Provisional ID under GST, Goods and Services Tax - GST

[chetan jadhav]

A person was registered under service tax regime. His turnover never crossed Rs 20 lacs in service tax as well as GST regime thereafter.

He was alloted Provisional ID by service tax department but he did not migrate to GST. GSTIN Status as per GST portal as on date for provisional registartion granted is "Not Migrated".

Thereafter he took registartion in Year 2021 and continued therefater.

Query is -

1. What would be his status for period July 2017 to 2021 - ( IMHO, he is unregistered person during this period as he never migrated to GST)

2. Weather he is liable for tax during the above period (IMHO - He is not liable to tax as he was unregistered during the period and his tunover was less than Rs 20 Lacs)

Kindly advise.

Regards,

Posts / Replies

[KASTURI SETHI]

Your views are correct. Not taxable prior to the year 2021.

[chetan jadhav]

Thank you for your responce Sir.

[Padmanathan Kollengode]

Dear querist,

kindly consider the following aspects:

A. Section 9 provides for levy of tax. Section 9(1) reads as under:

9. (1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for human consumption, on the value determined under section 15 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person.

A.1 The levy under GST law is on 'taxable person'.

B. Taxable person is defined under section 2(107) as under:

“taxable person” means a person who is registered or liable to be registered under section 22 or section 24;

B1. Thus a person who is liable to be registered under section 22 is "taxable person".

C. Section 22 provides for persons who are liable to be registered. Sub-section (2) reads as under:

(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.

C.1. Thus a person who holds registration under the erstwhile law is a person liable to be registered under section 22 and hence "taxable person" under section 2(107).

D. In your case, the person was holding a service tax registration as on 30-06-2017.

E. Therefore, in my opinion, levy is attracted irrespective of the fact that his turnover is less than 20 lakhs in PY.

[chetan jadhav]

Dear padmanathan,

I agree with your views but I have some other thoughts on the same. I would like to know from you-

1) will that person wld be treated as unregistered during 2017 to 2021

2) is he liable for all 4 years or only for FY. 17-18 and not thereafter..

Thank you in advance.

[Padmanathan Kollengode]

1. Will he be unregistered person? (I assume you are asking in the context of ITC)

My views:

Section 2(94) defines “registered person” to mean a person who is registered under section 25 but does not include a person having a Unique Identity Number;

In your case, he is not registered under section 25, hence, he is not a "registered person".

2. Whether he will be liable for only 2017-18 or up to 2021?

In my view, there is no concept of year wise application of section 22. In other words, once section 22 is attracted, it continues to apply purpectually.

Once section 22 is attracted, he becomes liable to be registered and in case his aggregate turnover falls below threshold level, he has to apply for cancellation of registration under section 29.

To put it differently, The scheme of Chapter VI is not such that registration is applied/ renewed every year based on Turnover, but it continues purpectually until the registration is cancelled under section 29. (I am fully open to contrary views).

[KASTURI SETHI]

Dear Querist,

It is worth while to read the following :-

As Section 139(1) of CGST Act : Migration of existing taxpayers : On and from the appointed day (22-6-2017), every person registered under any of the existing laws and having a valid Permanent Account Number shall be issued a certificate of registration on provisional basis, If such registration is not replaced by a final certificate of registration then it shall be liable to be cancelled.

(2) The final certificate of registration shall be granted in such form and manner and subject to such conditions as may be prescribed.

(3) The certificate of registration issued to a person under sub-section (1) shall be deemed to have not been issued if the said registration is cancelled in pursuance of an application filed by such person that he was not liable to registration under section 22 or section 24.

Read with Notification No.1/17-CT dated 19.6.17.

With the repeal of the Finance Act, 1994 (Service Tax law), existing Service Tax Registration became defunct w.e.f. 1.7.17.

