Ch 14 - Person Liable to Pay Tax | GST Saral by CA Dhruv Aggarwal PDF Download

 Page 1


CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 14 - Person l i able to pay tax 
 
 
 
 
 
CHAPTER 14 
 
Person liable to pay tax 
 
EXECUTIVE SUMMARY 
 
?   Person whose supplies of goods or services or both are more than Rs twenty lakhs per annum is 
required to pay GST. In case of North Eastern States, Jammu and Kashmir, Himachal Pradesh and 
Uttarakhand, third limit is Rs ten lakhs. 
?   He is required to register with GST Authorities. He has to apply electronica ly and submit his PAN 
details, address proof, details of constitution etc. 
?   Persons whose turnover is less than Rs 50 lakhs per annum can opt to pay tax under composition 
scheme. The rates are - 2% for manufacturers, 1% for traders and 5% for restaurants. 
?   However, the condition for composition scheme is that a l their purchases should be from registered 
persons. This is very di fficult for sma l businessmen. If they purchase from unregistered persons, they 
will be liable to pay GST on these purchases. 
?   E-commerce companies will be required to pay 1% as Tax Co lection at Source. In some cases (like 
taxi services), they will be liable to pay entire tax. 
?   In case of supplies to Government or Local Authority or Government Agencies, provision of TDS 
(Tax Deduction at Source) of 1% has been made, if contract exceeds Rs 2.50 lakhs. 
14.1 Person liable to pay tax 
 
Every taxable person is liable to pay CGST and SGST, except where tax is payable under reverse charge - 
section 9(1) of CGST Act. 
There are exemptions to sma l suppliers. Some persons are required to pay tax even if they are not suppliers. 
Issues are summarised above. These are discussed at appropriate places. 
14.1-1 Taxable person 
 
Taxable person means a person who is registered or liable to be registered under section 22 or 24 of CGST 
Act - section 2(107) of CGST Act. 
14.2 Meaning of 'Person' 
 
Section 2(84) of CGST Act defines 'person' as fo lows. 
"Person" includes— 
(a)   an individual 
(b)   a Hindu undivided family 
(c)   a company 
(d)   a firm 
Page 2


CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 14 - Person l i able to pay tax 
 
 
 
 
 
CHAPTER 14 
 
Person liable to pay tax 
 
EXECUTIVE SUMMARY 
 
?   Person whose supplies of goods or services or both are more than Rs twenty lakhs per annum is 
required to pay GST. In case of North Eastern States, Jammu and Kashmir, Himachal Pradesh and 
Uttarakhand, third limit is Rs ten lakhs. 
?   He is required to register with GST Authorities. He has to apply electronica ly and submit his PAN 
details, address proof, details of constitution etc. 
?   Persons whose turnover is less than Rs 50 lakhs per annum can opt to pay tax under composition 
scheme. The rates are - 2% for manufacturers, 1% for traders and 5% for restaurants. 
?   However, the condition for composition scheme is that a l their purchases should be from registered 
persons. This is very di fficult for sma l businessmen. If they purchase from unregistered persons, they 
will be liable to pay GST on these purchases. 
?   E-commerce companies will be required to pay 1% as Tax Co lection at Source. In some cases (like 
taxi services), they will be liable to pay entire tax. 
?   In case of supplies to Government or Local Authority or Government Agencies, provision of TDS 
(Tax Deduction at Source) of 1% has been made, if contract exceeds Rs 2.50 lakhs. 
14.1 Person liable to pay tax 
 
Every taxable person is liable to pay CGST and SGST, except where tax is payable under reverse charge - 
section 9(1) of CGST Act. 
There are exemptions to sma l suppliers. Some persons are required to pay tax even if they are not suppliers. 
Issues are summarised above. These are discussed at appropriate places. 
14.1-1 Taxable person 
 
Taxable person means a person who is registered or liable to be registered under section 22 or 24 of CGST 
Act - section 2(107) of CGST Act. 
14.2 Meaning of 'Person' 
 
Section 2(84) of CGST Act defines 'person' as fo lows. 
"Person" includes— 
(a)   an individual 
(b)   a Hindu undivided family 
(c)   a company 
(d)   a firm 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
(e)   a Limited Liability Partnership 
 
(f)  an association of persons or a body of individuals, whether incorporated or not, in India or outside 
India 
(g)   any  corporation  established  by  or  under  any  Central  Act,  State  Act  or  Provincial  Act  or  a 
Government company as defined in section 2(45) of the Companies Act, 2013 
(h)   any body corporate incorporated by or under the laws of a country outside India 
(i)   a co-operative society registered under any law relating to co-operative societies 
(j)   a local authority 
(k)  Central Government or State Government 
(l)   society as defined under the Societies Registration Act, 1860 (21 of 1860) 
(m)  trust and 
(n)   every artificial juridical person, not fa ling within any of above. 
The definition is 'inclusive' and can cover any other 'person' also. 
Person as per General  Clauses Act - Section 3(42) of General Clauses Act states that 'person' shall include 
any company or association or body of individuals, whether incorporated or not. 
PAN number  indicates  type of person - The fourth digit of Income Tax PAN number indicates type of 
'person', as follows - C - Company, P - Individual, H - HUF, F - Firm, A - AOP, T - Trust, B - BOI, L - 
Local Authority, G - Government, J - Artificial Judicial Person. 
Of course, this classification is not determinative e.g. alphabet A is used for societies also but sti l society is not 
AOP. 
 
