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November 2017

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GST REGISTRATION COMPULSORY FOR MSOS ?

Q: I am still not clear if it is compulsory for LCOs to register under GST?

Recently I read that MCOF members were informed in a GST seminar that it is not compulsory for them to register under GST.

I was no able to attend the GST seminar organised by SCaT, during the SCaT 2017 tradeshow. Can you please share details of what was discussed and if it is compulsory for LCOs to register under GST ? Please also clarify any other important points in this respect.

Vikram Jain, Via Whats App

ANS: First all all, we should be clear that if any LCO's aggregate turnover in a financial year exceeds ₹ 20 lakhs, it is compulsory for him to register under GST. This is true for all GST categories.

AGGREGATE TURNOVER

"Aggregate Turnover" means the aggregate value of all taxable supplies, exempt supplies, exports of goods or services or both and inter-State supplies of a person having the same Permanent Account Number, to be computed on all India basis and excludes central tax, State tax, Union territory tax, integrated tax and cess

For LCOs with annual aggregate turnover of less than 20 Lakhs, there seem to be 2 cases, and the answer is apparently, Yes & No ! MCOF (Maharashtra Cable Operator's Foundation http:// mcof.org.in) feels that the decision depends on the Exact words of the Agreement signed between the MSO & LCO / LMO.

TYPICAL MSO/LCO AGREEMENT

In SATELLITE & CABLE TV Magazine - July 2017 we had carried a detailed article explaining why its COMPULSORY for all LCOs / LMOs & Broadband Resellers to register for GST ... even if their annual turn over is less than ₹ 20 Lakhs.


NOTE

Do also note the following:

1. Anyone is welcome to register under GST.. even if your annual revenue is ₹ 1

2. If as an LCO / LMO you do not register for GST, you cannot reclaim GST credit for the GST that the MSO has paid when billing you. You completely loose this amount



SECTION 24 OF THE GST ACT

Section 24 of the GST Act details specific categories where it is compulsory to obtain a GST registration, even if the annual billing is less than ₹ 20 Lakhs per year.

Clause (vii) states:

(vii) persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent OR OTHERWISE;

SCaT believes that this clause is applicable to LCOs and VNOs / Broadband service providers. Our reading of this clause indicates that the clause specifically mentions that it is applicable even to non-agents.

However, MCOF says that if the agreement between the MSO and LCO /LMO is of that between 2 principals, and not between that of a principal & agent, then GST registration is not compulsory for the LCO/ LMO with annual revenues below ₹ 20 Lakhs per year.

DEFINITION OF AGENT

The GST Act defines an Agent as a person including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another.

(A del credere agency is a type of principal-agent relationship wherein the agent acts not only as a salesperson or broker for the principal but also as a guarantor of credit extended to the buyer. This is not applicable for the MSO / LCO arrangement).


Section 24, Clause vii (vii) Persons Who Make Taxable Supply Of Goods Or Services Or Both On Behalf Of Other Taxable Persons Whether As An Agent OR OTHERWISE;



DEFINITION OF PRINCIPAL

As per the definition provided in the GST law, the term "Principal" means a person on whose behalf an agent carries on the business of supply or receipt of goods or services, or both. For instance, a dealership store of an automobile company is an excellent example of Principal-Agent relationship.

GST RATE

GST on Cable TV services is 18%.

OPINIONS

As per the seminar during SCaT 2017... the Jt Commissioner GST said, that it appears that all LCOs must compulsorily register for GST, but reserved his final comment, the matter needed a detailed reading. The Jt. Commissioner felt that based on what he was told at the meeting, the LCO is an "agent" of the MSO, as per the GST definition of "agent".


Section 24, Clause vii For Compulsory GST Registration Is Not Restricted Only To Agents.



The MCOF also held a GST seminar in Panvel, in early Oct and MCOF says they were informed that the LCO / LMO does NOT have to compulsory register for GST if the MCOF's suggested agreement is signed between the MSO & LCO / LMO.

The MCOF says their suggested agreement terms the relation between MSO & LCO/ LMO as a Principal To Principal agreement.... and the MCOF argues that if their agreement is signed, it is not necessary for LCOs / LMOs to Compulsory register under GST.

I have not studied the MCOF agreement & its implications. However, as detailed above, Section 24, Clause vii is not restricted only to agents.

SCaT believes that LCOs / LMOs are required to compulsorily register under GST.

Not following the GST law has severe penalties, and we would advice all LCOs & LMOs who are planning not to register under GST, to proceed with Extreme Caution.

ADVANCE RULING

The best option for anyone in doubt is to obtain an "Advance Ruling" from the Authority for Advance Ruling (AAR).


The Advance Ruling Is Applicable Only To The Person Who Has Applied For It.



The application to the AAR must be in the prescribed format.

On receipt of the application, the AAR will send a copy of application to the officer in whose jurisdiction the applicant falls and call for all relevant records. The AAR may also hear the applicant. Thereafter he will pass an order either admitting or rejecting the application, within 90 days.

The applicant can appeal the order to the Appellate Authority for Advance Ruling (AAAR), within 30 days & receive a final verdict in 90 days.

An advance ruling binding only on the applicant and the concerned officer. The advance ruling is not applicable to similar taxable persons in the State. It is only limited to the person who has applied for an advance ruling.



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