XYZ (franchise) selling products under brand of PQR (Franchisor). PQR not taking any royalty from franchise. XYZ not allowed to sell product other than of PQR. E.g., MRP of product ‘X’ is ₹.100/-, ‘Franchisor’ charging XYZ ₹.90 + ₹.2 GST= ₹.92 by issuing a tax invoice. XYZ making payment to franchisor against this. XYZ re – selling product to customer at MRP of ₹.100/- thereby getting a profit of ₹.8 (100 – 92). Can XYZ claim exemption up to Rs.20 Lacs or need to pay GST from day one? Is XYZ falling under the concept of “persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise” under Section 24 and therefore requires compulsory registration without threshold?
In our prima facie view in this case XYZ is selling the goods as principal and not as agent. Thus threshold limit should be admissible. However it is advisable that a detailed legal opinion of the issue may be obtained.
Team Clearmytax.in