All assesses / dealers who are already registered under existing central excise/service tax/ vat laws - What will happen when turnover is not exceeding ₹ 20 Lakhs (or ₹ 10 Lakhs in Hill areas) - Complications and Problems

[CA Surender Gupta]

Here, we like highlight the ambiguity between the provisions of the statute and intention of the legislature relating to Registration under the GST regime.

As we know unlike the Service Tax or Central Excise regime, in the GST regime, a person once registered, will be liable to discharge GST liability irrespective of the turnover.

Therefore, the question arises, when the turnover of a person was much below Rs.  20 lakhs (or ₹ 10 lakhs as the case may be), but since he was registered under the existing law (i.e excise, service tax or vat etc.), whether he would be eligible to avail the benefit of exemption from the GST on the basis of turnover?

As per the provisions of the Sub-Section (2) of the Section 22 - Persons liable for registration  of the THE CENTRAL GOODS AND SERVICES TAX ACT, 2017, for the existing registered assessee, it is mandatory to seek GST registration, as reproduced hereinafter:

(2) Every person who, on the day immediately preceding the appointed day, is registered or holds a licence under an existing law, shall be liable to be registered under this Act with effect from the appointed day.

Therefore, it appears it is mandatory for such persons to have GST registration without any exclusion or exception.

Further Q. 33 (registration) of the FAQs, it is stated that all the existing registration shall be migrated to GSTN automatically and provisional registration no. shall be allotted. If an assessee fails to submit the documents and information as sought by the GSTN, provisional registration so allotted will be cancelled.

As per section 29 of the GST, a person can apply for cancellation of GST registration only in the following circumstances:

(a) the business has been discontinued, transferred fully for any reason including death of the proprietor, amalgamated with other legal entity, demerged or otherwise disposed of; or

(b) there is any change in the constitution of the business; or

(c) the taxable person, other than the person registered under sub-section (3) of section 25, is no longer liable to be registered under section 22 or section 24.

As per the provisions of Section 25(3), a person, though not liable to be registered under section 22 or section 24 may get himself registered voluntarily.

Therefore, a person who is registered under the existing laws (i.e. central excise, service tax, VAT etc.) is  required to obtain without any option since it is not voluntary by virtue of section 22(2) as above.

However, as per the all the information and statements from the Central Government, the persons who has turnover upto 20 lakhs will be out of GST.

Therefore, it is absolute necessary that Central Government must issue suitable clarification in time to avoid unwarranted litigation that may arise since this issue is going to effect lakhs of existing registered persons who otherwise would not be falling within the GST framework.

 

References

Section - 22 - Persons liable for registration  of the THE CENTRAL GOODS AND SERVICES TAX ACT, 2017

Section - 025 - Procedure for registration  of the THE CENTRAL GOODS AND SERVICES TAX ACT, 2017

Section - 29 - Cancellation of registration  of the THE CENTRAL GOODS AND SERVICES TAX ACT, 2017

Draft Rule 12 - Application for cancellation of registration   of the GST - REGISTRATION - Draft Rules 31-3-2017

Q. 23 - Whether Cancellation of Registration Certificate is permissible?  of the FAQ on GST (2nd Edition) dated 31.3.2017

Q. 33 - Whether all assesses / dealers who are already registered under existing central excise/service tax/ vat laws will have to obtain fresh registration?

 

Discussions to this article

[Ganeshan Kalyani]

In my view the dealer whose turnover is below threshold limit of GST will have an opportunity to surrender the number obtained under provisional basis once GST comes into effect.

[parimal kulkarni]

Very true.

Further, if an assesse is surrendering his registration number, the dept is not processing the same. These assesses are also facing the issue. Hopefully, some clarification should be issued sooner than later.

[A SUBRAHMANYAM]

Prima facie the migration should be automatic and system based than asking the assessee to meddle with original pan name or aadhar card telephone links. Next, the system should migrate those persons only whose turnover was above 20 lacs, as per the periodical returns filed by the assessees hitherto. This will prove that the e-sytems of Excise, Serv Tax and VAT have been effectively functional as of now.

Complications will initially be there when there is "one India and Four Taxes, instead of one Tax." Lets hope the clouds disappearing as the D-day approaches.

[KASTURI SETHI]

Sir,

It is really a problem/enigma pointed by you. Now you have pointed out. Govt. may find remedy to this problem in order to avoid hotch potch situation. Before enactment of GST, every direction in this aspect is just preparation for GST. Such migration has no statutory status. It is a sort of co-operation to Govt. and advance preparation in the interest of assessees. None of my clients whose turnover is below threshold exemption limit and remained below ₹ 20 lakhs for last five years, has applied for migration to GST. They are waiting for enactment of GST. Any change in the provision of the Act/ or Rules can take place at the eleventh hour. Even after enactment of GST, it is expected that Govt. will give sufficient time to get the assessee registered under GST Acts. After all Govt. also wants successful implementation of GST.

[Surender Gupta]

As per the current arrangement the provisions, existing registered person is required to obtain GST registration without any option as per section 22(2)

However, Central Government must come out with a Notification u/s 23(2) of CGST to grant relief to small traders or service provides who are already registered but not willing to migrate to GST.

[KASTURI SETHI]

Yes. Sir but from the appointed day i.e.the date of enactment.

[KASTURI SETHI]

Whenever there is flaw in the law, benefit goes to the assessee. There is judgement of Supreme Court in this context. Assessees whose turnover is below ₹ 20 lakhs, should not suffer at all. Why they should apply for registration ? On being pointed out by Chief Editor, TMI, this flaw in the law would come to the notice of Board and hope flaw would be removed before 1.7.17.

[MARIAPPAN GOVINDARAJAN]

Since registration in GST regime, whose turnover is less than ₹ 20 lakhs, is automatic, in my view, he is not at all required to pay GST and later he may surrender his registration by mentioning the fact. However clarification is required in this regard. This point may be sent to the CBE&C for their consideration.