Supply- Taxable Event under Model GST Law-Inclusive and Subjective
By: – Bimal jain
Goods and Services Tax – GST
Dated:- 1-9-2016
Supply- Taxable Event under Model GST Law-Inclusive and Subjective
With step-by-step progress towards Goods and Services Tax (“GST”), the Country is all set to witness the biggest indirect tax reform of unmatched importance in independent India. GST would mark a paradigm shift in the indirect taxation of our Country and the concept of origin based taxation as practiced currently, would no longer be there. In line with the global practices, concept of destination based taxation would usher in under GST. At the same time, 17 of the major taxes levied under the Indirect taxation i.e. Central Excise, Service tax, VAT/CST etc., would be subsumed under the ambit of GST, resulting in change of the taxable event as well.
Taxable events in present indirect tax regime
Determination of the taxable event in any tax law is of utmost significance as the
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d the Central Value Added Tax (CENVAT), on all excisable goods (excluded goods produced or manufactured in special economic zones) which are produced or manufactured in India as, and at the rates, set forth in the First Schedule to the Central Excise Tariff Act, 1985 (5 of 1986)………….”
Customs Duty
Goods imported into, or exported from, India
Section 12 of the Customs Act, 1962
“(1) Except as otherwise provided in this Act, or any other law for the time being in force, duties of customs shall be levied at such rates as may be specified under the Customs Tariff Act, 1975 (51 of 1975), or any other law for the time being in force, on goods imported into, or exported from, India……”
CST
Sale of goods in the course of Inter-State trade
Section 6 of Central Sales Tax Act, 1956
“(1) Subject to the other provisions contained in this Act, every dealer shall, with effect from such date as the Central Government may, by notification in the Official Gaz
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n GST, but, simultaneously, the term 'supply' will hold the greatest significance and shall be important in determining the taxability of all transactions, whether commercial or otherwise under GST regime.
Section 3 of the Model CGST/SGST Act, 2016 [also applicable for the Model IGST Act vide Section 2(f) thereof] specifies the meaning and scope of the term supply, broadly, in the following manner:
Broad Category
Sub- section of Section 3
Particulars
1
Supply includes:
Normal supply of goods and/or services
1(a)
All forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.
Import of service
1(b)
Importation of service, whether or not for a consideration and whether or not in the course or furtherance of business.
Supply Without consideration
1(c)
A supply specified in Schedule I (Matters to be treated as supply wi
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randed service by an aggregator under trade or brand name
4
Notwithstanding anything contained in sub-section 1, the supply of any branded service by an aggregator, as defined in sec 43B, under a brand name or trade name owned by him shall be deemed to be a supply of the said service by the said aggregator.
Inclusive definition of term 'supply'
Despite being the first step for taking off under GST regime, the Model GST Law has chosen to define 'supply' in an inclusive manner, without even defining what 'supply' actually means. Thus, the proposed definition of the term 'supply' under the Model GST Law suffers from ambiguity as it starts with the word “Supply includes….”.
It is crucial here to note that the term “includes” is generally used to expand the meaning of the former word. Even, the wide import of term “includes” has been settled in number of judicial pronouncements to establish that its usage expands the meaning. In the case of Doypack Systems (Pvt) Ltd. Vs. Union o
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payers and the Centre & the State Governments, which would lead to bizarre outcomes. The prudent approach here could have been to draw the meaning of such a crucial definition in crystal and definitive manner. Here, it would not be out of place to look at the meaning of term supply, as adopted in the other countries like Canada, Malaysia where GST is applicable.
Under Canadian Goods & Services Tax “supply means the provision of property or a service in any way, including sale, transfer, barter, exchange, licence, rental, lease, gift, or other disposition”. Similarly, under Malaysia Goods & Services Tax, where GST made applicable with effect from April, 2015, Section 4 thereof defines supply as “subject to subsections (2) and (3), “supply” means all forms of supply, including supply of imported services, done for a consideration and anything which is not a supply of goods but is done for a consideration is a supply of services.…..”
Keeping in mind, the importance the term supp
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ut consideration as per Schedule I. The Schedule I to the Model CGST/SGST Act, comprises of a list of matters/ transactions, which would be treated as 'supply without consideration', which are as under:
• Permanent transfer/disposal of business assets.
• Temporary application of business assets to a private or non-business use.
• Services put to a private or non-business use.
• Assets retained after deregistration.
• Supply of goods and/or services by a taxable person to another taxable or non- taxable person in the course or furtherance of business.But, this will not cover goods sent for job work.
Perusal of the above provisions reveals that the government wants to levy tax on each and every transaction entered by a taxable person and don't want to leave any room for charging GST. Even any business assets/ services used for private/ non-business use, shall also be treated as supply. This can be best understood with a simple example of a Company providing
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realities of the situation and ensure to have concrete taxable base by defining the term 'supply' in clear and unambiguous manner, which is the pivotal term under the proposed GST regime, that would be the centric point to determine levy & collection of GST. Knowingly or unknowingly, the Model GST Law has sown the seeds for another series of fresh litigation, which the present indirect taxation is crippled with, when it comes to determining the test of manufacture for levy of Excise duty or rendering of services to levy Service tax. The law is striving hard even as on date to settle down after several decades of jurisprudence. It would indeed be quite interesting to watch how the term supply is re-defined, amended, explained, substituted in the Final GST Law, keeping in mind the long trodden path so far.
Reply By Ganeshan Kalyani as =
Sir, article is very nicely written. Sir, abroad there is single GST concept whereas we are going to have dual GST. State will have power on State GS
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