The Goods and Services Tax (GST) is a destination-based tax. This means that the tax is levied on the consumption of goods and services, regardless of where they are produced. For exports, the GST is zero rated, which means that exporters do not have to pay GST on the goods or services that they export.
Zero rating of exports is a major incentive for businesses to export their goods and services. It helps to make Indian goods and services more competitive in the global market. Zero rating also helps to boost the Indian economy by increasing exports and creating jobs.
But then the question arises what if one does not want to claim the benefit of 0 rating and wants to be unregistered under the GST act. This article deals with various registration related aspects of Export of goods or services or both.
Blanket exemption under the GST Act-
Act provides for a blanket exemption based on threshold limit which is not breached renders a person not liable to obtain registration under the Act. Relevant provisions of section 22 is reproduced as under-
“(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:
Provided also that the Government may, at the request of a State and on the recommendations of the Council, enhance the Aggregate turnover from twenty lakh rupees to such amount not exceeding forty lakh rupees in case of supplier who is engaged exclusively in the supply of goods, subject to such conditions and limitations, as may be notified.”
Through section 22 and relevant notifications a threshold limit of Rs. 20 lakhs and Rs. 40 lakhs has been prescribed for supplier of goods or services or both and exclusive supplier of goods respectively. However, section 24 overrides the provisions of section 22(1) to prescribe that even if a person falls below the aforementioned threshold limit he shall be liable to registration if he satisfies the conditions specified therein. Relevant extracts of section 24 are reproduced as under-
“Notwithstanding anything contained in sub-section (1) of section 22, the following categories of persons shall be required to be registered under this Act,—
(i) persons making any inter-State Taxable supply;”
So from the combined reading of section 22 and section 24 it is clear beyond any doubt that where a person is engaged in interstate supply, he is compulsorily required to obtain registration irrespective of his turnover during the year. This makes it essential to understand what is an interstate supply and whether exports are considered as an interstate supply or otherwise. For this relevant extracts of section 8 of the IGST Act, 2017 are reproduced as under-
Section 8 of the IGST Act, 2017-
(5) Supply of goods or services or both,—
(a) when the supplier is located in India and the Place of supply is outside India;
Since exports are to be considered as interstate supply it becomes essential for a person to obtain registration but is prevented from obtaining registration under the following two circumstances-
1. Notification no 10/2017 IGST dated 13.10.2017 exempts supplier of taxable inter state services where Aggregate turnover on all India basis does not exceed Rs 20 Lakhs. So where a supplier supplies inter state services and his Aggregate turnover under his pan on all India basis is below Rs. 20 Lakhs he is exempted from mandatory GST registration.
The benefit of this notification is restricted to supplier of services whose turnover does not exceed the threshold limit. Since export is also an interstate supply the benefit of this notification shall apply to the exporter of service also up to the initial turnover that does not exceed the threshold limit.
2. Section 23. Persons not liable for registration.
(1) The following persons shall not be liable to registration, namely:—
(a) any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act;”
As per section 23 where supplier of goods or services or both is engaged in exclusively Exempt supply thereof the provisions of section 24 shall not apply and the section 23 overrides the entire act on the issue of registration. For example, if a trader is engaged in export of vegetables that are exempt under the GST he shall not be liable to obtain registration irrespective of his turnover provided he does not undertake Taxable supply of even a single rupee.
Now comes the Question of whether benefits of zero rating can be obtained if a person chooses not to obtain a registration-
This question has been answered bide FAQ released on the official website of the CBIC (https://cbic-gst.gov.in/faq.html#:~:text=Yes.,for%20GST%20to%20claim%20refunds.)
My all outward supplies are export services. In this case is it compulsory to register under GST?
Yes. Since, exports are zero rated, one needs to register for GST to claim refunds.
CA Pranay Jain is a young and aspiring Chartered accountant. He qualified Chartered Accountancy Course in 2021 and has a well-established practice in various fields of taxation and auditing, with his core area of practice being in the field of litigation i.e., handling assessment and appeal-related matters and representing assesses before various tax departments.
He is also socially active on LinkedIn at linkedin.com/in/capranayjain
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