[KASTURI SETHI]

Also go through the following case law carefully :

2018 (9) TMI 686 - MADRAS HIGH COURT - JAI LAXMI VENKATESH GRANITES PVT. LTD. Versus ASSTT. COMMR. OF COMMERCIAL TAXES (SGST), KRISHNAGIRI

[KASTURI SETHI]

Dear Querist,

Also read replies against Issue ID No.118625 dated 6.7.23.

ITC under Section 18 (2) of CGST Act has become time barred.

 

[KASTURI SETHI]

GST : Where taxable turnover is less than threshold limit fixed for Registration in case of supply of tobacco products, neither show cause notice could be issued nor adjudication order could be passed. -----------DELHI HIGH COURT in the case of Kishor Kumar Arora Vs. UOI - 2022 (6) TMI 278 - DELHI HIGH COURT

[chetan jadhav]

Dear Member,

My thoughts on the issues are as under -

Q. 1 - Liability to register under GST

Section 139(1) r.w. section 22(1) cast a liability on every person registered under earswhile law, to get himself register under GST. However at the same time option has been given under Rule 24(4) to apply for the cancellation of registartion if he is not liable to be register under the GST Act.

It clearly indicates that, the principal condition for registartion under GST law is turnover limit of Rs 20 Lacs [Sec 22(1)]. If the register person is of the opinion that, he will not cross the limit, he may opt to cancel his registartion.

Further, It is also provided in section 139(1) r.w. Rule 24(3) that, if after getting the provisional registration, taxpayer fail to submit the requisite documents Or file the form FORM GST REG–26, the Officer Shall cancel the provisional ID allotted to taxpayer.

Combine Reading of above provisions indicates that, liablity to register under new law for existing taxpayer is mere a facility to ensure the free flow or migration so that business continuity (such as availing ITC, credit for stock) is not hamper. It does not seems that, law wants existing taxpayer to complusory register themself and pay the tax even if there is T/over is less than 20 Lacs. Otherwise withdrawal option under Rule 24(4) is not required at all. Option for cancellation under section 29 is always there. The option is given so that, their withdrawal can be given effect right from 01.07.17. Same is the case, if officer himself cancel the provisional ID for not filling the form. Even in such case, provisional ID would be cancelled from 01.07.2017.

We can put it in this way - rather than first registering himself under GST and then applying for canellation, tax payer decided not to register himself at all as officer was anywhich way empowered to cancel the ID for not filling the form.

This can at the most br term as a procedural lapse and hence I believe tax payer can not be held liable for not registering under the Act and hence made liable to pay tax.

Q.2 Tax Liability for FY 17-18 and subsequent year

We have concluded that, since GSTIN status is "Not Migrated" means taxpayer will be treated as Unregistered Dealer for FY 17-18.

Now even if we assume that, he is liable for registartion and further liable to pay tax during FY 17-18, for the subsequent period he may not be liable to pay tax if his T/over is less than 20 Lacs in subsequent years for followings reasons -

1. Section 22(1) states that, the person is liable for registation if his aggregate turnover in a financial year exceeds twenty lakh rupees

2. Here turnover limit is prescribed for a F.Y. unlike the earswhile law where liability to register was subject to T/over in preceeding FY. Hence liability to register shall be ascertained for each FY separately (provided he is an Unregisted peson). Law did not use the words "Any, previose or preceeding FY"

3. Even if he is liable for registartion in FY 17-18 and liable to tax, for FY 18-19 he is not liable for registartion as his T/over for FY 18-19 is less than 20 Lacs. For Example turnover for veriose years are as under -

FY 19-20 = 20.50 Lacs

FY 20-21 = 0 (due to covid)

FY 21-22 = 0 (due to covid)

FY 22-23 = 10 Lacs ( restart his business)

Now if we assume that, since he taxpayer is liable for registration in FY 19-20, he shall pay tax for FY 22-23 and so on this would lead to absurd interpretaion. As liablity in such a case would be for infinite period unless he takes a registartion subsequently. There wont be any boundry to tax a person even though T/over is within thresehold limit.

