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.
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:
- Time of Supply
- Time of Supply for Goods & Services under Reverse & forward charge.
- Liability to pay tax