GST TERMINOLOGY (PART -3)(Various Persons)

[Dr. Sanjiv Agarwal]

The provisions of model GST law prescribes various types of persons for different purposes and taxation. Some of these are  being used for first time. Let's discuss these terms in relation to person or taxable persons in section 2 model GST law, viz,

1. Non-resident taxable person (clause 69)
2. Person (Clause 74)
3. Taxable person (Clause 96)

Non-resident taxable person [Section 2(69)]

'Non-resident taxable person' means a taxable person who occasionally undertakes transactions involving supply of goods and/or services whether as principal or agent or in any other capacity but who has no fixed place of business in India.

Accordingly, non-resident taxable person :

1. is a taxable person.
2. occasionally undertakes transactions involving supply of goods or services.
3. undertakes transactions as a principal or agent or in any other capacity.
4. has no fixed place of business in India.

The definition is similar to the meaning of casual taxable person with a difference that transactions may not be in course of or for furtherance of business and he should not have fixed place of business in India.

In terms of section 19 read with Schedule-III, non-resident taxable persons, irrespective of the specified threshold exemption are required to be registered. Also, a non-resident taxable person may be granted registration under GST on the basis of any document other than Permanent Account Number (PAN) which shall be prescribed later.

According to section 96A(e) of the Finance Act, 1994 'Non-resident' has the meaning assigned to it in the clause (30) of section 2 of the Income-tax Act, 1961. Accordingly, Non-resident means a person who is not a 'resident' and includes a person who is not ordinarily resident.

As per Income Tax Act, a non resident person needs to take PAN before starting any permanent establishment in India. There is no justification for making them an exception to rule of PAN for registration.

Person [Section 2(74)]

'Person' includes-

1. an individual;
2. a Hindu undivided family;
3. a company;
4.  a firm;
5. a Limited Liability Partnership;
6. an association of persons or a body of individuals, whether incorporated or not, in India or outside India;
7. any corporation established by or under any Central, State or Provincial Act or a Government company as defined in section 2(45) of the Companies Act, 2013 (18 of 2013);
8.  any body corporate incorporated by or under the laws of a country outside India;
9. a co-operative society registered under any law relating to cooperative societies;
10. a local authority;
11. government;
12. society as defined under the Societies Registration Act, 1860 (21 of 1860);
13.  trust; and
14. every artificial juridical person, not falling within any of the preceding sub-clauses;

The scope of the definition of 'person' given under proposed GST Act becomes wider than the existing definition given in section 65B(37) of Finance Act, 1994. Now, it also includes:

• limited liability partnership
• any corporation established by or under any Central, State or Provincial Act or a Government company as defined in section 2(45) of the Companies Act, 2013 (18 of 2013);
• any body corporate incorporated by or under the laws of a country outside India (foreign company or body corporate);
• Trust
• Association of persons / body of individuals outside India.

   The proposed definition has new entries where public sector undertakings, foreign body corporate, trusts and associations / body of individuals outside India are also covered.

'Person' has been defined to include -

1. an individual;
2. a Hindu undivided family;
3. a company;
4. a firm;
5. limited liability partnership
6. an association of persons or a body of individuals, whether incorporated or not, in India or outside India;
7. any corporation established by or under any Central, State or Provincial Act or a Government company as defined in section 2(45) of the Companies Act, 2013
8. anybody corporate incorporated by or under the laws of a country outside India;
9. a co-operative society registered under any law relating to cooperative societies;
10. a local authority;
11. government;
12. society as defined under the Societies Registration Act, 1860;
13. trust; and
14. every artificial juridical person, not falling within any of the preceding sub-clauses;

In terms of section 11 of Indian Contract Act, 1872, every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject. Persons not competent to contract would include minors, persons of unsound mind and persons disqualified by law. Section 10 and 11 make it clear that any agreement made by a minor is void ab initio. Thus, while the definition of ‘person’ includes individuals, it may not include ‘minors’ who are not capacitated to contract. However, there is no specific provision in Chapter V of the Finance Act, 1994 in relation to minors.

Following definitions and judicial interpretations can also be referred to understand the meaning of ‘person’ -

According to Black’s Dictionary, person means a human being, an entity (such as corporation that is recognised by law as having the rights and duties of a human being and living body of a human being).

According to General Clauses Act, it means a legal entity that is recognised by law as the subject of rights and duties, an individual.

The word ‘person’ includes any company or association or body of persons, whether incorporated or not. [Indian Panel Code, 1860 and General Clauses Act,].

The word ‘person’ shall include a company or corporation. [Police Act, 1861].

‘Person’ includes any association or body of persons, whether incorporated or not. [Carriers Act, 1865]

‘Person’ includes a Hindu Undivided Family [Income Tax Act, 1961]

‘Person’ does not include a body of persons. [Representation of the People Act, 1950]

‘Person’ means any individual or partnership or any public or private body, whether corporate or not, including a state or any of its constituent sub-divisions. [Merchant Shipping Act, 1958]

‘Person’ includes-

(i) an individual,

(ii) a Hindu Undivided Family

(iii) a company

(iv) a firm

(v) an association of persons or body of individuals, whether incorporate or not,

(vi) a local authority, and

  (vii) every artificial juridical person, not falling within any of the preceding sub-clauses. [Income Tax Act]

‘Person’ includes-

(i) a firm whether registered or not

(ii) a Hindu Undivided Family

(iii) a cooperative society

 (iv) every other association of persons whether registered under the Societies Registration Act, 1860, or not. [Consumer Protection Act, 1986]

