2019 (6) TMI 1063 - AAR - GST

Registration of firm - manufacture of animal feed - exemption from tax vide entry no. 102 of the Notification No. 2/2017 Central Tax (Rate) dated 28.06.2017 - Whether the firm is liable to take registration u/s 24 or is exempted from registration u/s 23? - principles of jurisprudence - HELD THAT - Scheme GST being a tax on the event of supply every supplier needs to get registered. However, as per the scheme of the Act, not every supplier is required to get registered. Only those suppliers, whose aggregate turnover of all supplies exceeds the threshold limit as prescribed under Section 22 (including exempted and taxable supplies). Thus to be registered a person satisfies two conditions namely, supply of taxable goods or services or both and aggregate turnover in a financial year exceeds threshold limit - Section 23, provide exemption to certain category/ class of person from obtaining registration under the Act. Such category consist of persons who are engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax or an agriculturist, to the extent of supply of produce out of cultivation of land. Thus section 23 is not contrary to section 22 but is clear expression of the intent of Section 23. From conjoint reading of Section 9 and section 24 of the Act, since the applicant is required to pay tax under reverse charge, they have to compulsorily register under GST and the requirements of Section 22(1) pertaining to taxable supply and the threshold limit are not applicable to them. The principles of jurisprudence namely the rule of harmonious construction and the rule against redundancy, the applicant would go out of the scope of Section 23 of the GST Act because he is making certain quantity of taxable supply of goods transport service by way of reverse charge mechanism and would fall within the scope of section 24 of the GST Act for the purpose of registration and hence he would be required to obtain registration under the Act in order to discharge his duty liability under reverse charge, notwithstanding the turnover limits specified in sub-section (1) of Section 22 of the GST Act. Applicant is liable to take registration in view of provisions of section 24 of the GST Act, 2017.

Summary

Issues Involved:
1. Whether the firm is liable to take registration under section 24 or is exempted from registration under section 23 of the CGST Act, 2017.

Issue-wise Detailed Analysis:

1. Applicability of Section 23 (Exemption from Registration):
The applicant, M/s. Jalaram Feeds, contended that since they are exclusively engaged in the supply of exempted goods (Compound Animal Feed, HSN Code: 2309), they fall under Section 23 of the CGST Act, 2017, which exempts them from registration. Section 23(1)(a) states that any person engaged exclusively in the supply of goods or services that are wholly exempt from tax is not liable for registration. The applicant argued that Section 23 is a standalone and specific provision that is not overridden by Section 24.

2. Interpretation of Section 24 (Compulsory Registration):
Section 24 mandates compulsory registration for certain categories of persons, including those required to pay tax under reverse charge. The applicant argued that Section 24 overrides only Section 22 (which pertains to the threshold limit for registration) and not Section 23. They maintained that if Section 24 overruled Section 23, it would render Section 23 meaningless, as most businesses dealing in exempt goods would require registration due to reverse charge liabilities.

3. Government's Notification and Reverse Charge Mechanism:
The concerned officer highlighted that according to Notification No. 13/2017-Central Tax (Rate), services like Goods Transport Agency (GTA) are liable to tax under reverse charge. As per Section 24(iii), persons required to pay tax under reverse charge must register under GST, irrespective of their turnover or the nature of their supply (exempt or taxable).

4. Judicial Precedents and Interpretation of Law:
The judgment referenced other rulings, such as Sonka Publications (India) (P) Ltd. and Joint Plant Committee, where it was held that persons dealing only in exempted products are not required to be registered under GST for reverse charge. However, the concerned officer argued that these precedents did not align with the current case, as the applicant's situation involved specific reverse charge liabilities.

5. Harmonious Construction and Legislative Intent:
The judgment emphasized that the law should be interpreted to give effect to all provisions harmoniously. Section 24 should not be rendered redundant by interpreting it in a way that excludes its applicability to persons covered under Section 23. The principle of harmonious construction dictates that both sections should be given effect, ensuring that persons liable for reverse charge must register, even if they deal in exempt supplies.

Conclusion:
The Authority for Advance Ruling concluded that M/s. Jalaram Feeds is required to take registration under Section 24 of the CGST Act, 2017. The firm’s liability to pay tax under reverse charge necessitates registration, notwithstanding the provisions of Section 23. The judgment clarified that the intention of the legislature was to ensure that all persons liable to pay tax under reverse charge must be registered to comply with GST regulations.

Order:
The firm is liable to take registration under Section 24 of the CGST Act, 2017, due to their obligation to pay tax under reverse charge, despite their involvement in the supply of exempt goods.