The Indirect Taxation regime in India will be undergoing a major shift. The new tax regime will change many old concepts without really changing the approach to study and apply the law.
The Statement of Object and Reasons to the Constitutional Amendment Bill states that the purpose of the amendment is to introduce the goods and services tax (GST) conferring concurrent taxing powers on the Union as well as the States including Union Territories with Legislature, to make laws for levying GST on every transaction of supply of goods or services or both.
As one comes across the ‘subsuming’ nature of GST to mean replacing a plethora of indirect taxes, we shall study this term through a more fundamental discussion. The taxable events we currently follow are broadly manufacture, service and sale – all of which will now be subsumed and the taxable event will be supply of goods or services or both. The Union at present does not have the power to tax transfer of property – sale and deemed sale [Article 366(29A)]. It will get the power to tax such transactions though on account of a ‘supply’. The States in India do not have power to tax services and with the Constitutional Amendment, the States will also be in a position to tax services in the form of “Supply”.
The GST legislation will bring in a comprehensive conceptual framework of indirect taxation with a key objective of making India a National Market. In other words, when there is a free flow of business transactions whether of goods or services across all states with seamless availability of input setoff, indirect tax is a pass through being borne by ultimate consumer. The business plays a facilitation role on behalf of Government of collecting the GST in staged manner up to the final consumer. An Indirect tax has to be paid by a household consumer or the private individual who consumes the supply of goods or services or both.
Under GST the taxable event will be “SUPPLY” and understanding the constitution of supply will be key.
The GST Model Law has provided the definition of Supply. The term supply has been defined to encompass and enlarge the scope of taxability. The detailed analysis has been provided in subsequent para’s. The key ingredients of the term supply will include but not limited to
a. All forms of Supply of goods and/or services
b. Supply should be in India (Section 1- Short title, extent…)
c. Supply made “in the course or furtherance of business”
d. Supply by a Person (Taxable Person)
e. Supply for a consideration
The ingredients mention above are essentials to comprise of Supply, however to meet the objective of being broad base tax and unintentional non-taxation and/or double taxation, not necessary some ingredients be fulfilled like
a. Supply without consideration
b. Free Supplies /Gift
c. Self Supplies (Stock Transfers/ Captive consumptions)
d. Deemed Supplies specifically provided for
e. Supplies not in the course or furtherance of business
Accordingly what constitutes supply is core to GST law in India. A simple break up of “SUPPLY” can be looked into as follows:
Supply & nature of supplies
Essentials ingredients of Supply
Supply of Goods
Supply of services
Supply of goods and services both
Supply for consideration
Supply without consideration
Supply – Intrastate
Supply – Interstate
Supply – Imports