Taxable Event in GST is known as Time of Supply

Under GST, a uniform and single Taxable Event CALLED ‘supply’ would replace multiple taxable events which are in current Indirect Tax regime, stated as follows :

  • For manufacture, Taxable event is when manufacture is complete – Excise levied.
  • For Service provided, Taxable event is when services provided completely OR agreed to be provided (advance received) – Service Tax levied. Subject to Invoice
  • For sale of goods, Taxable event is when sale of goods is complete – VAT/ CST levied.

Simply under GST the liability to pay tax is called as Time of Supply.

Thus, constant monitoring and compliance required for keeping track of all these different taxable events at present regime would fade away in GST, but, simultaneously, the term ‘supply’ will hold the greatest significance and shall be important in determining the tax ability of all transactions, whether commercial or otherwise under GST regime.

No doubt, GST has made taxable event simpler by keeping it uniform but it is crucial here to note that the term “includes” is attached with the word supply. And there has been lot of judicial pronouncements to establish the meaning of includes in law. – Here we recommend business to take consultations from professionals because supply falling under charging section.

Sharing some judicial judgement for reference:

The cases of Doypack Systems (Pvt) Ltd. Vs. Union of India [1988 (36) ELT 201 (SC)], the Hon’ble Supreme Court has interpreted the meaning of the term ‘includes’, as “It is well settled that the word ‘includes’ is an inclusive definition and expands the meaning.”

Similarly, in the case of Tata Consultancy Services Vs. State of Andhra Pradesh [2004 (178) ELT 22 (S.C.)], the Hon’ble Supreme Court has interpreted the meaning of the word ‘includes’, to suggest that “….When the word ‘includes’ is used in an interpretation clause, it must be construed as understood (comprehending) not only such things as they signify according to their nature and import but also those things which the interpretation clause declares that they shall include.

Keeping in mind, the importance this term supply would entail in GST, the term supply could have been defined in exhaustive manner to ensure the boundaries restricting any sort of wide interpretation of the taxable event. That would have further reduced the scope of litigation’s which is the major challenge with exiting indirect tax regime.

Ironically, the other way round we can conclude that anything defined in GST under Negative or exempted list is not “supply”.

Ease of Business with uniform taxable event

Based on above discussions, it is critical that the lawmakers should wake up to the 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.
And to keep the purpose of GST alive by not getting in litigations, whereas to have ease & real growth of business & economy.

Conclusion

The existing regime of taxation identifying taxable event for each activity was challenging  due to non uniformity of same under manufacturing, trading, services, customs etc.  GST has made it uniform for all the events by bringing it under one net of taxable event called as “Time of Supply”.

Though this will be in line with Service Tax Point of Taxation Rules.

References for Time of Supply:

Recommended Reads:

 

 

 

Step by Step Guide for GST migration from existing taxation

Step by Step Guide to GST Migration from existing Service Tax, VAT and Central Excise Assessee:

  1. Logon to Aces/VAT portal using the existing ACES/VAT User ID and Password.
  2. Follow the link there to view your Provisional ID & Password to access GSTN common portal. If you have not received any provisional ID & pwd. then please click on the registration tab & further click on GST login credentials.
  3. Make a note of provisional id & password that is provided & proceed further to the GST common portal for final registration.
  4. During final registration, be ready with following info. else you have to face the pain of repeating the process by login as the window login activation time is very short. The info is as follows:-
    • Valid E mail Id
    • Valid mobile no.
    • Bank Account no.
    • Bank IFSC
    • Proof of Constitution of Business (Partnership Deed, Company  RC for Pvt. / Public Ltd. Company)- Mind size of file should be maximum 1 MB (only PDF & JPEG only).
    • Photograph of Proprietor, Promoter etc. – Size Maximum 100 KB (Only PDF & JPEG only).
    • Proof of Appointment of Authorized  Signatory ( Extracts of Minutes in case of  Company , Partnership Deed & RC in case of proprietorship).- Size Maximum 1 MB (Only PDF & JPEG only).
    • Opening page of Bank Statement of company which should capture address.- Size Maximum 1 MB (Only PDF & JPEG only).
  5. Once these details are satisfactory an ARN No. (Application Reference No.) will be issued and the status of Provisional Id will be changed to Migrated till appointed date
  6. On the implementation date of GST (i.e. appointed date), the provisional id status will be changed to “Active” and a provisional RC will be issued.

We are happy to share our services in GST Migration process.