‘Person’ includes-

(i) an individual

(ii) a Hindu Undivided Family

(iii) a company

(iv) a firm,

(v) an association, of person or a body of individuals, whether incorporated or not, and

(vi) every artificial juridical person, not falling within any of the preceding sub-clauses, but does not include a local authority. [Voluntary Deposits (Immunities and Exemptions) Act, 1991]

So far as legal theory is concerned, a person is any being whom the law regards as capable of rights and duties. Any being that is so capable is a person, whether a human being or not, and no being that is not so capable is a person, even though he be a man. Persons are the substances of which rights and duties are the attributes. It is only in this respect that persons posses juridical significance, and this is the exclusive point of view from which personality receives legal recognition. [John Salmond, Jurisprudence 318 (Glanville L. Williams ed., 10^th edition 1947)]

The natural and obvious meaning of the expression ‘person’ is a living human being, a man, woman or child, an individual of the human race. As used in law the word includes natural persons and artificial persons like corporations and point stock companies, but it does not include a state or Government. [Shiv Prashad v. Punjab State, 1956 (9) TMI 57 - PUNJAB & HARYANA HIGH COURT (Constitution of India, Art. 14 The word, person means not duly a natural person, but also a jurisdic or artificial person, Rahmat v. Mandir Shri Laxminiaram, AIR 1976 MP 216, 218. [Madhya Pradesh Land Revenue Code 1859].

The expression ‘person’ as defined in Section 3(42) of the General Clauses Act (10 of 1897) includes a company or association or body of individuals whether incorporated or not, but the expression ‘person’ cannot be detached from the context and viewed apart from the nature of the writs that are enumerated in the article. In Re v. S. Hariharan, AIR 1960 AP 518, 519. [General Clauses Act, 1897].

The word ‘person’ has not been defined in the Companies Act. It may be that the word comprises a number of individuals, such as a hindu joint family. The question whether a syndicate of ten persons was really composed of more than twenty persons is a question of fact to be decided on the evidence and not on a mere allegation. AIR 1930 Bombay 431.

The word ‘person’ as understood in its ordinary sense generally implies a natural person and not a person artificial unless there is a provisions made for it either expressly or by necessary implication. Nand Prasad v. Arjun Prasad, 1958 (5) TMI 34 - HIGH COURT OF PATNA . [Companies Act, 1913]

‘Person’ includes a corporate body. The Collective Farming Society Ltd. v. State of MP, 1973 (10) TMI 52 - MADHYA PRADESH HIGH COURT [Madhya Pradesh Co-op. Societies Act, 1961] a corporate body like a club registered under Societies Registration Act is a ‘person’ within the meaning of Section 3, Madras Gaming Act. In Re Somasundaram Chettiar, 1947 (8) TMI 1 - MADRAS HIGH COURT

‘Person’ in the technical or legal sense can be a natural person like a human being or an artificial person like the holder of an office or a corporation. Jagneshwar Sen Gupta v. Bimal Kantipaul 1960 (12) TMI 79 - GAUHATI HIGH COURT

In Larsen & Toubro Ltd. v. CCE, Vadodara-II ( 2013 (12) TMI 492 - CESTAT AHMEDABAD , it was held that a ‘person’ is a juristic person. To become a person, person includes an association of person or body of individuals, whether incorporated or not. It cannot be said that the units in Special Economic Zones (SEZ) and Domestic Tariff Area (DTA) are separate persons in the eyes of law and can be considered as separate persons.

Taxable Person [Section 2(96)]

Taxable person has been defined to have a meaning as assigned to it in section 9 of the model law.

According to section 9, taxable person means a person who carries on any business at any place in any state or India or and who is registered or required to be registered for the purpose of GST law as per Schedule –III to the Act.

Taxable person would therefore, cover both - one who are registered as taxable person under the Act and two, persons who are not so registered but required to be so registered. Thus, even unregistered person would be called a taxable person liable as such under the Act.

Following points are worth noting in relation to taxable person –

1. Taxable person in a person who carries on any business.
2. Taxable person may carry such business at any place in India or any state in case of SGST
3. Taxable person should be registered or required to be registered under Schedule-III of the Act.
4. An agriculturist [defined in section 2(8)] is not considered as a taxable person
5. A person should be considered as a taxable person only if his aggregate turnover exceeds ₹ 10 lakh in a financial year [Rs. 5 lakh in case of North East States including Sikkim)
6. Central Government, State Government or local authority shall be considered as taxable person in respect of activities / transactions (other than as specified in Schedule-IV) where they are engaged as public authority

Schedule-IV of the Act contains list of activities or transactions in respect of which the Central Government, a State Government or any local authority shall not be regarded as a taxable person.

Examples of such services are services in relation to statutory functions (pass port, visa, driving license, birth or death certificate; functions under article 243W or 243G of Constitution; health care, education, tax, right to use natural resources, merchant overtime charges, registration under any law; services in relation to diplomatic / consular / emigration / currency / import or export / public order etc.

Following persons shall not be considered as taxable persons –

1. person providing services as an employee to his employer in terms of employment or under any legal tie creating employee –employer relationship.
2. person in business of exclusively supplying goods or services not liable to tax
3. person liable to pay tax under reverse charge [section 7(3)] receiving services of value not exceeding a specified limit in a year for personal use (not for use in course of or furtherance of his business).

(To be continued ……)

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