Is GST migration mandatory for persons with turnover less than INR 20 lakhs?


The government is ready to roll out GST by the deadline announced, i.e. 1st of July, 2017. On 27th March, 2017, the vetted CGST Act, IGST Act, UTGST Act and Compensation Act were presented before the Lok Sabha. On 29th March, 2017; the laws presented before Lok Sabha were passed. Now, these laws are to be presented before Rajya Sabha as money bills.

The process of migration of existing taxpayers under current taxation regime started on 8th November, 2016 and the process is still continuing. Under the current indirect tax regime, the person whose turnover is below the specified threshold limit does not need to get registered. It is important to note that threshold for charging tax can be different for threshold for taking registration. For example: under the service tax law, person is liable to get registered when his turnover exceeds Rs. 9 lakhs, but the liability to pay service tax arises only after the turnover exceeds Rs. 10 lakhs. Now, the question which arises is as to who is liable to get registered under GST?

Section 22 and section 24 of CGST Act explains about the persons required to take registration and cases where registration is mandatory. Section 22 states that a person whose aggregate turnover in a financial year exceeds Rs. 20 lakhs is liable to be registered under GST. But the person supplying goods or services or both from any of the ‘special category states’ shall be liable to get registered if his aggregate turnover in a financial year exceeds Rs. 10 lakhs. ‘Special category States’ includes Meghalaya, Manipur, Mizoram, Tripura, Nagaland, Assam, Arunachal Pradesh, Sikkim, Jammu & Kashmir, Uttarakhand and Himachal Pradesh.

Section 24 provides for the categories of persons who are compulsorily required to register under GST, i.e. to whom the threshold limit of Rs. 20 lakhs/ 10 lakhs shall not apply. Further, Section 139(1) of CGST Act clearly states that every person registered under existing laws needs to migrate to GST by filling application form, i.e. GST REG-20. But what about persons whose aggregate turnover in a financial year does not exceed Rs. 20 lakhs/10 lakhs, as the case may be?

Under GST, there is a threshold limit specified for registration but no such limit for charging tax from recipient. It means that even if a person’s aggregate turnover does not exceed the threshold limit, he will be required to charge GST if he has obtained a registration under GST law.

The catch here is that if a person has an aggregate turnover of less than Rs. 20 lakhs/ 10 lakhs but he is making inter-State taxable supply, he is mandatory required to take registration. This would have a significant effect on small service providers who make inter-state supplies but are not aware of these intricacies of GST law.

Thus, the persons registered under the current Service tax / VAT laws are mandatorily required to migrate to GST and will be issued a provisional Registration Certificate on the appointed date. Incase such persons would not like to continue under the GST regime, they can file an application in form GST REG-24 to get their registration cancelled.

Written by CA Sunakshi Garg