Supply - meaning, time and valuation

 Supply - meaning, time and valuation

Introduction:

(1) Levy of GST is based upon the term "supply". Taxability under the GST depends upon supply of goods and services.

(2) The terms sale, purchase, service provider and service receiver are irrelevant for the purposes of GST Act.

(3) The term "supply" has not been defined in the Constitution of India. However, it has been defined under the Model GST Act.

(4) Therefore, the first step is to know whether a person, who is engaged in the business has made any supply of goods and/or services; and whether these supplies are taxable under GST.

Meaning of supply:

Meaning of the term "supply" (Section 3)

(I) Supply includes all forms of supply (goods and/or services) and includes agreeing to supply when they are

(a) for a consideration; and

(b) in the course or furtherance of business.

(ii) The term "supply" includes-

(a) Sale. 

(b) Transfer.

(c) Barter:

(d) Exchange.

(e) License.

(f) Rental.

(g) Transaction between principal and agent.

(h) Supply of any branded service by an aggregator, For example: Ola, Uber etc.

(iii) " Supply" includes importation of service

The term 'supply' also includes importation of a service, whether or not for a consideration and whether or not in the course or furtherance of business.

This implies that import of services even for personal consumption would qualify as 'supply' and therefore, such importer of service would be liable to tax, subject to the threshold limit.

Imposition of this tax is of the nature of basic customs duty, which is levied on importation of goods, irrespective of nature of use of these goods, whether for personal consumption or commercial use. now importation of service for personal purposes would be subject to GST.

Such services would be liable to tax under reverse charge mechanism.

For example, a father pays fees for on - line coaching obtained from a teacher located in USA for coaching of JMAT course for his son. Even if receipt of the service is not for furtherance of business, he would be liable to pay GST under reverse charge mechanism if the amount exceeds the threshold limit.

(iv) The term "supply" also includes matters listed in Schedule II

Schedule II of the Model Law comprise various circumstances and situations when the activity shall be considered as supply of as service. These matters, in brief, are under.

(v) The Central/State Government may, upon recommendation of the GST Council, by notification, specify the transactions that to be treated as 

(a) a supply of goods, and not as a supply of services; or

(b) a supply of services, and not as a supply of goods; or

(c) neither a supply of goods nor a supply of services.

Whether the term "supply" includes stock transfer within the entity.

Yes. Transfer of goods/services by one unit to another of the same entity is covered within the term "supply". Generally, supply includes all transfers from one GSTIN to another.

Whether consideration is necessary for levying GST

No. Certain supplies which are even without consideration have also been included in the definition of "Supply". These are listed in Schedule I ---

(a) Permanent transfer of business assets.

For example, transfer of mobile/computer by an employer to his employee after its use for a certain period.

(b) Disposal of Business assets.

For example, sale of vehicle by a garment trader. This clause would also include those cases where business asset is transferred by the partnership firm to its retiring partner in settlement of this dues.

(c) Temporary application of business assets to private use.

For example, vehicle, capitalized in the books of a proprietorship firm, is used by the proprietor for personal use.

Another Example: The cable owner uses his taxis during the marriage of his son. As per this clause, he is liable to pay GST on the said use as if the same has been hired.

(d) Services put to a personal or non-business use.

For example, preparing and filling of income tax return of a friend of relative by one of the partners of CA firm.

(e) Assets retained after deregistration.

For example, at the time deregistration, it is assumed that business activities are discontinued, and assets are sold. Where assets are not sold, but retained by the entity at the time deregistration, it would be deemed as supply.

(f) Supply of goods and/or services by one taxable person to another taxable person or non-taxable person in the course or furtherance of business,

For example, free supplies, gifts, diaries and calendar distributed to clients at the time of festival

Role and functions of the GST Council

 Role and functions of the GST Council

(1) As per Article 279A (4) of the Constitution of India, the GST Council shall make recommendations to the Union and the states on- 

(I) the taxes, cesses and surcharges levied by the Centre, the State and the local bodies which may be subsumed under GST.

(ii) The goods and services that may be subjected to or exempted from the GST.

(iii) the date on which the GST shall be levied on petroleum crude, high speed diesel, motor sprit (commonly known as petrol), natural gas and aviation turbine fuel.

