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CMA Intermediate · Direct and Indirect Taxation · Registration

Mahesh Traders, a proprietary firm in Indore, deals exclusively in goods that are wholly exempt from tax under the CGST Act and the IGST Act. Which statement about its liability to register under GST is correct?

Mahesh Traders is not liable to registration. Section 23(1)(a) says a person engaged exclusively in supplying goods or services that are not taxable or are wholly exempt under the CGST or IGST Act need not register, and this holds regardless of turnover.

  1. AIt is not liable to registration, because a person engaged exclusively in supplying goods or services that are not liable to tax or wholly exempt is not liable to registerCorrect
  2. BIt must register, because every business must register irrespective of the nature of its supplies
  3. CIt must register only if its turnover exceeds the threshold, even though all its supplies are wholly exempt
  4. DIt must register, because exemption can be claimed only by a registered person

Explanation

Section 23(1)(a) of the CGST Act provides that a person engaged exclusively in supplying goods or services or both that are not liable to tax or wholly exempt from tax under the CGST or IGST Act is not liable to registration. Mahesh Traders deals exclusively in wholly exempt goods, so the rule applies. The threshold-based option is wrong because the exemption from registration does not depend on turnover.

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