14.2-1 Unincorporated club or association is 'person' 
 
An association of persons or a body of individuals, whether incorporated or not, in India or outside India is a 
'person' - section 2(84)(f) of CGST Act, 
 
Provision by a club, association, society or any such body (for a subscription or any other consideration) of 
the facilities or benefits to its members have been specifica ly covered in definition of 'business' in section 2(17) 
(e) of CGST Act. 
This is to avoid argument of 'mutuality' and reduce litigation. 
 
Supply of goods  by any unincorporated  association or body of persons  to a member  thereof for cash, 
deferred payment or other valuable consideration will be 'supply of goods' - para 7 of Schedule II of CGST 
Act. 
Interestingly,  there  is no  para lel provision  in respect  of services  provided  by club  or association  to  its 
members. However, it should come under 'supply' which is a wide definition. This activity has been specifica ly 
included in definition of 'business' and hence should be subject to GST. 
Thus, goods or services supplied by an unincorporated club, association or body of persons to its members 
will be subject to GST. 
A club  letting out rooms  and  cottages  to  its members  and  guests  on rent is liable  to  pay luxury tax - 
Trivandrum Club v. Sales Tax Officer (2012) 54 VST 442 (Ker HC DB). 
 
However, there is mutuality between members and club. There are conf licting judgments on this issue. Hence, 
the issue has been referred to large bench in State of West Bengal v. Calcutta  Club Ltd. (2016) 56 GST 
216 = 70 Latest Case212 = 96 VST 20 (SC). 
Page 3


CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 14 - Person l i able to pay tax 
 
 
 
 
 
CHAPTER 14 
 
Person liable to pay tax 
 
EXECUTIVE SUMMARY 
 
?   Person whose supplies of goods or services or both are more than Rs twenty lakhs per annum is 
required to pay GST. In case of North Eastern States, Jammu and Kashmir, Himachal Pradesh and 
Uttarakhand, third limit is Rs ten lakhs. 
?   He is required to register with GST Authorities. He has to apply electronica ly and submit his PAN 
details, address proof, details of constitution etc. 
?   Persons whose turnover is less than Rs 50 lakhs per annum can opt to pay tax under composition 
scheme. The rates are - 2% for manufacturers, 1% for traders and 5% for restaurants. 
?   However, the condition for composition scheme is that a l their purchases should be from registered 
persons. This is very di fficult for sma l businessmen. If they purchase from unregistered persons, they 
will be liable to pay GST on these purchases. 
?   E-commerce companies will be required to pay 1% as Tax Co lection at Source. In some cases (like 
taxi services), they will be liable to pay entire tax. 
?   In case of supplies to Government or Local Authority or Government Agencies, provision of TDS 
(Tax Deduction at Source) of 1% has been made, if contract exceeds Rs 2.50 lakhs. 
14.1 Person liable to pay tax 
 
Every taxable person is liable to pay CGST and SGST, except where tax is payable under reverse charge - 
section 9(1) of CGST Act. 
There are exemptions to sma l suppliers. Some persons are required to pay tax even if they are not suppliers. 
Issues are summarised above. These are discussed at appropriate places. 
14.1-1 Taxable person 
 
Taxable person means a person who is registered or liable to be registered under section 22 or 24 of CGST 
Act - section 2(107) of CGST Act. 
14.2 Meaning of 'Person' 
 
Section 2(84) of CGST Act defines 'person' as fo lows. 
"Person" includes— 
(a)   an individual 
(b)   a Hindu undivided family 
(c)   a company 
(d)   a firm 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
(e)   a Limited Liability Partnership 
 
(f)  an association of persons or a body of individuals, whether incorporated or not, in India or outside 
India 
(g)   any  corporation  established  by  or  under  any  Central  Act,  State  Act  or  Provincial  Act  or  a 
Government company as defined in section 2(45) of the Companies Act, 2013 
(h)   any body corporate incorporated by or under the laws of a country outside India 
(i)   a co-operative society registered under any law relating to co-operative societies 
(j)   a local authority 
(k)  Central Government or State Government 
(l)   society as defined under the Societies Registration Act, 1860 (21 of 1860) 
(m)  trust and 
(n)   every artificial juridical person, not fa ling within any of above. 
The definition is 'inclusive' and can cover any other 'person' also. 
Person as per General  Clauses Act - Section 3(42) of General Clauses Act states that 'person' shall include 
any company or association or body of individuals, whether incorporated or not. 
PAN number  indicates  type of person - The fourth digit of Income Tax PAN number indicates type of 
'person', as follows - C - Company, P - Individual, H - HUF, F - Firm, A - AOP, T - Trust, B - BOI, L - 
Local Authority, G - Government, J - Artificial Judicial Person. 
Of course, this classification is not determinative e.g. alphabet A is used for societies also but sti l society is not 
AOP. 
 
14.2-1 Unincorporated club or association is 'person' 
 
An association of persons or a body of individuals, whether incorporated or not, in India or outside India is a 
'person' - section 2(84)(f) of CGST Act, 
 
Provision by a club, association, society or any such body (for a subscription or any other consideration) of 
the facilities or benefits to its members have been specifica ly covered in definition of 'business' in section 2(17) 
(e) of CGST Act. 
This is to avoid argument of 'mutuality' and reduce litigation. 
 
