CGST Section 23 — Persons not liable for registration
CGST Act · Persons not liable for registration
Quick Answer
Section 23 of the CGST Act, 2017 governs Persons not liable for registration. It provides the core statutory basis, outlining the essential legal principles, rights, and liabilities under Indian indirect tax law. Section 23 GST: Persons not liable for registration — eligibility, conditions, case laws and compliance impact under Indian tax law.
Plain-English Explanation
Section 23 of the CGST Act defines specific categories of individuals and businesses that are not required to register under the Goods and Services Tax (GST) regime. This section aims to ease the compliance burden on small businesses and certain specific sectors, ensuring that only those who need to be in the GST net are obligated to register.
This section primarily applies to two categories of individuals/businesses:
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Those dealing exclusively in non-taxable or wholly exempt goods/services: If your business only supplies goods or services (or both) that are either not subject to GST at all (non-taxable) or are completely exempt from GST, then you are not required to register.
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Agriculturists supplying produce from their land: An agriculturist is exempt from GST registration to the extent of supplying produce derived from the cultivation of their own land. This exemption is specifically for produce grown on their own land, not for trading of agricultural products sourced from others.
Here's a breakdown of the key conditions and exceptions:
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Exclusive Supply is Crucial: The exemption under clause (a) hinges on the exclusivity of dealing in non-taxable or wholly exempt supplies. If you supply even a single taxable item or service alongside the exempt ones, this exemption doesn't apply, and you will likely be required to register if your aggregate turnover exceeds the threshold limit.
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Agriculturist Definition: The term "agriculturist" refers to an individual or HUF who cultivates land either by own labour, by the labour of family members, or by hired labour under personal supervision. This exemption is intended to support genuine farming activities.
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Produce of Cultivation: The agricultural exemption applies only to the supply of produce derived from the cultivation of land. It does not extend to activities like processing agricultural produce (beyond basic processing to make it marketable), or trading agricultural produce purchased from other farmers.
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Government's Power to Exempt: Sub-section (2) allows the Government, based on the recommendations of the GST Council, to issue notifications specifying additional categories of persons who may be exempted from GST registration, subject to conditions and restrictions. This provides flexibility to adapt the registration requirements based on economic considerations.
Here are a few practical examples:
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Example 1 (Exempt Supply): Imagine a small business owner who only sells handmade khadi garments. If khadi garments are fully exempt from GST, and the business only deals with khadi, they would not be required to register under GST, even if their annual turnover exceeds the usual threshold for registration. However, if they start selling even a small amount of non-khadi, taxable clothing, they would lose this exemption.
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Example 2 (Agriculturist): A farmer grows rice on his land and sells it directly to a local mill. He also leases out a portion of his land for telecommunication towers. He is exempt from GST registration only for the sale of rice (produce from cultivation). The income from leasing the land for telecommunication towers is taxable and he would be required to register if his aggregate turnover (income from lease + other taxable income if any) exceeds the threshold limit.
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Example 3 (Composite Supply): A business supplies both exempt (say, fresh vegetables) and taxable goods (say, packaged spices). In this case, they would not be exempt from registration under Section 23(1)(a), and would need to register if their aggregate turnover exceeds the prescribed threshold.
Important Amendment:
The Finance Act, 2023, substituted the original text of Section 23. Before this amendment, the Government could specify categories of persons who could be exempted from registration on the recommendations of the Council. Now, the section explicitly defines two categories of persons who are not liable for registration (those dealing exclusively in non-taxable/exempt supplies and agriculturists). This change makes the exemption more direct and less dependent on government notifications for these specific categories. The power of the Government to exempt other categories via notification still exists in sub-section (2).
No case laws found for this section yet.
Browse all case laws →Frequently Asked Questions
Who is exempt from GST registration under Section 23?
Section 23 exempts two main categories of persons from GST registration: (1) Individuals engaged exclusively in supplying goods or services that are wholly exempt from GST. (2) Agriculturists engaged in supplying produce out of cultivation of land.
What does 'exclusively supplying goods or services that are wholly exempt from GST' mean in the context of Section 23?
This means that the person's entire supply basket consists only of goods or services on which no GST is levied. If even a single taxable supply is made, even occasionally, the exemption under this clause of Section 23 does not apply, and registration may be required if the aggregate turnover exceeds the threshold.
What constitutes an 'agriculturist' for the purpose of exemption under Section 23?
An agriculturist, as per Section 2(7) of the CGST Act, means an individual or Hindu Undivided Family (HUF) who undertakes cultivation of land (1) by own labour, or (2) by the labour of family, or (3) by hired labour under his personal supervision or the personal supervision of any member of his family.
If an agriculturist also sells processed agricultural produce, are they still exempt from registration under Section 23?
The exemption under Section 23 for agriculturists is limited to the supply of produce out of the cultivation of land. If the agriculturist undertakes further processing that transforms the produce significantly, it might be considered a separate taxable supply, potentially requiring registration if the turnover exceeds the threshold. The extent of processing and its impact on the essential character of the produce is crucial in determining taxability.
Does Section 23 exemption apply to those making inter-state supplies of exempted goods?
Yes, the exemption under Section 23 applies regardless of whether the supply is intra-state or inter-state, provided that all supplies are wholly exempt from GST and the person is not otherwise required to register (e.g., as a casual taxable person making taxable supplies).
If a person is exempt from registration under Section 23, can they still voluntarily register for GST?
Yes, even if a person is exempt from mandatory registration under Section 23, they can voluntarily register under Section 25(3) of the CGST Act. This allows them to avail Input Tax Credit (ITC) and other benefits associated with GST registration, even if their turnover is below the threshold limit.
How does the aggregate turnover affect the applicability of Section 23?
While Section 23 provides an exemption from registration for certain persons, it is important to note that the threshold limits for mandatory registration, as specified in Section 22, still apply. If a person, though initially eligible under Section 23 due to dealing solely in exempt supplies, starts making even a small amount of taxable supplies, their aggregate turnover (including the value of exempt supplies) must be considered. If this aggregate turnover exceeds the specified threshold, they will be required to register, irrespective of the exemption under Section 23 previously enjoyed.
Key Conditions & Requirements
| Condition | Details |
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| Engaged exclusively in supplying non-taxable/wholly exempt goods or services | The person must be exclusively engaged in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under the CGST Act or IGST Act. |
| Agriculturist supplying produce from cultivation of land | An agriculturist is not liable to registration to the extent of supply of produce out of cultivation of land. |
| Government Notification for Exempted Categories | The Government may, based on Council recommendations and subject to specified conditions and restrictions, exempt categories of persons from registration through notification. |
| Exemption overrides Section 22 and 24 | The Government's power to exempt categories of persons through notification overrides the mandatory registration requirements under Section 22 and Section 24. |
No related notifications found for this section.
Browse all notifications →Amendment History
Substituted ( w.e.f. 1st July, 2017 ) by s. 140 of The Finance Act 2023 (No. 8 of 2023) for " The Government may, on the recommendations of the Council, by notification, specify the category of persons who may be exempted from obtaining registration under this Act. ".