Hence in our query, I believe that, even if tax liablity arises in FY 17-18, still tax may not be levied for subsequent year if T/over is less than 20 Lacs. (Provided tax payer is unregister. In case of register Taxable person the same is not applicable as all the provisions of law would be applicable irrespective of T/Over limit)

Above explanation is only thoughts and not the opinion. I would like to request experts to guide us on this. Any alternative view is highly appreciated.

Section 139 (1) - On and from the appointed day, every person registered under any of the existing laws and having a valid Permanent Account Number shall be issued a certificate of registration on provisional basis, subject to such conditions and in such form and manner as may be prescribed, which unless replaced by a final certificate of registration under sub-section (2), shall be liable to be cancelled if the conditions so prescribed are not complied with.

[KASTURI SETHI]

Sh.Chetan Jadhav Ji,

Read your analysis thoroughly. I stick to my views as explained above. Let other experts opine.

[chetan jadhav]

Dear Kasturi Sir,

I read your judgement and explanation but unable to draw any conclusion thereon.

However in your first reply you said, you agree with my view that, GST registartion not required and not liable for tax before 2021.

Is this correct.

[KASTURI SETHI]

Yes. It is correct.

[KASTURI SETHI]

As per EXCUS CD (CENTAX PUBLICATIONS) , above judgments of Madras High Court and Delhi High Court have not been challenged by the department.

[Amit Agrawal]

I respectfully differ with Shri Kasturi Sethi Ji.

Section 139 (3) read with Rule 24 (3) is NOT applicable for given situation as person was liable to be registered as per Section 22 (2).

Section 139 (3) read with Rule 24 (3) applies only when a person is not liable to be registered under the Act (i.e. situations covered in Section 23), in my view.

Further, Section 139 (1) does not give licence / legal right to a person to circumvent the requirement of compulsory registration mandated under Section 22 (2)

What happens to the consequential question/s of tax-liability and more importantly, till what period, are altogether separate matters. But, I need more time to delve upon these consequential issues (in given set of facts, where person was not registered till year 2021) before commenting thereon.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Shilpi Jain]

Registration is not migrated. Also turnover is less than 20L.

I assume no condition has attracted for complusory registration of person.

Hence, not registered, no GST liability up to actual date of registration in 2021.

[KASTURI SETHI]

For those persons whose turnover does not exceed Rs..twenty lakhs, threshold exemption is a substantive right. For the past period it is his option whether to avail ITC or not. If the registered tax payer intends to avail ITC for the past one year prior to registration under Section 18 of CGST Act, that person will pay tax on the past turnover. Threshold exemption cannot be denied in this scenario.

Based on the analysis of various case laws on the issue.

[Amit Agrawal]

For raised queries, if anyone can explain 'contrary views' giving cogent reasoning, supporting case-laws / circular & case-laws which are directly relevant for the legal point under dispute, after duly noting & considering the wordings of Section 22 (2), Section 139 & Rule 24 & my understanding thereto (as explained in above post of mine at serial No. 15), same would be helpful to make this discussion more meaningful & relevant for the querist, professionals like us as well as all readers of TMI.

Requested accordingly.

[Padmanathan Kollengode]

Kasturi Sir,

A. Threshold limit if 20 lakh is not available to all persons. For example, where compulsory registration is required u/s 23

B. Similarly, section 22(2) specifically states

(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.

C. One cannot simply read down section 22(2) just because his turnover didnot cross 20 lakhs.

D. In my opinion, once a person becomes liable to be registered, he continues to be a "taxable person" till he applies for cancellation.

Assume this situation:-

FY 2018-19 TO is 50L

FY 2019-20 TO is 10L

FY 2020-21 TO is Nil

FY 2021-22 TO is 10L

Assuming that registration has not been taken in FY 2018-19, can we give Threshold of 20 lakhs each Financial year and hold that 30 lakhs in FY 2018-19 alone is taxable?

I think no. Only for 2018-19, the first 20 lakhs will not be taxable. Rest everything becomes taxable.

If the above understanding is correct, the same extends to Section 22(2) as well.