(iv) mode GST laws, principles of levy, apportionment of IGST and the principles that govern the place of supply.

(v) the threshold limit of turnover below which the goods and services may be exempted from GST.

(vi) the rate including floor rates with bands of GST;

(vii) any special rate or rates for a specified period to raise additional resources during any natural calamity or disaster.

(viii) special provision with respect to the Northeast States, J&K, Himachal Pradesh and Uttarakhand; and 

(ix) any other matter relating to the GST, as the Council may decide.

(2) The GST Council shall establish a mechanism to adjudicate any dispute--

(a) between the Government of India and one or more states; or

(b) between the Government of India and any state or states on one side and one or more other states on the other side; or

(c) between two or more states, arising out of the recommendations of the Council or implementation thereof.

Observations---

As per Art. 279A of the Constitution of India, the GST Council shall make recommendations to the Union and the State. It means that the Union Government and the State Government will have option either to accept or reject any or all the recommendation. The recommendations made by the GST Council will act merely as guidance to the Union as well as to State Government. The Parliament as well as the State Legislatures will be free to exercise their powers since the GST would be levied through separate Central and State Legislations.

Therefore, the decisions of the GST Council should have been binding upon the governments to avoid any contingencies in future.

Pan Masala and Tobacco taxpayers

 Filling of information by manufacturers of Pan Masala and Tobacco taxpayers

Please refer to the notification No.04/2024 - Central Tax dated 05-01-20024 to seek information from taxpayers dealing in the goods mentioned therein. Two form have been notified vide this notification namely GST SRM-I and GST SRM-II. The former pertains to the registration and disposal of machines while the latter asks for information on inputs and output during a month. Form GST SRM-I meant for registration of machines has already been made available on the Portal w.e.f. 15-05-2024 Concerned taxpayers are using the same for the registration of machines and other information asked therein.

Now, the second form namely, Form GST SRM-II is also available on the portal. Taxpayers dealing in the manufacture of Pan Masala and Tobacco products can now report the details of inputs and outputs procured and consumed for the relevant month.

Features of Indian GST

Features of Indian GST

(1)  In India, GST will be a "Dual GST" with both central GST and State GST components levied on the same base. All goods and services, barring a few exceptions, will be brought into the GST base. Importantly, there will be on distinction between goods and services for the purpose of the tax with common legislations applicable to both.

(2) Reason for Dual GST: India is a federal country where both the Centre and the State have separate powers to levy and collect taxes through appropriate legislations; and accordingly, both the levels of Government have distinct responsibilities to perform.

(3) The power to levy tax is drawn from the Indian Constitution, which has been amended through Constitution (101st Amendment) Act, 2016 assented by the president of India on 8 September 2016. Since, GST requires different kind of taxation powers than the ones provided for in the present Constitution, thus certain Constitutional Amendments have been necessitated in this context.

(4) All the amendments in the Constitution of India have been made effective from 16 September 2016, except in respect of creation of GST Council, which have been made effective from 12 September 2016.

(5) Concurrent power have been conferred upon the parliament and the State Legislatures, through Article 246A of the Constitution of India, to make law's governing GST.

Every state will legislate its own GS law, such as, Delhi GST Act, UP GST Act, MP GST Act, Gujarat GST Act, and so on, in addition to CGST Act by the Central Government. IGST (Intergrated GST Act by the Central Government.

(6) GST Council has been created to examine issues relating to GST and make recommendations to the Union and the State on various parameters, like rates of tax, exemption list, threshold limit, etc.

(7) The rates of CGST and SGST will be recomb mended by the GST Council keeping in view -

(a) the revenue considerations.

(b) Total tax burden; and 

(c) the acceptability of the tax.

(8) In relation to levy tax on supply of goods, there might be 5 tier rate-structure; Exempted, Lower, Standard, Luxury and Bullion. In relation to taxation of services, there might be a single, or might be double rates.

(9) GST will subsume various central and state indirect taxes/duties on supplies of goods and services.

(12) Specified petroleum goods will be included into the GST regime from the date to be goods and services, except those which are kept out of the purview of the GST.

