Distinct Person Under GST, if a taxable person/establishment is obtained or required to obtain more than one registration, whether in one state or union territory or more than one state or union territory shall, in respect of each such registration, be treated as Distinct Person for tax purposes under Section 25(2) of CGST Act 2017
So according to Proviso to section 25(2) provides that a person having multiple business verticals may obtain separate registration for each business vertical in the State, therefore same establishment or offices or branches or godowns which are situated outside the state are treated as Distinct Person and inter-state supply also chargeable under GST i.e. IGST is payable here.
when two units of the same business have taken different registration, then they will be considered as a Distinct entity/ person as per the GST Act. GST Rules relating to the filing of returns and other compliance procedures will apply to both of them separately.
Hence, Distinct persons can be:-
- An establishment in India and an establishment outside India
- An establishment in one state or union territory and an establishment in another state or union territory
eg, if Businessmen A of Delhi has branches in Japan and Gujarat, the branches in Gujarat and Japan will both be distinct persons/ entities. If A has another entity B which is different from A and has obtained a different GST registration, A and B will be distinct entities.
Taxability of Transactions
The above-stated supply is covered under Schedule I of the CGST Act and as per this schedule, when a supply is made between distinct persons during the course of business, it is considered as a supply even when there is no consideration. Therefore these transactions are considered as taxable supply.
For example- stock transfers made between distinct units, even if without consideration will be a taxable supply.
Another example, suppose a business entity has a branch office in Delhi and head office in Mumbai, some employees of the Delhi Branch join training services or personality grooming services given by the head office in Mumbai then as per the distinct person concept, both offices are separate under GST and therefore GST is payable here as per schedule I, but as per section 12(4) place of supply is Mumbai head office and CGST and SGST is charged by Mumbai head office under this case and no credit is available to Delhi branch of such CGST in this case. Therefore only IGST will be set- off from CGST and SGST but CGST credit of one distinct person cannot be utilized by the other distinct person for paying CGST liability.
Export of Services
Even if the supplier and receiver in an international transaction are establishments of a distinct person it will not be considered as the export of services This clarifies that these transactions cannot be treated as a zero-rated supply, and hence would be taxed under GST.
the transaction is considered as an export if:
- The supplier of services is located in India.
- The recipient of services is located outside India.
- The place of supply is in a foreign territory.
- Payment of services is received in convertible foreign exchange.
- Suppliers and receivers of service are not merely establishments of a distinct person.
Also Read The Meaning and Scope of Supply under GST