Here are few of the latest challenges during GST Migration process & there solutions:-

1. I am an existing PAN-based Service Tax , Central Excise and State VAT assessee. I received the Provisional ID and password from the State VAT. While migrating to GST through VAT on the GST Common Portal, I did not add my ST and CE details in the Enrolment Application.

Solution: In this scenario the assessee who has missed registering during time of seeking original migration & have submitted the final registration by digitally signing, can now add or remove other registrations in the enrollment application only after the appointed date (i.e. date of implementation of GST) through the process of amendment.

2. I am an existing PAN- based Service Tax assessee, & wish to enroll in GST, having multiple registered business premises in different states from where services are provided. I have not received the provisional IDs & Passwords for all the different states.

Solution: In case of such assessee centralized registration captures address details of the assesses registered business premises in a state, as well as captures the branches details in different states from where services are provided. As a policy these assessee are issued one provisional ID and Password for each State.

3. I am an existing tax payer and wish to enroll in GST. For migrating to GST, I created a new username and password on the GST common portal. However I have forgotten the username/ password, created. When I tried to create a new username / password, I received the message “Provisional ID entered is already mapped to a user. Kindly map it with a valid username.

Solution: In this scenario please seek assistance of GST helpdesk at helpdesk@gst.gov.in or call at  0124-4688999.

4. I am an existing taxpayer and wish to enroll in GST. For enrolment under GST, I want to create a new username and password. However, I have not received the OTP which is required to proceed further for seeking final registration. The problem  continued even   during resend buttons.

Solutions: There can be scenario of your mobile number registered for DND. Kindly de-activate the DND & then try again. Else please contact the GST Helpdesk at 0124-4688999.

GST Migration Conclusion

Therefore we believe that those who are already registered in current tax regime, its an easy process to GST Migration by following above simple steps. On completion, a provisional GST No. will be allocated which can be shared with clients.

Reference for GST Migration

http://www.cbec.gov.in/resources//htdocs-cbec/gst/user-guide-for-migration.pdf

Impact of GST in Business Processes across Industries

GST will affect all industries Business Processes, irrespective of the sector. It will impact the entire value chain of operations , namely:-

1. Procurement

Purchasing across states is set to become a lot more hassle free as a unified tax structure will allow for seamless movement across state borders. Currently interstate logistics is a major pain area with a long queue of trucks waiting for clearance by state tax and octroi authorities is a common sight on Indian highways. This will soon be relegated to the past as free movement of goods will be possible within India. It is estimated that this will reduce distribution costs by as much as 10-15% and reduce the time taken for transport at the same time. Along with lesser inventory to be maintained due to shorter transport times, this will also open up a wider base of suppliers that will push costs further down.

2. Manufacturing

 Manufacturing is a very complex industry while reducing the cost of production & improving the incremental value for customers is one of the major challenge for every business. The new GST regime will trigger a transformation shift from a complex multi- layered indirect taxation system to a unified indirect taxation system. Under the new regime reduction in tax cascading may lead to lower cost. Therefore it will compel organizations to re- align bottlenecks in production process to make business opportunities better.

3. Distribution

Under GST the distribution model needs to be revamped due to free flow of tax movement in case of inter state supply of goods . Now businesses will not think of opening warehouses just because of cutting CST cost, instead they will think in more competitive manner & follow benchmark process like Hubs & Spoke Model where warehouse will be opened as a central depot & based on the customer demand delivery of goods shall be made. Avoiding unnecessary blocking of funds.

4. Warehousing

GST presents an opportunity for industry players to consolidate their warehouses and set up larger facilities, which will bring in supply chain efficiency. Therefore Model like Hubs & Spokes Model will be of real sense for logistic companies.

5. Sales

Since GST has made availement of credit arising from inputs a detailed task by following defined steps mentioned in GST. Therefore it automatically leads that tax collected  from sales made to customers should be deposited timely in order to allow them with credit benefits, else loosing on credit benefit is just like standing on edge & loosing the customer in GST regime.      

6. Purchase

 So far businesses with vendors was done even without contracts & agreements as credit benefit was not dependent on payment of tax by the vendor or not. But because in GST one can book the credit benefit only once there supplier has deposited tax. Now to make sure that vendors abide by these rules & let business function smoothly, there should be fixed terms & condition at the beginning which shall be done through agreements.   

We will try to sensitise about GST impact in each of these chains & many other chains.

Stay tuned 🙂

Conclusion

Organizations with heterogeneous transactional system may face the greatest challenge as they will have to make changes in terms of technology across all the systems & ensure everything works together seamlessly post GST implementation.