(10) The Central and State GST will be levied on all transactions involving supply of

(11) Alcoholic liquor for human consumption will be kept outside the GST structure.

 recommended by GST Council.

(13) Concept of 'declared goods of special importance' will be dispensed with.

(14) Excise duty would be a matter of history in relation to goods covered within the scope of GST.

(15) Exports will be zero-rated and will be relieved of all embedded taxes and levies at both Central and State level.

(16) Import of goods and services would be treated as inter-state supplies and would be subject to IGST in addition to the applicable customs duties. The IGST paid shall be available as input tax credit for further transactions.

(17) Taxpayers with an aggregate turnover in a financial year up to specified limits, which may be between INR 10 lakhs and 25 lakhs, would be exempt from tax Aggregate turnover, to be computed on all India basis, shall include aggregate value of all taxable and non-taxable supplies, exempt supplies and exports of goods and /or services and exclude taxes viz. GST

Tax Cascading

 

Tax Cascading

Tax cascading occurs under the center as well as the state taxes. The most significant contributing factor to tax cascading is the partial coverage by central and state taxes, Mining, agriculture, wholesale and retail trade, and range of the center. The exempt sectors are not allowed to claim any credit for the Cen vat, or the service tax paid on their inputs.

Similarly, under the State VAT, on credits are allowed for the input to the exempted sectors, which include the entire service sector and sale of exempted goods. Another major contributing factor to tax cascading is the central sales is allowed by any state government.

Other important indirect taxes or duties

 Other important

indirect taxes or duties

(a) Betting and gambling tax;
(b) Entertainment tax;
(c) Entry tax and Octroi.;
(d) Lottery tax;
(c) Property tax;
(d) Research and development cess;
(e) Stamp duty;
(f) Tax on consumption or sale of electricity;
(g) Taxes on transporation of goods and services;
(h) Telecom License fees.
(i) Toll tax, passenger tax and road tax.
(j) Turnover tax.

Thanks

Customs duty

 Customs duty

---- Indian Customs have been assigned a number of risks, more important of which are:

(I) Collection of customs duties on imports an export as per basic Customs Laws (The Customs Act, 1962 and the Customs Tariff Act, 1975).

(II) Enforcement of the various provisions of the Customs Act governing imports and export of cargo, baggage, postal articles and arrival & departure of vessels, aircrafts etc.

(III) Discharge of various agency functions and enforcing various prohibitions and restrictions on imports and exports under Customs Act and other allied enactments.

(IV) Prevention of smuggling including interdiction of narcotics/drug trafficking; and

(V) International passenger processing.

----- The Constitutional provisions have given to the Union, the right to legislate and collect duties on imports and exports as per Entry 83 of List I TO Sch VII of the Constitution. The Customs Act, 1962 is the basic Statute, effective from I February 1963, empowering duties to be levied on goods imported into or exported from India.

---- The categories of goods and the rates of duties leviable have been specified int he schedules to the customs Tariff Act, 1975. The First schedule to the said Act specifies various categories of import commodities in a systematic and well considered d manner, it accordance with the Internationa scheme of classification of internationally traded goods - termed Harmonized system of commodity classification Different rates of duties have been prescribed by the legislature on different commodities/group of commodities mentioned in the Furst sockeye.

---- The durries are levied both on specific and ad valorem basis; while there are few cases where at times specific-cum ad valorem duties are also Tariff Act. 1975 incorporates commodities subject to exports duties and rates thereof.

----- Where ad valorem duties (i.e. duties with reference to value) are collected, which are the predominate mode of levy, the value of the goods for customs duty purposes is determined as per provisions laid down under sec 14 of the customs Acts and the Customs Valuation (Determination of prices of Imports Goods) Rules. 2007 issued thereunder.

----- Customs duties on import are primarily of three types: -

(a) Basic customs Duty (levied u/s 12 of the Customs Act).

(b) Additional Customs Duty (CVD) under sections 3(1) and 3(3) of the customs Tariff Act, in lieu of excise duty.

(c) Special Additional Duty of customs (SAD) under sec 3(5) of the customs Tariff Act to counterbalance the sales tax, value added tax, local tax or any other charges for the time being leviable on a like article on its sale, purchase or Transporation in India.