Supply of goods  by any unincorporated  association or body of persons  to a member  thereof for cash, 
deferred payment or other valuable consideration will be 'supply of goods' - para 7 of Schedule II of CGST 
Act. 
Interestingly,  there  is no  para lel provision  in respect  of services  provided  by club  or association  to  its 
members. However, it should come under 'supply' which is a wide definition. This activity has been specifica ly 
included in definition of 'business' and hence should be subject to GST. 
Thus, goods or services supplied by an unincorporated club, association or body of persons to its members 
will be subject to GST. 
A club  letting out rooms  and  cottages  to  its members  and  guests  on rent is liable  to  pay luxury tax - 
Trivandrum Club v. Sales Tax Officer (2012) 54 VST 442 (Ker HC DB). 
 
However, there is mutuality between members and club. There are conf licting judgments on this issue. Hence, 
the issue has been referred to large bench in State of West Bengal v. Calcutta  Club Ltd. (2016) 56 GST 
216 = 70 Latest Case212 = 96 VST 20 (SC). 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
14.3 Partnership firm 
 
It may be surprising but true that a Partnership Firm is not a legal entity. It has limited identity for purpose of 
tax law. 
A partnership firm is not a 'body corporate'. It is treated as having separate entity only for limited purposes 
e.g. for taxation and filing of suits. 
"Partnership" is the relation between persons who have agreed to share the profits of business carried on by a l 
or any to them acting for a l. - - Persons who have entered into partnership  with one another are ca led 
individua ly "partners" and co lectively "a firm", and the name under which their business is carried on is ca led 
the "firm name". [section 4 of Partnership Act]. 
14.4 Proprietary concern or firm 
 
An individual may carry on business under some name. This is a 'proprietary concern' or 'proprietary firm'. 
 
In case of sole proprietary concern, there is unity of interest between proprietary concern and the proprietor. 
In fact, proprietor and the concern is same. 
In Ashok Transport  Agency v. Awadhesh Kumar 1998 AIR SCW 4042 = 1998(5) SCC 567, it was 
observed - 'A partnership firm di ffers from a proprietary concern owned by an individual. A partnership is 
governed by the provisions of Indian Partnership Act. Though partnership firm is not a juristic person, it can 
sue and be sued in name of firm. A proprietary concern is only business name in which the proprietor of the 
business carries on the business. A suit by or against a proprietary concern is by or against the proprietor of 
business' - quoted with approval in Raghu Laksminarayan v. Fine Tubes (2007) 215 ELT 19 (SC). 
Proprietor is a person, but he does business for trading convenience in the name of proprietary concern, which 
is not a legal or juristic entity. Thus, proprietor and proprietary concern are one and the same person. - SK 
Real Estates v. Ahmed Meeran (2002) 111 Comp Cas 400 (Mad) - Same view in Lawn Hosiery Mills v. 
Durga Fashions (2002) 111 Comp Cas 568 (Mad HC) * Jai Timber Company v. CCE (2009) 234 ELT 
457 (CESTAT). 
 
14.5 Hindu Undivided Family (HUF) 
Definition of 'person' includes HUF. 
HUF is not 'body corporate'. 
HUF is a unit consisting of common ancestor and his male lineal descendent of any generation and also wife or 
wives or unmarried daughters of the said common ancestor. 
 
However, whenever marriage takes place amongst Hindus, Jains or Sikhs, a family is automatica ly constituted 
as comprising of husband and the wife. Such a family remains as HUF until divided. 
Both son and daughter are 'Coparceners' of HUF. Daughter can continue as member and coparcener of HUF 
even after marriage. 
 
HUF comes into existence automatica ly on the marriage of the Hindu male. HUF is a creature of law. It 
cannot be created by acts of any party except that by adoption or marriage, a stranger may become part 
thereof. Thus, there is no question of 'forming' an HUF. Possession of property or a nucleus of property is not 
necessary for formation of HUF. - SmtSathyaprema Gowda v. CED (1997) 92 Taxman 617 (SC). 
HUF is considered to be a separate entity under Income Tax Act. - K V Kuppa Raju v. GOI (2002) 123 
Taxman 926 (Kar HC DB). 
 
Since HUF is a separate legal entity for purpose of income tax, property of individual member of HUF cannot 
be attached for recovery of dues of HUF - Kapurchand  Shrimal v. TRO AIR 1969 SC 682- fo lowed in 
Page 4


CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 14 - Person l i able to pay tax 
 
 
 
 
 
CHAPTER 14 
 
Person liable to pay tax 
 
EXECUTIVE SUMMARY 
 
?   Person whose supplies of goods or services or both are more than Rs twenty lakhs per annum is 
required to pay GST. In case of North Eastern States, Jammu and Kashmir, Himachal Pradesh and 
Uttarakhand, third limit is Rs ten lakhs. 
?   He is required to register with GST Authorities. He has to apply electronica ly and submit his PAN 
details, address proof, details of constitution etc. 
?   Persons whose turnover is less than Rs 50 lakhs per annum can opt to pay tax under composition 
scheme. The rates are - 2% for manufacturers, 1% for traders and 5% for restaurants. 
?   However, the condition for composition scheme is that a l their purchases should be from registered 
persons. This is very di fficult for sma l businessmen. If they purchase from unregistered persons, they 
will be liable to pay GST on these purchases. 
?   E-commerce companies will be required to pay 1% as Tax Co lection at Source. In some cases (like 
taxi services), they will be liable to pay entire tax. 
?   In case of supplies to Government or Local Authority or Government Agencies, provision of TDS 
(Tax Deduction at Source) of 1% has been made, if contract exceeds Rs 2.50 lakhs. 
14.1 Person liable to pay tax 
 
