1.1 It is imperative for any law to provide for the “person” who is liable for payment of tax. The person so identified is liable for payment of tax under the GST Act.
1.2 Section 7(2) prescribes that GST shall be paid by every Taxable Person in accordance with the provisions of the Act. Taxable person is defined in section 2(96) of the Act as having the meaning assigned to it in section 9.
1.3 As per section 9, taxable person means a person:
a. who carries on any business at any place in the state [in respect of CGST who carry on business at any place in India], and
b. who is registered/required to be registered under schedule III of the GST Act.
1.4 Thus, in order to be covered within the definition of ‘Taxable Person”, both the above conditions are to be satisfied.
General rule: provider to pay the GST
1.5 On perusal of schedule III, it would be noted that it is the supplier who is required to get himself registered .Thus, it is seen that ordinarily it is the liability of the supplier to pay the tax.
Liability of Government and Local Authority
1.6 Section 9(2) specifically includes Central Government, State Government or any Local Authority within the meaning of Taxable Person in respect of activities or transactions in which they are engaged as public authorities.
1.7 However if Central Government, State Government or any Local Authority act as public authorities, then they are not considered as taxable person if they carry out the activities or transactions as specified in schedule IV of the Act. Said Schedule contains activities such as :
(i) Services provided by a Government or local authority to another Government or local authority.
(ii) Services provided by a Government or local authority to individuals or functions such as-
issuance of passport, visa, driving licence, birth certificate or death certificate.
(iii) Services provided by Government towards-
– diplomatic or consular activities;
– citizenship, naturalization and aliens;
1.8 Following persons are not considered as a taxable person:
• An agriculturalist defined in section 2(8) which means a person who cultivates land personally, for the purpose of agriculture.
• A person required to be registered under paragraph 1 of schedule III shall not be considered as a taxable person until his aggregate turnover in a financial year exceed Rs. 10 lakh [In respect of North Eastern states including Sikkim 5 lakh]
• Any person who provides services as an employee to the employer in the course of or in relation to his employment. Interestingly this exclusion has been made more elaborate by further providing that any person, who provides services by any other legal ties, creates the relationship of employer and employee as regards working conditions, remunerations and employers liability, shall also remain outside the ambit of taxable person.
Thus even though the contractual relationship between two persons may not be that of an employer and employee, still in case as regards working conditions, remuneration and employers liability any law creates relationship between them as that of an employer and employee, such a relationship would also remain outside the ambit of GST.
• Any person engaged in business of exclusively supplying goods or services that are not liable to tax under the Act.
• A receiver of service who is otherwise liable to pay tax on reverse charge basis under section 7(3), but he received the services of a value not exceeding specified amount for personal use, other than for use in the course of furtherance of his business, would also not be considered as taxable person.
Exception to suppliers’ liability: reverse charge
1.9 As seen above, though ordinarily it is the supplier who is considered as taxable person and hence liable for payment of GST, provisions of section 7(3) provides for an exception in form of reverse charge.
1.10 It has been provided that:
• the government may
• on the recommendation of the GST Council
• by notification
• specify category of supply of goods and / or services the tax on which is payable on reverse charge basis
… then the tax thereon shall be paid by the person receiving such taxable goods or services.
1.11 In that case all the provisions of this GST Act shall apply to such person as if he is the person liable for paying the tax in relation to such goods and/or services.