Threshold limit under GST, Goods and Services Tax - GST

[Anand Desai]

If any Service provider crosses Rs. 20 lakhs turnover limit in the Financial Year, then, whether he is liable to pay GST on the turnover over and above 20 lakhs or on the entire turnover?

Please also mention legal provisions in support of your reply.

Thank you.

Posts / Replies

[KASTURI SETHI]

SECTION 22. Persons liable for registration. — (1) Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees :

As per above, you will pay tax on the supplies above twenty lakh rupees. Also go through the other conditions in Section 22 of CGST Act.

If you opt for registration prior to crossing 20 lakhs, you will pay tax from day one i.e. Re.one.

[KASTURI SETHI]

In continuation of my above reply :

Answer is inherent in the words, 'liable for registration'. A service provider is liable for registration when tax is payable. Tax is payable either after crossing exemption limit as explained above or before crossing exemption limit (voluntarily). After crossing exemption limit the person will tax only on the turnover exceeding 20 lakhs and if before crossing exemption limit he will pay tax from Re one.

Authority is Section 22 of CGST Act and it is a matter of proper understanding, interpretation, analysis. and arriving at correct conclusion.

[DR.MARIAPPAN GOVINDARAJAN]

The service provider is to get himself registered within one month from the date when his turnover exceeds Rs.20 lakh. He is also liable to pay tax when he crossed the threshold limit. The registered person is liable to pay tax from the date of crossing the threshold for the entire transaction after this date and not before that date.

[Anand Desai]

Thank you, Govindarajan sir and Kasturi Sethi sir.

[Padmanathan Kollengode]

Dear Anand Sir,

Turnover Limit of 20 lakhs is NOT an exemption per se. It is only threshold limit for getting registered u/s 22. If a person voluntarily registers himself or is liable to be compulsorily registered under Sec 24, he shall be liable to pay GST on his taxable turnover regardless of the 20 lakhs limit.

also, If a single invoice is exceeding Rs.20 Lakhs is raised (say, a single invoice for Rs.25 Lakhs) then entire Rs.25 lakhs would be liable to tax, since the person becomes "taxable person" the moment he raises invoice for Rs.25 lakhs (reading Section 22 , Section 2(107) and Section 9 together)

If he raises an invoice for Rs.18 lakhs and another invoice for Rs.7 lakhs, he becomes "taxable person" only when he raises the second invoice for Rs.7 lakhs and as such, he shall be liable to register and pay GST only on the Rs.7 lakhs onwards.

This is my understanding. I am open to different views.

[Amit Agrawal]

With due respect, I am unable to agree with part of reply of my learned colleague Shri Padmanatham Kollengode Ji (i.e. portion which states ''If a single invoice is exceeding Rs.20 Lakhs is raised (say, a single invoice for Rs.25 Lakhs) then entire Rs.25 lakhs would be liable to tax ....').

For this post, I am dealing with a situation where supplier who is unregistered and who was otherwise not to be registered under GST and his obligation to get registered under GST is triggered when he supplied goods / services & raised a single invoice exceeding Rs. 25 Lacs against one / singular supply.

As per Section 2 (107), “taxable person” means a person who is registered or liable to be registered under section 22 or section 24.

Relevant portion (from point of this ongoing discussion) of Section 22 (1) reads as follows:

Every supplier shall be liable to be registered under this Act in the State or Union territory, other than special category States, from where he makes a taxable supply of goods or services or both, if his aggregate turnover in a financial year exceeds twenty lakh rupees:".

In my view, at the time of supplying goods / services (involving value of Rs. 25 Lacs), supplier's turnover was below threshold limit u/s 22. Only when he supplied goods / services with value of Rs. 25 Lacs, supplier's turnover got above (i.e. exceeded) the threshold limit u/s 22, warranting him to get registration under GST.

In other words, at the time of making subject supply, supplier was not a taxable person u/s 2 (107). And if so, Section 9 does not come into picture at all in my view and consequently, no tax is payable under GST on entire value of Rs. 25 Lacs.

P.S. Considering risks involved in above argument (For example, what is one / singular supply?), the supplier should take practical call (including charging & paying taxes on value exceeding threshold limits or even following up with views of my learned colleague Shri Padmanatham Kollengode Ji) depending upon factual aspects involved, risk appetite & so.

These are ex facie views of mine, the same should not be construed as professional advice / suggestion & I respect contrary views.

[KASTURI SETHI]

It is neither the intention of legislature nor the intention of the Govt. to tax the first supply of service for twenty lakhs. The ultimate purpose of threshold limit is to provide threshold exemption to small service providers and nothing else. The word, 'limit' does not disturb the benefit of threshold exemption.

The turnover of Rs.20 lakhs and Rs.5 lakhs (as per above example) cannot be clubbed for the purpose of payment of tax on the first twenty lakhs.

[Ganeshan Kalyani]

If single invoice is 25 lacs then for the purpose of filing return and making GST payment the working would be like - 25 lacs minus 20 lacs threshold limit = 5 lacs taxable.

Further, for convenience purpose the invoice can be split into two - one 20 lac and second 5 lac.

[KASTURI SETHI]

Disagreement is not bad. Disagreement opens the door for innovative ideas.

I concur with the views of both Sh.Amit Agrawal Sir and Sh.Ganeshan Kalyani, Sir. Their views are full of legal and logical force. No dearth of reasoning.

I am hopeful and confident that Sh.Padamnathan Kollengode will not mind difference of opinion. I learn from his replies. Really I eagerly wait for his reply to any query rather than jumping into the query first.

[KASTURI SETHI]

The word/letter 'a' is mentioned in the term, 'a financial year ' in Section 22(1) of the CGST Act It i.e. (a) also means 'initial' 'commencement' as per dictionary meaning. This signifies the first supply of twenty lakhs. Hence threshold exemption cannot be denied by any stretch of imagination.

[Padmanathan Kollengode]

Kasturi Sir,
I am absolutely open to the difference views and in fact, I whole-heartedly accept the views put forward by experts - Ld. Amit ji, Kasturi Sir and Ganesh ji. I also stand corrected to that extend.

I was only playing the role of a Devil's Advocate and tried to solicit academic discussion on the said aspect as the said scenario is a gray area, at least for me.

Of course while practically advising, one can always take a recourse from this grey area by splitting the transaction.

But as always there is always a slightly selfish motive in my replies - which is to elicit different/ contrary views on academic aspects from other Ld. Experts in order to strengthen my knowledge of subject as well. I hope my intention is justified and taken in the right spirit.

Once again, I thank the learned Experts for throwing light on the issue. Ultimately, the querist has to take a practical view considering all the discussions happening in the forum.

[KASTURI SETHI]

Dear Sh.Padmanathan Kollengode Ji,

I agree with you in toto. You played your role in right perspective. Here I would like to highlight that with your entry as well as Sh.Amit Agrwal's into TMI Discussion Forum, the number of queries has increased. Resultantly, I am getting pre-cooked legal contents on the issues not found elsewhere in any book or website.

To sum up from all aspects, you should add an epithet, 'humanitarian' to your profile in TMI.

[Amit Agrawal]

Thank you, Shri Kasturi Sethi Ji, for your kind words!

Thank you, Shri Padmanathan Kollengode Ji, for making discussion vibrant and interesting!

[Amit Agrawal]

Dear Shri Kasturi Sethi Ji,

You are helping readers on TMI discussion since ages ........ no comparison of your efforts of helping others with my efforts. You are too far ahead, Sir!

[KASTURI SETHI]

Dear Sir,

Both of you are game changers in TMI. Revitalized TMI.