Every taxable person is liable to pay CGST and SGST, except where tax is payable under reverse charge - 
section 9(1) of CGST Act. 
There are exemptions to sma l suppliers. Some persons are required to pay tax even if they are not suppliers. 
Issues are summarised above. These are discussed at appropriate places. 
14.1-1 Taxable person 
 
Taxable person means a person who is registered or liable to be registered under section 22 or 24 of CGST 
Act - section 2(107) of CGST Act. 
14.2 Meaning of 'Person' 
 
Section 2(84) of CGST Act defines 'person' as fo lows. 
"Person" includes— 
(a)   an individual 
(b)   a Hindu undivided family 
(c)   a company 
(d)   a firm 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
(e)   a Limited Liability Partnership 
 
(f)  an association of persons or a body of individuals, whether incorporated or not, in India or outside 
India 
(g)   any  corporation  established  by  or  under  any  Central  Act,  State  Act  or  Provincial  Act  or  a 
Government company as defined in section 2(45) of the Companies Act, 2013 
(h)   any body corporate incorporated by or under the laws of a country outside India 
(i)   a co-operative society registered under any law relating to co-operative societies 
(j)   a local authority 
(k)  Central Government or State Government 
(l)   society as defined under the Societies Registration Act, 1860 (21 of 1860) 
(m)  trust and 
(n)   every artificial juridical person, not fa ling within any of above. 
The definition is 'inclusive' and can cover any other 'person' also. 
Person as per General  Clauses Act - Section 3(42) of General Clauses Act states that 'person' shall include 
any company or association or body of individuals, whether incorporated or not. 
PAN number  indicates  type of person - The fourth digit of Income Tax PAN number indicates type of 
'person', as follows - C - Company, P - Individual, H - HUF, F - Firm, A - AOP, T - Trust, B - BOI, L - 
Local Authority, G - Government, J - Artificial Judicial Person. 
Of course, this classification is not determinative e.g. alphabet A is used for societies also but sti l society is not 
AOP. 
 
14.2-1 Unincorporated club or association is 'person' 
 
An association of persons or a body of individuals, whether incorporated or not, in India or outside India is a 
'person' - section 2(84)(f) of CGST Act, 
 
Provision by a club, association, society or any such body (for a subscription or any other consideration) of 
the facilities or benefits to its members have been specifica ly covered in definition of 'business' in section 2(17) 
(e) of CGST Act. 
This is to avoid argument of 'mutuality' and reduce litigation. 
 
Supply of goods  by any unincorporated  association or body of persons  to a member  thereof for cash, 
deferred payment or other valuable consideration will be 'supply of goods' - para 7 of Schedule II of CGST 
Act. 
Interestingly,  there  is no  para lel provision  in respect  of services  provided  by club  or association  to  its 
members. However, it should come under 'supply' which is a wide definition. This activity has been specifica ly 
included in definition of 'business' and hence should be subject to GST. 
Thus, goods or services supplied by an unincorporated club, association or body of persons to its members 
will be subject to GST. 
A club  letting out rooms  and  cottages  to  its members  and  guests  on rent is liable  to  pay luxury tax - 
Trivandrum Club v. Sales Tax Officer (2012) 54 VST 442 (Ker HC DB). 
 
However, there is mutuality between members and club. There are conf licting judgments on this issue. Hence, 
the issue has been referred to large bench in State of West Bengal v. Calcutta  Club Ltd. (2016) 56 GST 
216 = 70 Latest Case212 = 96 VST 20 (SC). 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
14.3 Partnership firm 
 
It may be surprising but true that a Partnership Firm is not a legal entity. It has limited identity for purpose of 
tax law. 
A partnership firm is not a 'body corporate'. It is treated as having separate entity only for limited purposes 
e.g. for taxation and filing of suits. 
"Partnership" is the relation between persons who have agreed to share the profits of business carried on by a l 
or any to them acting for a l. - - Persons who have entered into partnership  with one another are ca led 
individua ly "partners" and co lectively "a firm", and the name under which their business is carried on is ca led 
the "firm name". [section 4 of Partnership Act]. 
14.4 Proprietary concern or firm 
 
An individual may carry on business under some name. This is a 'proprietary concern' or 'proprietary firm'. 
 
In case of sole proprietary concern, there is unity of interest between proprietary concern and the proprietor. 
In fact, proprietor and the concern is same. 
In Ashok Transport  Agency v. Awadhesh Kumar 1998 AIR SCW 4042 = 1998(5) SCC 567, it was 
observed - 'A partnership firm di ffers from a proprietary concern owned by an individual. A partnership is 
governed by the provisions of Indian Partnership Act. Though partnership firm is not a juristic person, it can 
sue and be sued in name of firm. A proprietary concern is only business name in which the proprietor of the 
business carries on the business. A suit by or against a proprietary concern is by or against the proprietor of 
business' - quoted with approval in Raghu Laksminarayan v. Fine Tubes (2007) 215 ELT 19 (SC). 
Proprietor is a person, but he does business for trading convenience in the name of proprietary concern, which 
is not a legal or juristic entity. Thus, proprietor and proprietary concern are one and the same person. - SK 
Real Estates v. Ahmed Meeran (2002) 111 Comp Cas 400 (Mad) - Same view in Lawn Hosiery Mills v. 
Durga Fashions (2002) 111 Comp Cas 568 (Mad HC) * Jai Timber Company v. CCE (2009) 234 ELT 
457 (CESTAT). 
 