[KASTURI SETHI]

Sh.Padmanathan Kollengode Ji,

First of all I am very thankful to you for your reply.

"Only for 2018-19, the first 20 lakhs will not be taxable." This sentence indicates that you agree that past turnover prior to the date of registration is not taxable whether it pertains to the year 18-19 or 17-18. The year 17-18 is not in the example given by you. Am I right or have I missed something ?

There is no dispute about the period after taking registration.

[Amit Agrawal]

Dear Shri Padmanathan Ji & my fellow professional colleagues,

Kindly allow me to play advocate for the contrarian view here

My whole Idea is to make all these discussions as engaging, relevant & interesting by testing all potential legal interpretations:

A. What is purpose of the wording of Section 139 (3):

"The certificate of registration issued to a person under sub-section (1) shall be deemed to have not been issued if the said registration is cancelled in pursuance of an application filed by such person that he was not liable to registration under section 22 or section 24"

A1. How to interpret BOTH section 22 (2) and above-highlighted portion from Section 139 (3) harmoniously?

A2. Please also note the wordings used in rule 24 (4) & FORM GST REG-29 i.e. "who is not liable to be registered under the Act" as well as Section 23 (i.e. Persons not liable for registration) & Section 25 (1) (i.e. Every person who is liable to be registered under section 22 or section 24 ...) , while solving above-explained conundrum.

B. Please read Section 29 (1) where reason/s - for which a registered person can seek cancellation of registration - are listed. If one interpret that the Section 139 (3) does NOT apply to a migrated person, due to mandated registration under Section 22 (2), does that mean that such person can NEVER seek cancellation of his registration u/s Section 29 (1) (i.e. even when his aggregate turnover never exceeds Rs. 20 Lac in a financial year) EVER (i.e. unless his case is covered under clause (a) or (b) of Section 29 (1) as his case will never fall under any reasons listed u/s 29 (1) (i.e. clause (c) of Section 29 (1)?

C. If a registered person can seek cancellation of his existing registration if his aggregate turnover in a financial year does not exceed Rs. 20 Lac (a view, you seem to imply), then, why same privilege does not apply to a person who is bound to take & has taken registration as per Section 22 (2)? And if same privilege is indeed available, then, why such privilege is not available to him as on appointed day itself?

Kindly note that I have not shared any views in this post. It is just that I find these are relevant questions before one decide the issue raised by the Querist.

These are ex facie views of mine and the same should not be construed as professional advice / suggestion.

[Padmanathan Kollengode]

Kasturi Ji,

Yes. I do agree.

Provided "he was not holding registration under erstwhile Act" and not liable for compulsory registration under section 24.

So, my point here is since he was registered under erstwhile Law, the threshold limit of 20 lakhs becomes irrelevant.

And it becomes irrelevant for subsequent years as well due to logic I explained earlier.

This is my current understanding. (I shall address Amit ji's poser after a more detail study, which he always makes us do)

[Amit Agrawal]

In my last post, In Para A, please also consider the following as part of conundrum:

A3. As on start of appointed day, there was NO person who was required to be registered u/s 22 (1) everyone's aggregate turnover was zero at the start.

[KASTURI SETHI]

Interpretational dispute still hangs on. Come on with some authority as suggested above by Sh.Amit Agrawal,Sir

[Amit Agrawal]

@ Shri Kasturi Sethi Ji,

Only because you have said 'Based on the analysis of various case laws on the issue' in post at serial no. 17 above, in my post at serial No. 18, I had suggested to let us have detailed analysis after taking into account the point of dispute with supporting case-laws relevant thereon.

As you know, I have left open the question of the consequential question/s of tax-liability and more importantly, till what period (in my post at serial No. 15 above). This is most important element for the matter under discussion here. And I am working towards that.

I have already shared some potential pointers explaining complexities - in this regard - in my last post at serial no. 21.

I was expecting help & support from professional colleagues to solve the conundrum.

Anyway, I will try & come out with my conclusions soon.