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Published on:

September 27, 2024

Shaaransh Sharma

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‍Person Not Liable for Registration Under GST - Section 23 of CGST Act

The Goods and Services Tax (GST) regime introduced in India is aimed at reducing the complexities existing in the country's tax system. Nevertheless, like any system of tax, some various provisions and exemptions have to be comprehended to plan the taxes effectively without fail. Section 23 of CGST Act has stipulated that some persons do not need to be registered under GST under specified circumstances. We have a more in-depth look at this section to explore the conditions under which exemptions apply and their impacts on both individuals and businesses.

Speaking of CGST, you might also be interested in our other blog on What is CGST: Central Goods and Service Tax

Understanding Section 23 of CGST Act

Persons are not liable to be registered under the GST – categories listed in section 23 of the CGST Act. This is opposite to the basic rule which mandates registration for persons crossing the aggregate turnover limit fixed under GST laws.

Section 23(1) of the CGST Act specifies that the following persons need not take a registration:

Any related person,who is only engaged in making exempt supply of goods or services or both under this Act.
Any person who is engaged in the business of making only exempt supplies of goods or services or both.
Agriculturists, to the extent of supply of produce out of cultivation of land.

The objective of this provision is to ensure that the persons/companies which are not into any business which attracts GST or have business but do not fall under the threshold limits should also be free from considering themselves as a taxable person with its attendant financial and administrative costs.

Who Are Exempt from GST Registration?

Under Section 23 of CGST Act, certain categories of individuals and entities are exempt from GST registration. Let's explore these categories in detail:

1. Suppliers of Non-Taxable Goods and Services

They need not take registration if they make a supply of only exempted goods or services or both. Non-taxable supplies refer to a supply that does not attract GST by falling outside the ambit of the definition of outward supply.

E.g., Alcoholic liquor for human consumption is non-GST supplies. There is no compulsion on the suppliers of these supplies to get registered since these supplies are outside the GST regime.

2. Suppliers of Exempt Goods and Services

A person who deals only in exempt goods or services is also not required to register. The tax slab under the GST is based on 4 major categories, namely- Zero-rated goods – zero per cent rate of GST applies to this category of Goods. If the turnover of any one person is only in exempt goods or services, then that person need not obtain registration under GST.
Learn more about GST on Reimbursement of Expenses to a Supplier

3. Agriculturists

A person is not liable for registration where such person carries on the business of

(i) cultivation of land or

(ii) produce out of cultivation of land.

This exemption is given to simply reduce the compliance burden on farmers which otherwise could have been tiring in nature, while adhering to GST laws. This would cover anyone who grows crops, does gardening, forestry or farming in any other form. However, if an agriculturist has non-farming activities like providing services or selling processed goods, they are required to get a GST registration.

Threshold Exemptions: Who Else Is Not Liable for Registration?

Section 23 establishes categories of exemption, but also sets out particular thresholds below which registration is not required. The threshold limits depend on whether a supplier of goods, services or both and whether the supply is made from a special category state. Here are the high-level limits:

For Goods: Suppliers of goods (having aggregate turnover less than ₹40 lakhs) are exempted from registration in case they are not supplying their goods in special category states for which the threshold is ₹10 lacs.
For Services: Suppliers of services whose yearly revenue is between Rs 10 lakhs and Rs 20 lakhs are exempt from registration in special category states.

Registration is exempted based on the turnover which is different from exemptions provided under Section 23 of CGST Act. Subject to the conditions provided, such persons shall be exempt from registration without turnover based on their activities.

Exemptions for Special Categories: Composition Scheme

In the case of small taxpayers who do not belong to categories exempted by Section 23, they can get relief from relaxation from GST compliance altogether and opt for the Composition Scheme. Under this scheme, a taxpayer with a turnover of up to Rs 1.5 crore (Rs 75 lakh for special category states) within the scope of this scheme can pay tax at a prescribed percentage on their turnover every quarter, instead of paying it monthly filing paperwork frequently and shelling out in taxes. However, they cannot get the exemption given under Section 23, provided that they register under GST opting for this scheme.

Important Updates and Amendments in GST Registration Rules

The government has since made several modifications and changes in the GST laws to make the system more flexible and reduce the compliance burden over time. These include making changes to provide more clarity in the registration requirement for e-commerce operators, job workers and non-resident taxpayers w.e.f 2021.

The GST Council has also recommended that businesses dealing with petroleum products, alcohol meant for human consumption and other non-GST goods will be out of the scope of GST registration which provides clarity on the applicability of Section 23.

The list of exempt services and goods has been updated until after the most recent update. Zero-Rated Supply also benefits businesses engaged in the export of services and goods, however, they usually still register under GST to claim input tax credit (ITC).

How Does Section 23 Impact Businesses and Individuals?

For several small businesses, sole proprietors and also individuals dealing in non-taxable or exempt supplies, section 23 of the CGST Act is very important. Additionally, with no necessity for their registration under GST, it does away with intricate tax filings or compliance costs/audits.

Nevertheless, a person whose only business is the cultivation of crops and such tax contribution on his sale is not applicable for GST. Likewise, a supplier that only sells exempt goods such as medical care or education would also be advantaged by this exemption. This provision makes the system more efficient because it makes sure that people who are not at all engaged in any kind of taxable activity will not be covered by GST.

Common Misconceptions About GST Registration Exemptions

There are many a myth about registration under GST, mainly because of the threshold exemptions and also due to section 23. A few common misconceptions:

Exemptions Based on Turnover are Universally Applicable: There is a common myth that gets propagated saying if your turnover is so and so you are exempt but this does not apply universally. Even if they run on a small scale, businesses dealing in taxable goods have to register if their turnover crosses the limit.
Registration under GST: Where a person is engaged in a taxable activity and an exempted activity, then the effective division of that person will be deemed to be engaged exclusively in the taxable activity and thus liable for registration. The exemption in Section 23 is applicable only if a person involves himself only in exempt supplies.
Non-Agricultural Activities of Agriculturists: Land cultivated by agriculturists is exempt, however, when engaged in non-agricultural business activities (selling processed goods or services related to agriculture), they must register.

The complete GST registration guide is explained in our other blog on All about the GST registration process

Conclusion

CGST Act Section 23: The most important section that would help in unrevealing some compliance burden of certain categories like people doing Non-taxable or Exempt supplies, agriculturists. It allows businesses to focus on doing what they do best — their core business without the hassle of tax compliance, provided they satisfy certain requirements that exempt them from registration.

Now anyone who is thinking, "Who is exempt from GST registration?" That depends on the type of your business and if it is classified as Non-Taxable or Exempt types under Section 23 of CGST Act. As the government continues to fine-tune GST compliance for the ease of doing business, businesses (irrespective of size) must stay abreast with such changes in law.

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FAQs

What is Section 23 of the CGST Act?

Section 23 of CGST Act specifies categories of persons who are not required to register under GST, including suppliers of exempt goods or services and agriculturists.

Who is exempt from GST registration?

Persons supplying only non-taxable or exempt goods and services, as well as agriculturists, are exempt from GST registration under Section 23 of the CGST Act.

Do agriculturists need to register under GST?

No, agriculturists are not required to register under GST for the supply of produce cultivated from their land.

What is the GST registration threshold for goods?

Suppliers of goods are exempt from GST registration if their aggregate turnover is below ₹40 lakhs, with lower thresholds for special category states.

Does Section 23 apply to businesses with taxable goods?

No, Section 23 only applies to those engaged exclusively in non-taxable or exempt supplies. Businesses dealing in taxable goods must register if they exceed the turnover threshold.