Separate registration within the State-Need of Transition provisions

[niranjan gupta]

1. There is a provision under section 25 of the CGST Act, 2017 as amended, that a person, having a multiple places of business in a State or union territory of India, may have another registration in the State or Union territory as the case may be. It is not compulsory but optional. Relevant provision is as follow:

25. (2) A person seeking registration under this Act shall be granted a single registration in a State or Union territory:

Provided that a person having multiple places of business in a State or Union territory may be granted a separate registration for each such place of business, subject to such conditions as may be prescribed.

2. The above said proviso was amended to allow all the businesses of a person rather than having multiple business verticals to have separate registration within the State or union Territory by Central Goods and Services Tax (Amendment) Act, 2018 w.e.f 1.2.2019. Before the amendment the proviso was as follows:

“Provided that a person having multiple business verticals in a State or Union territory may be granted a separate registration for each business vertical, subject to such conditions as may be prescribed.”

3. There is no transitional provisions to implement the above provisions. A person is having a registration number (herein after called “the existing registration”) in a State for all the places of business in a State. He wants to have a separate registration number (herein after called “new registration number”) of a running factory in the State. He is having closing stock of raw materials, Work in process, Finished goods, goods in transits, pending orders for inputs and outputs, in the existing registration number. In case, the person takes new registration, say on 1.3.2021, he has to close all the balances as at 28.2.2021. In fact, he has to carry certain operations even after taking new registration for that place of business in the existing registration number. A new registration number is a distinct person as defined under section 25(4) of the CGST Act effective from 1.3.2021. The existing number will also be in operation till all the activities are closed in that. It means both the registration will operate for a limited period. To deal with this situation, there should be transitional provisions for such new registration as there is under section 18 (b) of the CGST Act, 2017 as amended for merger, demergers etc.. Section 18(3) is referred hereunder for ready reference:

18 (3) Where there is a change in the constitution of a registered person on account of sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provisions for transfer of liabilities, the said registered person shall be allowed to transfer the input tax credit which remains unutilised in his electronic credit ledger to such sold, merged, demerged, amalgamated, leased or transferred business in such manner as may be prescribed.

4. A person takes a registration and to start the function, he receive goods and services or both for production purposes. Production cycle is generally 30-45 days. Once, the inputs and input services are received, processed, supplies of outwards start. In the meantime, the existing registration clears all stocks, orders etc.. It means, that the persons has to close all the activities to start operating under the new registration number. Accordingly, there is a time gap to close all the activities under the existing registration and to start activities under new registration number.

5. There is a transitional provision under section 18(2) of the CGST Act with regard to new registration under section 25(3) but there is no such provisions for registration taken under proviso to section 25(2). Section 18(2) is referred hereunder for ready reference:

(b) a person who takes registration under sub-section (3) of section 25 shall be entitled to take credit of input tax in respect of inputs held in stock and inputs contained in semi-finished or finished goods held in stock on the day immediately preceding the date of grant of registration;.

6. In fact, there is no proper transitional provisions in case of merger, demerger etc., also.

7. In absence of any transitional provisions, there may be disputes regarding maintaining of TWO GST numbers at single premises, having operation in both the GSTIN for a limited period.

8. Accordingly, there is need to have transitional provisions under GST Laws in such situations. The GST Council to look into this.