14.5 Hindu Undivided Family (HUF) 
Definition of 'person' includes HUF. 
HUF is not 'body corporate'. 
HUF is a unit consisting of common ancestor and his male lineal descendent of any generation and also wife or 
wives or unmarried daughters of the said common ancestor. 
 
However, whenever marriage takes place amongst Hindus, Jains or Sikhs, a family is automatica ly constituted 
as comprising of husband and the wife. Such a family remains as HUF until divided. 
Both son and daughter are 'Coparceners' of HUF. Daughter can continue as member and coparcener of HUF 
even after marriage. 
 
HUF comes into existence automatica ly on the marriage of the Hindu male. HUF is a creature of law. It 
cannot be created by acts of any party except that by adoption or marriage, a stranger may become part 
thereof. Thus, there is no question of 'forming' an HUF. Possession of property or a nucleus of property is not 
necessary for formation of HUF. - SmtSathyaprema Gowda v. CED (1997) 92 Taxman 617 (SC). 
HUF is considered to be a separate entity under Income Tax Act. - K V Kuppa Raju v. GOI (2002) 123 
Taxman 926 (Kar HC DB). 
 
Since HUF is a separate legal entity for purpose of income tax, property of individual member of HUF cannot 
be attached for recovery of dues of HUF - Kapurchand  Shrimal v. TRO AIR 1969 SC 682- fo lowed in 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
State of Gujarat  v. Jwelly Tea Co (2016) 54 GST 148 = 66 Latest Case42 (Guj HC DB). 
However, HUF is not a 'body corporate'. 
Karta  and  coparceners - In HUF, the senior most person is ca led 'Karta'  and other male members are 
'coparceners'.  A karta  can draw salary from HUF for services rendered by him in running the business of 
HUF. 
 
14.6 Association of Persons or Body of Individuals 
 
Definition of 'Person' includes 'Association of Persons' (AOP) or 'Body of Individuals', whether incorporated 
or not, in India or outside India. 
It seems the main distinction between 'body of individuals' and 'Association of Persons' is that the term 'person' 
is wide and would include company, LLP or body corporate also, while 'body of individuals' would cover only 
individual persons. Otherwise, principa ly, there seems no di fference between the two. 
As per Oxford Dictionary, 'associate' means to join in common purpose of to join in an action. 
 
Thus, some people coming together is not 'AOP'. It should be for common purpose (of providing a taxable 
service jointly). 
In B. N. Elias, In re (1935) 3 ITR 408 (Cal) it was held that the word "associate" means, according to the 
Oxford Dictionary, "to join in common purpose, or to join in an action." Therefore, an AOP must be one in 
which two or more persons join in a common purpose or common action, and as the words occur in a section 
which imposes a tax on income, the association must be one the object of which is to produce income, profits 
or gains.  This was the view expressed  in CIT v. Lakshmidas Devidas  (1937)  5 ITR 584  and  also  in 
Dwarakanath  Harischandra Pitale In re (1937) 5 ITR 716 (Bom). In re, B. N. Elias (supra), it was held : 
"It may we l be that the intention of the legislature was to hit combinations of individuals who were engaged 
together in some joint enterprise but did not in law constitute partnerships. - - When we find that there is a 
combination of persons formed for the promotion of a joint enterprise, then no di fficulty arises whatever in the 
way of saying that these persons did constitute an association". A l these three decisions were quoted with 
approval in CIT v. Indira Balkrisha (1960) 39 ITR 546 (SC) - also in N V Shanmugham & Co. v. CIT 
(1971) 81 ITR 310 (SC 3 member bench). 
In CIT v. Indira Balkrisha (1960) 39 ITR 546 (SC), it was held that the definition of AOP hits combination 
of individuals who were engaged together in some joint enterprise but did not constitute partnership in law - 
same view in Meera & Co. v. CIT (1997) 4 SCC 677 = 91 Taxman 219 = 224 ITR 635 (SC). 
In Mohamed Noorullah  v. CIT (1961) 42 ITR 115 (SC), business of deceased carried on by receivers. 
There was unity of control of business and its continuity. Business was carried on by consent of a l parties as 
one unit. It was held that the Co-heirs did form an AOP. Income of business of a deceased carried on as a 
single business by receivers with the consent of a l the parties with unitary control was assessable as income of 
an AOP. 
An AOP must be one in which two or more persons join in a common purpose or common action, and as the 
words occur in a section which imposes a tax on income, the association must be one the object of which is to 
produce income, profits or gains- CIT v. Indira Balkrisha (1960) 39 ITR 546 (SC). In this case, three co- 
widows had inherited property of deceased husband. They succeeded estate of husband as co-heirs, and had 
ri ghts of survivorship and equal beneficial enjoyment. They are entitled as between themselves to an equal 
share of the income. It was held that in absence of evidence that the persons (three widows in this case) have 
combined in a joint enterprise to produce income, they cannot be considered as AOP. 
An element of joint venture for profit is necessary to constitute an AOP - CAIT v. Raja Ratan Gopal (1966) 
Page 5


CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
 
 
 
 
 
 
 
 
 
 
CHAPTER 14 - Person l i able to pay tax 
 
 
 
 
 
CHAPTER 14 
 
Person liable to pay tax 
 
EXECUTIVE SUMMARY 
 
?   Person whose supplies of goods or services or both are more than Rs twenty lakhs per annum is 
required to pay GST. In case of North Eastern States, Jammu and Kashmir, Himachal Pradesh and 
Uttarakhand, third limit is Rs ten lakhs. 
?   He is required to register with GST Authorities. He has to apply electronica ly and submit his PAN 
details, address proof, details of constitution etc. 
?   Persons whose turnover is less than Rs 50 lakhs per annum can opt to pay tax under composition 
scheme. The rates are - 2% for manufacturers, 1% for traders and 5% for restaurants. 
?   However, the condition for composition scheme is that a l their purchases should be from registered 
persons. This is very di fficult for sma l businessmen. If they purchase from unregistered persons, they 
will be liable to pay GST on these purchases. 
?   E-commerce companies will be required to pay 1% as Tax Co lection at Source. In some cases (like 
taxi services), they will be liable to pay entire tax. 
?   In case of supplies to Government or Local Authority or Government Agencies, provision of TDS 
(Tax Deduction at Source) of 1% has been made, if contract exceeds Rs 2.50 lakhs. 
14.1 Person liable to pay tax 
 
Every taxable person is liable to pay CGST and SGST, except where tax is payable under reverse charge - 
section 9(1) of CGST Act. 
There are exemptions to sma l suppliers. Some persons are required to pay tax even if they are not suppliers. 
Issues are summarised above. These are discussed at appropriate places. 
14.1-1 Taxable person 
 
Taxable person means a person who is registered or liable to be registered under section 22 or 24 of CGST 
Act - section 2(107) of CGST Act. 
14.2 Meaning of 'Person' 
 
Section 2(84) of CGST Act defines 'person' as fo lows. 
"Person" includes— 
(a)   an individual 
(b)   a Hindu undivided family 
(c)   a company 
(d)   a firm 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
(e)   a Limited Liability Partnership 
 
(f)  an association of persons or a body of individuals, whether incorporated or not, in India or outside 
India 
(g)   any  corporation  established  by  or  under  any  Central  Act,  State  Act  or  Provincial  Act  or  a 
Government company as defined in section 2(45) of the Companies Act, 2013 
(h)   any body corporate incorporated by or under the laws of a country outside India 
(i)   a co-operative society registered under any law relating to co-operative societies 
(j)   a local authority 
(k)  Central Government or State Government 
(l)   society as defined under the Societies Registration Act, 1860 (21 of 1860) 
(m)  trust and 
(n)   every artificial juridical person, not fa ling within any of above. 
The definition is 'inclusive' and can cover any other 'person' also. 
Person as per General  Clauses Act - Section 3(42) of General Clauses Act states that 'person' shall include 
any company or association or body of individuals, whether incorporated or not. 
PAN number  indicates  type of person - The fourth digit of Income Tax PAN number indicates type of 
'person', as follows - C - Company, P - Individual, H - HUF, F - Firm, A - AOP, T - Trust, B - BOI, L - 
Local Authority, G - Government, J - Artificial Judicial Person. 
Of course, this classification is not determinative e.g. alphabet A is used for societies also but sti l society is not 
AOP. 
 
14.2-1 Unincorporated club or association is 'person' 
 
An association of persons or a body of individuals, whether incorporated or not, in India or outside India is a 
'person' - section 2(84)(f) of CGST Act, 
 
Provision by a club, association, society or any such body (for a subscription or any other consideration) of 
the facilities or benefits to its members have been specifica ly covered in definition of 'business' in section 2(17) 
(e) of CGST Act. 
This is to avoid argument of 'mutuality' and reduce litigation. 
 
Supply of goods  by any unincorporated  association or body of persons  to a member  thereof for cash, 
deferred payment or other valuable consideration will be 'supply of goods' - para 7 of Schedule II of CGST 
Act. 
Interestingly,  there  is no  para lel provision  in respect  of services  provided  by club  or association  to  its 
members. However, it should come under 'supply' which is a wide definition. This activity has been specifica ly 
included in definition of 'business' and hence should be subject to GST. 
Thus, goods or services supplied by an unincorporated club, association or body of persons to its members 
will be subject to GST. 
A club  letting out rooms  and  cottages  to  its members  and  guests  on rent is liable  to  pay luxury tax - 
Trivandrum Club v. Sales Tax Officer (2012) 54 VST 442 (Ker HC DB). 
 
