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Supply- Taxable Event under Model GST Law-Inclusive and Subjective

Goods and Services Tax - GST - By: - Bimal jain - Dated:- 1-9-2016 Last Replied Date:- 3-9-2016 - 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 ba .....

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nt under the GST regime, it is imperative to first understand the taxable events under the present indirect taxation: Tax/ Duty Taxable Event Section/ Act Relevant Provision Service Tax Service provided or agreed to be provided by one person to another in the taxable territory Section 66B of the Finance Act, 1994 There shall be levied a tax (hereinafter referred to as the service tax) at the rate of fourteen per cent. on the value of all services, other than those services specified in the negat .....

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ch 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 f .....

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er than electrical energy effected by him in the course of inter-State trade or commerce during any year on and from the date so notified…… VAT Sale of goods in the course of Intra-State trade As per the provisions given in respective State VAT Acts, like under DVAT, Section 3(2) of the DVAT Act, 2004 provides that Every dealer shall be liable to pay tax at the rates specified in Section 4 of this Act on every sale of goods effected by him…. SUPPLY - the taxable event under .....

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r 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 m .....

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), in respect of matters mentioned therein, shall apply for determining what is, or is to be treated as either supply of goods or supply of services. Principal - Agent Transaction 2A Where a person acting as an agent who, for an agreed commission or brokerage, either supplies or receives any goods and/or services on behalf of any principal, the transaction between such principal and agent shall be deemed to be a supply. Power(s) of Central/State government 3 Subject to sub-section 2, the Central .....

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d 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 n .....

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meaning. Similarly, in the case of Tata Consultancy Services Vs. State of Andhra Pradesh [ 2004 (11) TMI 11 - Supreme Court ], 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 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. [See Scient .....

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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 subsecti .....

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y round and any activity having the characteristics as stipulated in Section 3 of the Model CGST/SGST Act, can be contemplated as supply even if not so envisaged by the legislation as such. To add more woes, Section 3 of the Model CGST/SGST Act, 2016 , uses the term such as while covering all forms of supply of goods and/or services under the taxable net. Thus, all or any form of supply which is made for a consideration by a person in the course or furtherance of business, would be supply to att .....

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osal 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 transa .....

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be an uphill task to bifurcate the usage of business assets/services to a private or non-business use. At the same time, one may also ponder as to how the department will ascertain the proportion of personal and business use or administer such transactions for levying GST. It may not be out of place here to mention that on one hand, the credit of GST will be restricted to so much of the input tax as is attributed to the purposes of business only [as per Section 16 of the Model CGST/SGST Act], bu .....

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