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GST registration mandatory for person authorized to supply under the brand name of taxable person


Facts


Applicant is a partnership firm, unregistered under the GST Act and one of the franchisee's of EXPLORE KNOWLEDGE RESOURCES LLP, Rajkot. “ALOHA” a business brand is operated by EXPLORE KNOWLEDGE RESOURCES LLP, Rajkot. It charges Royalty from its franchisees for using its brand name and sells its product under its brand through its franchisees. Applicant sell products like books, stationary etc. without having profit margin under the brand name of “ALOHA”.

The applicant total yearly receipt does not exceeds Rs. 20 lacs in any financial year; however an annual receipt of the franchisor, KNOWLEDGE RESOURCES LLP, Rajkot exceeds Rs. 20 lacs.

Question:-

  1. Is Applicant required to take GSTIN ?

  2. Is PATRATOR required to pay tax under GST Act?

Discussion


As per Section 22(1) of CGST Act, 2017, if a person makes a taxable supply of goods or service or both and on account of said supply his aggregate turnover in a financial year exceeds of Rs. 20 lacs, then he is liable for GST Registration. The applicant has stated his aggregate turnover on supply of goods and services do not exceeds Rs. 20 lacs in a financial year therefore, he is not liable for Registration under section 22(1) of CGST Act, 2017.


As per section 24, persons mentioned in said section are mandatorily required to take GST registration and for them threshold limit of aggregate turnover of Rs. 20 lacs is not applicable. Sr. No. (vii) of said Section defines the category of person who supply the goods and service or both on behalf of the other taxable person.


AAR went through the agreement entered between applicant and Explore Knowledge Resources, LLP, Rajkot and examined terms and conditions such as :-

  • the applicant is required to fulfill the requirements of infrastructure and manpower before commencement of operations of the Centre as per the instructions of the Company

  • the applicant shall permit the representatives of the Company to conduct spot checks in order to ensure that the applicant is functioning in compliance to the Company’s instructions

  • the applicant shall not use any other course material other than those supplied by the company

  • the applicant also undertakes not to conduct, run and engage in any other courses or activities else than licensed in this agreement,

  • the applicant shall only use the application forms, receipt books, fees lists etc. supplied by the Company and shall not attempt to print its own material

  • All the payments from the students are collected in name of the applicant on receipts printed by the Company

  • The applicant also collects Student Registration fee from every student on behalf of the Company and remits the same to the Company.

Conclusion


Hence, AAR ruled that the applicant is only authorized to supply the goods and service under the brand name of “ALOHA” and cannot supply the other goods and service. Hence applicant is supplying the goods and service on behalf of the taxable person and therefore liable to take registration under section 24 of CGST, Act 2017 and pay GST accordingly.

 

Read Full text of Ruling by AAR-Gujarat

 

The applicant is engaged in selling books, stationery, etc. and offering courses like Mental Arithmetic, English Smart under brand name of ‘ALOHA’ operated by Explore Knowledge Resources, LLP Applicant has entered into an agreement with Explore Knowledge Resources, LLP as per which applicant is only authorized to supply goods and services under brand name of ‘ALOHA’ and cannot supply other goods and services Thus, applicant is supplying goods and services on behalf of other taxable person and shall accordingly be covered under Sl. No. (vii) of section 24, hence shall be liable to take GST registration and pay GST on supply of goods and services

[2020] 119 taxmann.com 332 (AAR – GUJARAT)

AUTHORITY FOR ADVANCE RULINGS, GUJARAT


Patrator, In re


SANJAY SAXENA AND MOHIT AGRAWAL, MEMBER

ADVANCE RULING NO. GUJ/GAAR/R/28 OF 2020

JULY  2, 2020 

Darshit Soni for the Applicant.

RULING

 

1. M/s. Patrator, 307 Vraj Plaza, Opp. Janta Ice Cream, Bhatta, Ahmedabad in not having GSTIN filed an application for Advance Ruling under section 97 of CGST Act, 2017 and Section 97 of the GGST Act, 2017 in FORM GST ARA-01 discharging the fee of Rs. 5,000/- each under the CGST Act and the SGST Act.


2. The applicant submitted that, “ALOHA” a business brand is operated by EXPLORE KNOWLEDGE RESOURCES LLP, Rajkot. It charges Royalty from its franchisees for using its brand name and sells its product under its brand through its franchisees.


3. The applicant further submitted that “PATRATOR” is a partnership firm, unregistered under the GST Act and one of the franchisees of EXPLORE KNOWLEDGE RESOURCES LLP, Rajkot. Further submitted that they sell their products and provide services under the brand name of “ALOHA” to customers. They sell products like books, stationary etc. without having profit margin under the brand name of “ALOHA”. They offer various courses to students Mental Arithmetic, English Smart under the brand name of “ALOHA”. All receipts of product sale or services are being taken in the name of their partnership firm “PATRATOR” and deposit the fees in their partnership firm bank account. At the end of every fifteen days, they pay royalty to their franchisor, KNOWLEDGE RESOURCES LLP, Rajkot based on fees they collect from their customers.


4. The applicant submitted that total yearly receipt of their partnership firms PATRATOR does not exceeds Rs. 20 lacs in any financial year; however an annual receipt of the franchisor, KNOWLEDGE RESOURCES LLP, Rajkot exceeds Rs. 20 lacs.

5. The applicant has submitted the copy of agreement held between the applicant and Explore Knowledge Resources LLP for franchisee of “ALOHA”.


6. Accordingly, the applicant sought the advance Ruling on the following question


(1)Is PATRATOR required to take GSTIN ?

(2)Is PATRATOR required to pay tax under GST Act?


Personal Hearing


7. Personal hearing in the matter was held on 11-06-2020. Shri Darshit Soni, appeared on behalf of the applicant and re-iterated the submission made in the Application.


Discussion and Finding


8. We have considered the submissio