However, there is mutuality between members and club. There are conf licting judgments on this issue. Hence, 
the issue has been referred to large bench in State of West Bengal v. Calcutta  Club Ltd. (2016) 56 GST 
216 = 70 Latest Case212 = 96 VST 20 (SC). 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
14.3 Partnership firm 
 
It may be surprising but true that a Partnership Firm is not a legal entity. It has limited identity for purpose of 
tax law. 
A partnership firm is not a 'body corporate'. It is treated as having separate entity only for limited purposes 
e.g. for taxation and filing of suits. 
"Partnership" is the relation between persons who have agreed to share the profits of business carried on by a l 
or any to them acting for a l. - - Persons who have entered into partnership  with one another are ca led 
individua ly "partners" and co lectively "a firm", and the name under which their business is carried on is ca led 
the "firm name". [section 4 of Partnership Act]. 
14.4 Proprietary concern or firm 
 
An individual may carry on business under some name. This is a 'proprietary concern' or 'proprietary firm'. 
 
In case of sole proprietary concern, there is unity of interest between proprietary concern and the proprietor. 
In fact, proprietor and the concern is same. 
In Ashok Transport  Agency v. Awadhesh Kumar 1998 AIR SCW 4042 = 1998(5) SCC 567, it was 
observed - 'A partnership firm di ffers from a proprietary concern owned by an individual. A partnership is 
governed by the provisions of Indian Partnership Act. Though partnership firm is not a juristic person, it can 
sue and be sued in name of firm. A proprietary concern is only business name in which the proprietor of the 
business carries on the business. A suit by or against a proprietary concern is by or against the proprietor of 
business' - quoted with approval in Raghu Laksminarayan v. Fine Tubes (2007) 215 ELT 19 (SC). 
Proprietor is a person, but he does business for trading convenience in the name of proprietary concern, which 
is not a legal or juristic entity. Thus, proprietor and proprietary concern are one and the same person. - SK 
Real Estates v. Ahmed Meeran (2002) 111 Comp Cas 400 (Mad) - Same view in Lawn Hosiery Mills v. 
Durga Fashions (2002) 111 Comp Cas 568 (Mad HC) * Jai Timber Company v. CCE (2009) 234 ELT 
457 (CESTAT). 
 
14.5 Hindu Undivided Family (HUF) 
Definition of 'person' includes HUF. 
HUF is not 'body corporate'. 
HUF is a unit consisting of common ancestor and his male lineal descendent of any generation and also wife or 
wives or unmarried daughters of the said common ancestor. 
 
However, whenever marriage takes place amongst Hindus, Jains or Sikhs, a family is automatica ly constituted 
as comprising of husband and the wife. Such a family remains as HUF until divided. 
Both son and daughter are 'Coparceners' of HUF. Daughter can continue as member and coparcener of HUF 
even after marriage. 
 
HUF comes into existence automatica ly on the marriage of the Hindu male. HUF is a creature of law. It 
cannot be created by acts of any party except that by adoption or marriage, a stranger may become part 
thereof. Thus, there is no question of 'forming' an HUF. Possession of property or a nucleus of property is not 
necessary for formation of HUF. - SmtSathyaprema Gowda v. CED (1997) 92 Taxman 617 (SC). 
HUF is considered to be a separate entity under Income Tax Act. - K V Kuppa Raju v. GOI (2002) 123 
Taxman 926 (Kar HC DB). 
 
Since HUF is a separate legal entity for purpose of income tax, property of individual member of HUF cannot 
be attached for recovery of dues of HUF - Kapurchand  Shrimal v. TRO AIR 1969 SC 682- fo lowed in 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
State of Gujarat  v. Jwelly Tea Co (2016) 54 GST 148 = 66 Latest Case42 (Guj HC DB). 
However, HUF is not a 'body corporate'. 
Karta  and  coparceners - In HUF, the senior most person is ca led 'Karta'  and other male members are 
'coparceners'.  A karta  can draw salary from HUF for services rendered by him in running the business of 
HUF. 
 
14.6 Association of Persons or Body of Individuals 
 
Definition of 'Person' includes 'Association of Persons' (AOP) or 'Body of Individuals', whether incorporated 
or not, in India or outside India. 
It seems the main distinction between 'body of individuals' and 'Association of Persons' is that the term 'person' 
is wide and would include company, LLP or body corporate also, while 'body of individuals' would cover only 
individual persons. Otherwise, principa ly, there seems no di fference between the two. 
As per Oxford Dictionary, 'associate' means to join in common purpose of to join in an action. 
 
