INTRODUCTION TO NON RESIDENT TAXABLE PERSON (NRTP)
The Constitution of India under Article 5 and Part II defines three parameters to be fulfilled for being considered as a Citizen of India which are in the following sequence;
At the Commencement of the Constitution every person who has his domicile in the territory of India and –
- a) who was born in the territory of India ;or
b)either of those parents were born in the territory of India; or
c)who has been ordinarily resident in the territory of India for not less than five years immediately preceding such commencement, shall be a Citizen of India
Acquisition of Indian Citizenship
Citizenship Act, 1955, provides that a person would acquire the ‘Citizenship of India’ if either of the following condition is fulfilled.
- If he acquires the same either by birth,
- By descent and
- By registration.
Taxation statutes focuses on determination of the status of a person as NRI based on his residential status.
Let us now analyse the treatment of Non-residents under the current direct tax and Indirect tax Statutes in India
RESIDENCY UNDER TAX LAWS
- a) Income Tax Act 1961.
“Non-Resident Indian (NRI)”
As per Section 2(30) of the Income tax act “non-resident”, “means a person who is not a “resident” and for the purposes of sections 92, 93 63[* * *] and 168, includes a person who is not ordinarily resident within the meaning of clause (6) of section 6]”.
The Person of Indian Origin (PIO) who is residing outside India temporarily or permanently for certain period of time is called an NRI. We can interpret it as, NRI is Indian citizen migrated to another country. Section 6 of the Income Tax Act contains detailed criteria of who is considered as Resident in India and provides that anyone who doesn’t meet these criteria is Non-Resident or non- ordinary resident. Liability to pay tax in India does not depend on the nationality or domicile of the Tax payer but on his residential status.
The status of a person as a resident or non-resident depends on his period of stay in India. The period of stay is counted in number of days for each financial year beginning from 1st April to 31st March (known as previous year under the Income-tax Act).
- B) Goods and Services Tax Act 2017
“Non Resident Taxable person (NRTP)”
Section 2(77) defines a “non-resident taxable person” (NRTP). It has been defined as “any person who occasionally undertakes transactions involving supply of goods or services of both, whether as principal or agent or in any other capacity, but who has no fixed place of business or residence in India”
This term has three limbs attached to it which can be dissected for better understanding:
- Non –resident
- Taxable
- Person
A plain reading of the above statutory provision makes it abundantly clear that GST Act lays emphasis on the residential status of a person. He need not be a Citizen of India and still be subject to GST because the Act defines a “non-resident taxable person” without any reference to his Citizenship. It does not say ‘non- resident Indian (NRI) taxable person’. Hence, a careful consideration must be paid here to each term.
One has to be clear and not get confused between a citizen and resident. In the realm of GST, it does not talk about citizenship but talks about the residential status of the person and the taxability of the activity to GST undertaken by the person
Based on the above connotations, we can understand that GST laws have not considered the citizenship criteria. No distinction has been made between an Indian citizen or a citizen of any other country in the definition of ‘Non-Resident Taxable Person’. Hence GST is applicable on the all types of resident’s i.e. Indian citizens, Non- Resident Indians and residents of other countries without any distinction on basis of citizenship.
Which means, if complied with other requirements of the definition and GST Act, a person who is passport holder/citizen of some other country “may be” made to pay GST in India, which we have further studied to understand the provisions in detail.
‘Person’ is defined under section 2(84) of the CGST Act, 2017 to include (a) an individual; (b) a Hindu Undivided Family; (c) a company; (d) a firm; (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 clause (45) of section 2 of the Companies Act, 2013; (h) anybody 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 a State Government; (l) society as defined under the Societies Registration Act, 1860; (m) trust; and (n) every artificial juridical person, not falling within any of the above. Anybody incorporated by or under the laws of a country outside India is also a person under GST law. So the ‘Person’ has a very wide connotation under the GST law.
We thereby, come to the next issue after considering the above discussion is that Person who is not a citizen and a Non- Resident can still be covered under the purview of GST Law.
Exigibility to GST of Foreign nationals are applicable in the following two situations.
