
This benefit is available to:
- Individuals
- Hindu Undivided Families (HUFs)
engaged in agricultural activities.
2. Persons Exclusively Making Exempt Supplies
Registration is not required when a person is exclusively engaged in making exempt supplies.
Exempt supplies include:
- Nil-rated supplies
- Fully exempt supplies
- Non-taxable supplies
Since GST is not leviable on such supplies, registration is not mandatory.
3. Persons Notified by the Government
The Government may notify specific categories of persons who are not required to obtain GST registration. For example, certain suppliers whose supplies are entirely covered under Reverse Charge Mechanism (RCM) may be exempt from registration requirements.
Section 24: Mandatory Registration
Certain categories of persons are required to obtain GST registration irrespective of their turnover.
In these cases, the threshold exemption limit does not apply.
1. Inter-State Suppliers of Taxable Goods
Persons making inter-state taxable supplies of goods are generally required to obtain mandatory registration.
Important Exceptions
The following categories are eligible for threshold-based registration:
- Inter-state suppliers of services
- Inter-state suppliers of handicraft goods
2. Casual Taxable Persons
A Casual Taxable Person is required to obtain registration at least five days before commencing business.
Examples include:
- Temporary exhibition sellers
- Trade fair participants
- Seasonal vendors
3. Non-Resident Taxable Persons
A Non-Resident Taxable Person must obtain GST registration at least five days before starting business activities in India.
4. Persons Liable to Pay Tax Under Reverse Charge
Any recipient required to pay GST under Reverse Charge Mechanism (RCM) must obtain GST registration.
5. Government Departments Liable to Deduct TDS
Government departments required to deduct Tax Deducted at Source (TDS) under GST must obtain registration.
6. E-Commerce Operators Liable to Collect TCS
E-commerce operators responsible for collecting Tax Collected at Source (TCS) are required to obtain GST registration.
7. Online Money Gaming Operators Located Outside India
Suppliers providing online money gaming services from outside India to customers in India must obtain GST registration.
8. Agents Covered Under Schedule I
Specified agents making supplies on behalf of principals are required to obtain GST registration.
Registration Requirements in E-Commerce Models
GST law contains special provisions for supplies made through E-Commerce Operators (ECOs).
Hotel Accommodation Services
Generally:
- GST is paid by the E-Commerce Operator.
- ECO must obtain mandatory registration.
However, where the hotel exceeds prescribed turnover limits, the hotel itself may become liable to pay GST and obtain registration.
Transportation of Passengers by Radio Taxi
For services such as:
- Radio taxis
- Cab aggregators
GST is generally payable by the E-Commerce Operator.
Transportation of Passengers by Omni Bus
The E-Commerce Operator is primarily liable to pay GST. However, where the operator is a company, separate registration and GST liability provisions may apply.
Restaurant Services Through E-Commerce Platforms
For restaurant services supplied through food delivery platforms:
- GST is generally payable by the E-Commerce Operator.
However, where the restaurant is part of a hotel having room tariff exceeding prescribed limits, the restaurant itself may become liable.
Other Services Through E-Commerce Platforms
- ECO registration is mandatory.
- Service providers may require registration based on applicable threshold limits.
Supply of Goods Through E-Commerce Platforms
Generally:
- E-Commerce Operators require registration.
- Vendors supplying goods through such platforms are also liable to GST registration.
Special Relief for Micro-Level Vendors
Small businesses may enjoy certain relaxations.
Such vendors:
- Can operate using an enrolment number initially.
- Must not make inter-state supplies.
- Must operate from a single location within one state.
- Need GST registration only after crossing the applicable threshold limit.
Section 22: Threshold-Based Registration
A person is required to obtain GST registration only after crossing the prescribed aggregate turnover limit. If turnover remains within the threshold limit, registration is not mandatory. Once the threshold is crossed, registration must be obtained in every State from where taxable supplies are made.
Applicable Threshold Limits
Category 1: Specified Special Category States
Where taxable supplies are made from any of the following states:
- Manipur
- Mizoram
- Nagaland
- Tripura
Threshold limit = ₹10 lakh
This limit applies across all states for such taxpayers.
Category 2: Other Specified States and UTs
Where supplies are made from:
- Arunachal Pradesh
- Uttarakhand
- Meghalaya
- Sikkim
- Telangana
- Puducherry
Threshold limit = ₹20 lakh
Category 3: Remaining States and Union Territories
Suppliers Exclusively Engaged in Supply of Goods
- Threshold limit = ₹40 lakh
- Exceptions to ₹40 Lakh Limit
The ₹40 lakh threshold is not available to suppliers dealing in:
- Tobacco products
- Ice cream
- Pan masala
- Bricks
- Building blocks
- Earthen roofing tiles
For such suppliers:
- Threshold limit = ₹20 lakh
Suppliers Exclusively Engaged in Services:
- Threshold limit = ₹20 lakh
Suppliers Engaged in Both Goods and Services
- Threshold limit = ₹20 lakh
Interest Income Clarification
Where a person supplies goods and also earns interest income (which is an exempt supply of service), such exempt interest income is ignored while determining eligibility for the ₹40 lakh threshold available to goods suppliers.
Important Practical Points
Transfer or Succession of Business
When a business is transferred, succeeded, or undergoes a change in PAN, the transferee or successor must obtain GST registration from the date of transfer or succession.
Amalgamation and Demerger
In cases of amalgamation or demerger resulting in the creation of a new entity, registration becomes effective from the date of incorporation of the new entity.
Principal-Agent Transactions
Where goods are transferred from a principal to an agent, the turnover may be clubbed for GST purposes in accordance with the relevant provisions.
- Effective Date of Registration - The effective date depends on the type of registration.
- Threshold-Based Registration - Registration becomes effective from the date on which the threshold limit is crossed.
- Mandatory Registration - Registration becomes effective from the date on which the person becomes liable for mandatory registration.
- Voluntary Registration - Registration becomes effective from the date on which the registration certificate is granted.
Job Work and Aggregate Turnover
Where goods are sent for job work and subsequently supplied by the principal in the open market after completion of job work, such supplies are included in the aggregate turnover of the principal and not the job worker.
Conclusion
The concept of a Taxable Person is central to the GST framework because GST liability arises only when supplies are made by persons who are registered or liable to be registered under the law. Understanding the provisions relating to non-registration, mandatory registration, threshold limits, e-commerce transactions, and effective dates of registration is essential for ensuring GST compliance and avoiding penalties.
A clear understanding of Sections 22, 23, and 24 helps businesses determine whether GST registration is required and when tax obligations begin under the GST regime.
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