28/06/2017
Taxable Event in
GST Regime, Meaning and Scope of Supply under GST: The taxable event is
Thepoint of time
when tax is to be levied on the transaction or activity or any action.
Presently, we areequipped with the levy of taxes under indirect taxes regime at
different point of time and underdifferent laws. The principle among them which
directly or indirectly affects the great er mass of population is ‘Sale’ under
VAT, ‘Manufacture’ under Excise and ‘Provision of service or Agreement
ofprovision of Service’ under Service tax.
Taxable Event in GST Regime
The new tax
reforming law which is going to be reality by July 2017 is proposing to shift
all suchdiffer ent levies under various taxation under one single levy and
under single law. The newtaxable event which will subsume all the above
mentioned present levied is named as ‘Supply’. Inother words, under GST regime,
if there is Supply then there is levy and liability to pay tax willarise.
Meaning of Supply
As per Section 7
of the CGST law, the meaning of supply is defined as under:-
The term supply includes
all forms of
supply of goods or services or both such as sale, transfer, barter, exchange,
licence,rental, lease or disposal made or agreed to be made for a consideration
by a person in the course orfurtherance of business;
Analysis – It
largely includes all sorts of transactions which are presently covered under
sales tax, exciseand service tax. It seems that it takes land also in its
purview and therefore there is specific ex clusion ofland from the term supply
as mentioned in later part of this article.(b) import of services for a
consideration whether or not in the course or furtherance of business;Analysis
– This provision seeks to consider import of services for a consideration
irrespective of suchservices being used in the course or furtherance of
business.(c) the activities specified in Schedule I, made or agreed to be made
without a consideration; and
Analysis – This sub-section seeks to specify the various activities which
shall be considered as supplyeven without consideration. The details of such
activities are :-
Permanent transfer or disposal
of business assets where input tax credit has been availed onsuchSupply of
goods or services or both between related persons or between distinct persons
asspeci fied in section 25, when made in the course or furtherance of
business:Provided that gifts not exceeding fifty thousand rupees in value in a
financial year by anemployer to an employee shall not be treated as supply of
goods or services or both.
Supply of goods between agent
and principal when they undertake to supply such goods on behalf of each other
Import of services by a
taxable person from a related person or from any of his other establish -ments
outside India, in the course or furtherance of business.(d) the activities to be treated as supply of goods or supply of
services as referred to in ScheduleAnalysis – Earlier the
activities specified in Schedule II were covered in sub-section (2) of the
defini tionof supply thereby restricting its scope to classification of goods
and services. But as with the changeIntroduced In first sub-section itself, the
activities mentioned in this sub-section not only pro vides forclassification
between goods and services but also specifies levy of tax on the goods and
servicesmentioned in this Schedule.
Exclusion from the definition of supply –
The following
actives are excluded from the definition of supply-
1. Services by an
employee to the employer in the course of or in relation to his employment.
2. Services by
any court (District Court, High Court and Supreme Court) or Tribunal established under anylaw for the time being
in force.
3. The functions
performed by the Members of Parliament, Members of State Legislature, Members
ofPanchayats, Members of Municipalities and Members of other local authorities.
4. The duties
performed by any person who holds any post in pursuance of the provisions of
the Con -stitution in that capacity
5. The duties
performed by any person as a Chairperson or a Member or a Director in a body
estab lishedby the Central Government or a State Government or local authority
and who is not deemed as anemployee before the commencement of this clause.
6. Services of
funeral, burial, crematorium or mortuary including transportation of tdeceased.
7. Sale of land
and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.
8. Actionable
claims, other than lottery, betting and gambling.
9. Such
activities or transactions undertaken by the Central Government, a State Government
or any localauthority in which they are engaged as public authorities, as may
be notified by the Government onthe recommendations of the Council, shall be
treated neither as a supply of goods nor a supply of
Declared Supply of goods or services
The Government
may, on the recommendations of the Council, specify, by notification, the
transac tionsthat are to be treated as—a supply of goods and not as a supply of
services; or
a supply of
services and not as a supply of goods.
Composite Supply
Composite supply
means a supply made by a taxable person to a recipient comprising two or more
supplies of goods
or services, or any combination thereof, which are naturally bundled and
supplied in
conjunction with
each other in the ordinary course of business, one of which is a principal
supply. Here,
principal supply
means the supply of goods or services which constitutes the predominant ele
ment of a
composite supply
and to which any other supply forming part of that composite supply is an
cillary and
does not
constitute, for the recipient an aim in itself, but a means for better
enjoyment of the principal
supply.
Taxability will be attracted as per provisions applicable to the principal
supply.
Examples :-
Laptops with carry case, Machinery with installation, Travel with food, Stay
with break fast,etcNote:- The works contract services and restaurant and
outdoor catering services are specifically cov eredwithin the meaning of composite supply.
Mixed supply
means two or more individual supplies of goods or services, or any combination
thereof,made in conjunction with each other by a taxable person for a single
price where such supply does notconstitute a composite supply. Taxability on
mixed supply will be applicable at the highest tax rate asapplicable on the supply
if taxed individually.Mixed SupplyExamples:- Tooth brush with tooth paste, Soap
free with detergent, Buiscuits free with chips, etc.
Taxability on a composite or a mixed supply
A composite
supply comprising two or more supplies, one of which is a principal supply,
shall be treatedas a supply of such principal supply. A mixed supply comprising
two or more supplies shall be treated asa supply of that particular supply
which attracts the highest rate of tax.
Conclusion
Thus the taxable
event is going to shift to Supply and as there is difference in the nature of
goods andservices, a bifurcation between the two is kept so as to identify the
time and placeof supply for goodsand services. Further, the concepts of mixed
supply and composite supply also finds theirplace in thelaw so as to avoid
confusion in case of bundled supplies.
Recommended Articles
Time of Supply
GST, Principles of Time of Supply GST Law
FAQ on Time of
Supply in GST (Goods and Service Tax)
Time and Value of
Supply under GST Act 2017
Place of supply
of goods and services under GST regime
FAQ on Meaning
and Scope of Supply Under GST
FAQs on Place of
Supply of Goods and Service under GST
GST Rules 2017,
Check & Download All New GST Rules 2017
GST Registration
– Procedure, Rules, Forms, Documents Required
GST Rate – GST
Rates in India, Worldwide GST Rates – Full Analysis
GST Downloads:
GST Acts, GST Rules, GST Forms, GST PPT’s 2017
GST Forms:
Registration, Return Filing, Payment, Challan, Refund
Value of taxable supply
Important Questions with Answers 2017
|
About the author
HIMANSHU TIWARI
CHARTERED ACCOUNTANT
|
Print