Taxable Event under GST

CA Chandan , Last updated: 22 August 2016
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What is Taxable Event ?

(a) Taxable:- Liable to be taxed;subject to tax.
(b) Event: - A thing that happens or takes place, especially one of importance.

(Source :- Oxford Dictionary)

Taxable event:- A taxable event is any event or occurrence that results in a tax liability. Normally taxable event means occurrence creates or attracts the liability to be fixed.

Tax can be imposed only on taxable event.

Taxable event under GST.

Tax will be levied when supply of Goods and/or services. Time of supply of goods and/or services is more important under GST.

Hence the word “supply” is more important. Consideration is not mandatory for supply.

Meaning of Supply.

(a) Supply:- A stock or amount of something supplied or available for use.
(b) Sale:- The exchange of a commodity for money; the action of selling something.

(Source: - Oxford Dictionary)

Section 4(1) of the Indian sales of goods act.

Sales means.

“A contract of sales means such contract by which the seller transfers the title or ownership of the goods to the buyer or makes an agreement to transfer it against a fixed price.”

Section 3 of GST Act, 2016 Meaning and Scope of supply

Supply includes

(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 made for a consideration by a person in the course or furtherance of business,

(b) Importation of service, whether or not for a consideration and whether or not in the course or furtherance of business, and

(2) Schedule II, in respect of matters mentioned therein, shall apply for determining what is, or is to be treated as a supply of goods or a supply of services.

(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.

(3) Subject to sub-section (2), the Central or a State Government may, upon recommendation of the Council, specify, by notification, the transactions that are to be treated as—

(i) A supply of goods and not as a supply of services; or
(ii) A supply of services and not as a supply of goods; or
(iii) Neither a supply of goods nor a supply of services.

(4) Notwithstanding anything contained in sub-section (1), the supply of any branded service by an aggregator, as defined in section 43B, under a brand name or trade name owned by him shall be deemed to be a supply of the said service by the said aggregator.

Definition of Supply is “inclusive”. Hence any supply of goods or services would get cover, even if not specified in this section.

As per above discussion Supply does not need Consideration. Free supply of goods and service can be subject to GST. i.e. Stock transfer, branch transfer, Depot transfer is also cover under GST.

As per recently suggestion module issued by ICAI.

a. It is suggested that the words “Except as provided otherwise, supply includes……” be used in place of the words “Supply includes”

b. Instead of having different class of supplies like supplies by agents, aggregator services under section 3, all the forms of deemed supplies be included in a single Schedule say Schedule.

c. The supply of capital goods (whether to own depot or to the customer) be kept outside the purview of GST, and only the leasing/ renting/ transfer of right to use the asset be subject to tax. Movement of capital goods for provision of services like renting/leasing/ transfer of right to use be excluded from the scope of supply under the proposed GST regime.

Analysis of Section 3 of GST ACT 2016.

Section 3(1) (C)

Supply specified in schedule I, made or agreed to be made without a consideration is ‘Supply’

As per schedule I of model of GST 2016. As follows.

Permanent transfer/ disposal of business Assets :- Sale/ discard or otherwise without consideration.
Temporary application of business assets to a private or non-business use :- Such as Business car, plant, building use for personal, partner, director, etc.
Services put to a private or non-business use :- such as telephone, other services provided to proprietor, partner, director, etc.
Assets retained after deregistration: - if taxable person de-registered, he will be liable to pay GST. But if transfer of business as a going concern, then it will not be supply. As per schedule II
Supply of goods and/or services by a taxable person to another taxable or non-taxable person in the course or furtherance of business: - this will be cover like sample, gift, etc.

Provided that the supply of goods by a registered taxable person to a job worker in term of section 43A shall not be treated as supply of goods.

Section 3(2)

1. Transfer

(1) Any transfer of the title in goods is a supply of goods.

(2) Any transfer of goods or of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of services.

(3) Any transfer of title in goods under an agreement which stipulates that property in goods will pass at a future date upon payment of full consideration as agreed, is a supply of goods.

2. Land and Building

(1) Any lease, tenancy, easement, licence to occupy land is a supply of services.

(2) Any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services.

3. Treatment or process

Any treatment or process which is being applied to another person’s goods is a supply of services.

4. Transfer of business assets

(1) Where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration, such transfer or disposal is a supply of goods by the person.

(2) Where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, whether or not for a consideration, the usage or making available of such goods is a supply of services.

(3) Where any goods, forming part of the business assets of a taxable person, are sold by any other person who has the power to do so to recover any debt owed by the taxable person, the goods shall be deemed to be supplied by the taxable person in the course or furtherance of his business.

(4) Where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable

Person, unless—

(a) The business is transferred as a going concern to another person; or
(b) The business is carried on by a personal representative who is deemed to be a taxable person.

5. The following shall be treated as “supply of service”

(a) Renting of immovable property;

(b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where

Required, by the competent authority or before its first occupation, whichever is earlier? Explanation.- For the purposes of this clause-

(1) the expression "competent authority" means the Government or any authority authorized to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the

Following, namely:–

(i) An architect registered with the Council of Architecture constituted under the Architects Act, 1972; or

(ii) A chartered engineer registered with the Institution of Engineers (India); or

(iii) A licensed surveyor of the respective local body of the city or town or village or development or planning authority;

(2) The expression "construction" includes additions, alterations, replacements or remodeling of any existing civil structure;

(d) Development, design, programming, customisation, adaptation, up gradation, enhancement, implementation of information technology software;

(e) Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act;

(f) works contract including transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;

(g) Transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; and

(h) Supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration.

6. The following shall be treated as supply of goods

(a) Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.

Section 3 (2A)

Agent will not be liable for GST on value of goods and services if he neither receive nor supplies any goods or services on behalf of principal.

Principal define under section 2(77)

Means any person on whose behalf an agent carries on the business of supply or receipt of goods and/or services

Agent define under section 2(5)

“Means a person who carries on the business of supply or receipt of

goods and/or services on behalf of another, whether disclosed or not and includes a factor, broker, commission agent, arhatia, del credere agent, intermediary or an auctioneer or any other mercantile agent, by whatever name called, and whether of the same description as hereinbefore mentioned or not;”

Thanks for your consideration.

The author can also be reached at Jha.cachandan@gmail.com