Thus, some people coming together is not 'AOP'. It should be for common purpose (of providing a taxable 
service jointly). 
In B. N. Elias, In re (1935) 3 ITR 408 (Cal) it was held that the word "associate" means, according to the 
Oxford Dictionary, "to join in common purpose, or to join in an action." Therefore, an AOP must be one in 
which two or more persons join in a common purpose or common action, and as the words occur in a section 
which imposes a tax on income, the association must be one the object of which is to produce income, profits 
or gains.  This was the view expressed  in CIT v. Lakshmidas Devidas  (1937)  5 ITR 584  and  also  in 
Dwarakanath  Harischandra Pitale In re (1937) 5 ITR 716 (Bom). In re, B. N. Elias (supra), it was held : 
"It may we l be that the intention of the legislature was to hit combinations of individuals who were engaged 
together in some joint enterprise but did not in law constitute partnerships. - - When we find that there is a 
combination of persons formed for the promotion of a joint enterprise, then no di fficulty arises whatever in the 
way of saying that these persons did constitute an association". A l these three decisions were quoted with 
approval in CIT v. Indira Balkrisha (1960) 39 ITR 546 (SC) - also in N V Shanmugham & Co. v. CIT 
(1971) 81 ITR 310 (SC 3 member bench). 
In CIT v. Indira Balkrisha (1960) 39 ITR 546 (SC), it was held that the definition of AOP hits combination 
of individuals who were engaged together in some joint enterprise but did not constitute partnership in law - 
same view in Meera & Co. v. CIT (1997) 4 SCC 677 = 91 Taxman 219 = 224 ITR 635 (SC). 
In Mohamed Noorullah  v. CIT (1961) 42 ITR 115 (SC), business of deceased carried on by receivers. 
There was unity of control of business and its continuity. Business was carried on by consent of a l parties as 
one unit. It was held that the Co-heirs did form an AOP. Income of business of a deceased carried on as a 
single business by receivers with the consent of a l the parties with unitary control was assessable as income of 
an AOP. 
An AOP must be one in which two or more persons join in a common purpose or common action, and as the 
words occur in a section which imposes a tax on income, the association must be one the object of which is to 
produce income, profits or gains- CIT v. Indira Balkrisha (1960) 39 ITR 546 (SC). In this case, three co- 
widows had inherited property of deceased husband. They succeeded estate of husband as co-heirs, and had 
ri ghts of survivorship and equal beneficial enjoyment. They are entitled as between themselves to an equal 
share of the income. It was held that in absence of evidence that the persons (three widows in this case) have 
combined in a joint enterprise to produce income, they cannot be considered as AOP. 
An element of joint venture for profit is necessary to constitute an AOP - CAIT v. Raja Ratan Gopal (1966) 
CA DHRUV AGRAWAL – National Chairman Taxation Committee-All India Confederation of Small & Micro Industries Association  
 
 
59 ITR 728 (SC). 
 
In CIT v. Govindbhai Mamaiya (2015) 229 Taxman 138 = 52 Latest Case270 (SC), it has been held that if 
income from land was obtained through inheritance, these persons have to be assessed as 'individuals'. It is 
not AOP as it was not formed by volition of parties to generate income. 
Association of persons means an association in which two or more persons join in a common purpose or 
common action, and the association must be one, the object of which is to produce an income, profit or gains. 
However, ultimate division of profits is not relevant factor. - N V Shanmugham & Co. v. CIT (1971) 81 ITR 
310 (SC 3 member bench). In this case, the business of erstwhile partnership was carried on by receivers on 
behalf of erstwhile partners with their consent under a unified control and management. The receivers did not 
(and indeed could not) represent the individual interests of various owners of business. The control and the 
management of the business was in the hands of the receivers. That control and management was a unified 
one. It was held that this is business of AOP. 
Two persons joining together, purchasing immovable properties by contributing capital equa ly, such properties 
jointly held and managed by or on behalf of them resulting in profits and gains which were divided by them 
equa ly, they constituted "association of individuals", notwithstanding that one of them was a minor - CIT v. 
Laxmidas Devidas (1937) 5 ITR 584 (Bom HC DB). 
"AOP", means the members of the body must have joined together for the purpose of producing income - CIT 
v. HarivadanTribhovandas (1977) 106 ITR 494 (Guj HC DB). 
 
In CIT v. Buldana District Main Cloth Importers Group (1961) 42 ITR 172 (SC), the business of import 
and distribution of cloth was carried on a joint basis. The purchases were joint, so were the sales. The profits 
were ascertained on a joint basis and then distributed according to the capital contributed by each member of 
the group. It was held that this is AOP. 
In Geoconsult ZT GMBH, In re (2008) 172 Taxman 396 = 304 ITR 283 (AAR), it has been held that an 
unincorporated  Joint Venture is 'Association of Persons' for purpose of income tax, if it satisfies fo lowing 
essentials  of AOP-  (i) two or more persons ( i) Voluntary combinations  and ( i) A common purpose or 
common action with object to produce profits or gains - similar view in ABC In re (2012) 207 Taxman 315 = 
20 Latest Case152 (AAR). 
 
If there is common purpose or common action, it is case of two adventures coming together for promotion of a 
joint enterprise, it is AOP - B N Elias In re (1935) 3 ITR 408 (Cal HC) - quoted with approval in Linde AG, 
Linde Engineering Division In re (2012) 19 Latest Case238 = 207 Taxman 299 (AAR). 
In Linde AG, Linde Engineering Division In re (2012) 19 Latest Case238 = 207 Taxman 299 (AAR), the 
appe lant had formed a consortium in the nature of Unincorporated Joint Venture (UJV). It was found that the 
parties were liable jointly and severa ly. Splitting up of contract was not possible. Transaction should be 
'looked at' and not 'looked through'. Internal division of responsibility by consortium and its recognition by 
customer cannot dislodge the legal position of formation of AOP. It was held that the consortium is AOP. 
However,  this decision has been reversed in Linde AG v. Dy DIT (2014) 44 Latest Case224 = 224 
Taxman 43 = 365 ITR 1 (Del HC DB). It was held that mere fact that they had accepted  contractual 
obligation towards third party would not in itself lead to conclusion that the members have formed as AOP. 
[The example given was that of director giving personal guarantee for loan given to company. This cannot be 
AOP].  It was held  that in AOP,  there  must be common action and some  common management.  Mere 
cooperation is not sufficient to form AOP. 
In Van Ord ACZ BV In re - (2001) 115 Latest Case317 (AAR), it was held that in order to constitute an 
AOP, there has to be common purpose or action. The object must be to produce income jointly. Mere