Firstly, As per Section 15 of the IGST Act the integrated tax paid by tourist leaving India on any supply of goods taken out of India by him shall be refunded in such manner and subject to such conditions and safeguards as may be prescribed1. Please note that the act uses the term “tourist” here and means a person not normally resident in India who enters India for a stay on temporary visa (tourist Visa) for legitimate non-immigrant purposes. Please note that the refund is provided for only on supply of goods and not services.
The second situation is provided under Section 24(v) of CGST ACT talks about mandatory registration for Non-Resident Taxable Person irrespective of the turnover limit or size of transaction. The normal threshold limit for registration under GST registration, is not applicable as per S. 24 of CGST Act 2017 and all the category of persons mentioned in Section 24(1) are required to compulsorily register themselves under GST irrespective of their aggregate turnover mention in Section 22 and the procedure for registration is mentioned in Section 25. Thus, it is interpreted as provision which provides that where a Non-Taxable Person making Taxable Supply of goods or services, even during their stay in India for a short period, needs to be compulsorily registered under the GST Act and discharge GST liability like any other registered tax payer irrespective of the limit of transaction or turnover.
“Non-resident taxable persons making taxable supply” is covered under clause (v) of the above section. The words used in Section 24(v) make it amply clear that any ‘non-resident taxable person making taxable supply’ is required to take compulsory registration. Taxable Supply means a supply of goods or services or both which is leviable to tax under the Act: Section 2(108) of CGST Act. Section 9 of CGST Act, Section 5 of IGST Act and Section 7 of UTGST Act are the charging sections for levy and collection Goods and Services under the respective acts and by the virtue of these provisions every good and services other than Petroleum crude, high speed diesel, motor spirit, natural gas, aviation turbine fuel, alcoholic liquor for human consumption, and other articles listed in section 9(2) or in schedule III, are leviable under GST law.
Thus, where a person is Non- Resident, provides Taxable Supply under GST has to compulsorily register itself under GST Law irrespective of the Citizenship or turnover of supply. Hence, by the above discussion we understand that NRTP is required to pay GST under the Act.
Nonetheless, one also needs to keep in mind that taxability of NRTP should not be confused with casual taxable person. Casual taxable person is required to be compulsorily registered under Sec. 24 of CGST Act 2017. But the distinction lies with the definition of “Supply” under Section 7(1) (a) where Supply must be “in the course or furtherance of business”. Non- Resident Taxable Person is not covered under the purview of this definition, whereas ‘Casual Taxable Person’ is taxable if it makes the supply “in the course or furtherance of business”.
OTHER PROVISIONS OF LAW FOR THE NON-RESIDENT TAXABLE PERSON
Validity of GST Registration certificate of Non-resident taxable persons
The GST certificate of registration for non-resident taxable person shall be valid for the period specified in the registration certificate or a period of ninety days from the effective date of registration as per Section 27(1). However, the proper officer, at the request of the said taxable person, may extend the validity of the aforesaid period of ninety days by a further period not exceeding ninety days.
Is there any Advance tax to be paid by a Non-Resident Taxable Person at the time of obtaining registration under this Special Category?
While a normal taxable person does not have to make any deposit of money to obtain registration, since it is a special category of taxable person, a casual taxable person or a non-resident taxable person shall, at the time of submission of application for registration under sub-section (1) of section 25, make an advance deposit of tax in an amount equivalent to the estimated tax liability of such person for the period for which the registration is sought-Section 27(2). If registration is to be extended beyond the initial period of ninety days, an advance additional amount of tax equivalent to the estimated tax liability is to be deposited for the period for which the extension beyond ninety days is being sought.
The above position in GST Act on taxability of Non-Resident Taxable Person will have significant impact on all the multi-national companies operating in and out of India which are frequented by expatriates and Non-Resident Indians for business and personal reasons. The employer companies and the individuals concerned must make a note of the above provision and comply with the same to avoid any disputes in future.
 |
 |
 |
| Prateek Gupta
Co-Founder, Partner & Counsel SHARNAM LEGAL |
Shiva Nagesh
Partner- Litigation & Advisory SHARNAM LEGAL |
Nainshree Goyal
Associate Lawyer SHARNAM LEGAL |