1 “Supply” under proposed Indian GST – Model GST Law CA. Amitabh Khemka 1. Proposed taxable event – „supply‟ Any event or transaction or occurrence that results in a tax consequence / liability can be said to be a taxable event. Under the current Indian indirect tax regime such event /transaction /occurrence include manufacturing, sale, provision of service, import of goods into India, export of goods from India, entry of goods into a specified area for sale /use / consumption, admission to an entertainment etc. Under the proposed Indian Goods and Services Tax (GST) regime majority of these taxable events would be subsumed into a single taxable event - ―supply‖. The GST Constitution Amendment Bill 1 defines 2 GST as – ―goods and services tax means any tax on supply of goods, or services or both except taxes on supply of the alcoholic liquor for human consumption‖. The term ‗supply‘ has not been defined therein. 2. „Supply‟, a taxable event under different jurisdictions Under the Directive 3 issued by the Council of the European Union, the ‗chargeable event‘ is defined as – ―chargeable event shall mean the occurrence by virtue of which the legal conditions necessary for VAT to become chargeable are fulfilled‖. Under the Directives, ―the chargeable event shall occur and VAT shall become chargeable when the goods or the services are supplied‖. Following are further defined – - ‗Supply of goods‘ shall mean the transfer of the right to dispose of tangible property as owner. - ‗Supply of services‘ shall mean any transaction which does not constitute a supply of goods. In Canada, for levy of Goods and Services Tax 4 , ‗taxable supply means a supply that is made in the course of a commercial activity‘. Further, ‗supply means, subject to sections 133 and 134, the provision of property or a service in any manner, including sale, transfer, barter, exchange, licence, rental, lease, gift or disposition‘. In United Kingdom, scope of Valued Added Tax is specified 5 as - (1) VAT shall be charged on any supply of goods or services made in the United Kingdom, where it is a taxable supply made by a taxable person in the course or furtherance of any business carried on by him. (2) A taxable supply is a supply of goods or services made in the United Kingdom other than an exempt supply. In turn, ‗supply is defined as ―supply‖ in this Act includes all forms of supply, but not anything done otherwise than for a consideration. Further, anything which is not a supply of goods but is done for a consideration (including, if so done, the granting, assignment or surrender of any right) is a supply of services. In Singapore, for levy of Goods and Services Tax 6 , ‗A taxable supply is a supply of goods or services made in Singapore other than an exempt supply‘. . In turn, ‗supply is defined as ―supply‖ in this Act includes all forms of supply, but not anything done otherwise than for a consideration. Further, anything which is not a supply of goods but is done for a consideration (including, if so done, the granting, assignment or surrender of any right) is a supply of services. 1 The Constitution (One Hundred and Twenty-second Amendment) Bill, 2014 2 Proposed Article 366(12A) in the Constitution of India 3 Council Directive 2006/112/EC of November 28, 2006 on the common system of value added tax 4 Levied under Part IX – Goods and Services Tax – of the Excise Tax Act, 1985 5 Section 4 of the Value Added Tax Act, 1994 6 Goods and Services Tax Act, 1993
12
Embed
'Supply' under proposed Indian GST - Model GST Law
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
1
“Supply” under proposed Indian GST – Model GST Law
CA. Amitabh Khemka
1. Proposed taxable event – „supply‟
Any event or transaction or occurrence that results in a tax consequence / liability can be said to be a
taxable event. Under the current Indian indirect tax regime such event /transaction /occurrence
include manufacturing, sale, provision of service, import of goods into India, export of goods from
India, entry of goods into a specified area for sale /use / consumption, admission to an entertainment
etc. Under the proposed Indian Goods and Services Tax (GST) regime majority of these taxable
events would be subsumed into a single taxable event - ―supply‖. The GST Constitution Amendment
Bill1 defines
2 GST as – ―goods and services tax means any tax on supply of goods, or services or both
except taxes on supply of the alcoholic liquor for human consumption‖. The term ‗supply‘ has not
been defined therein.
2. „Supply‟, a taxable event under different jurisdictions
Under the Directive3 issued by the Council of the European Union, the ‗chargeable event‘ is defined
as – ―chargeable event shall mean the occurrence by virtue of which the legal conditions necessary
for VAT to become chargeable are fulfilled‖. Under the Directives, ―the chargeable event shall occur
and VAT shall become chargeable when the goods or the services are supplied‖. Following are
further defined –
- ‗Supply of goods‘ shall mean the transfer of the right to dispose of tangible property as owner.
- ‗Supply of services‘ shall mean any transaction which does not constitute a supply of goods.
In Canada, for levy of Goods and Services Tax4, ‗taxable supply means a supply that is made in the
course of a commercial activity‘. Further, ‗supply means, subject to sections 133 and 134, the
provision of property or a service in any manner, including sale, transfer, barter, exchange, licence,
rental, lease, gift or disposition‘.
In United Kingdom, scope of Valued Added Tax is specified5 as - (1) VAT shall be charged on any
supply of goods or services made in the United Kingdom, where it is a taxable supply made by a
taxable person in the course or furtherance of any business carried on by him. (2) A taxable supply is
a supply of goods or services made in the United Kingdom other than an exempt supply. In turn,
‗supply is defined as ―supply‖ in this Act includes all forms of supply, but not anything done
otherwise than for a consideration. Further, anything which is not a supply of goods but is done for a
consideration (including, if so done, the granting, assignment or surrender of any right) is a supply of
services.
In Singapore, for levy of Goods and Services Tax6, ‗A taxable supply is a supply of goods or services
made in Singapore other than an exempt supply‘. . In turn, ‗supply is defined as ―supply‖ in this Act
includes all forms of supply, but not anything done otherwise than for a consideration. Further,
anything which is not a supply of goods but is done for a consideration (including, if so done, the
granting, assignment or surrender of any right) is a supply of services.
1 The Constitution (One Hundred and Twenty-second Amendment) Bill, 2014
2 Proposed Article 366(12A) in the Constitution of India
3 Council Directive 2006/112/EC of November 28, 2006 on the common system of value added tax
4 Levied under Part IX – Goods and Services Tax – of the Excise Tax Act, 1985
5 Section 4 of the Value Added Tax Act, 1994
6 Goods and Services Tax Act, 1993
2
In Malaysia, for levy of Goods and Services Tax7, ‗supply means all forms of supply, including
supply of imported services, done for a consideration and anything which is not a supply of goods but
is done for a consideration is a supply of services‘.
In Australia, ‗taxable supplies‘8 is defined as follows:
You make a taxable supply if:
(a) you make the supply for consideration; and
(b) the supply is made in the course or furtherance of an enterprise that you carry on; and
(c) the supply is connected with the indirect tax zone; and
(d) you are registered, or required to be registered.
However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.
Meaning of supply9, in turn, in Australia, is as follows:
(1) A supply is any form of supply whatsoever.
(2) Without limiting subsection (1), supply includes any of these:
(a) a supply of goods;
(b) a supply of services;
(c) a provision of advice or information;
(d) a grant, assignment or surrender of real property;
(e) a creation, grant, transfer, assignment or surrender of any right;
(f) a financial supply;
(g) an entry into, or release from, an obligation:
(i) to do anything; or
(ii) to refrain from an act; or
(iii) to tolerate an act or situation;
(h) any combination of any 2 or more of the matters referred to in paragraphs (a) to (g).
(3) It does not matter whether it is lawful to do, to refrain from doing or to tolerate the act or
situation constituting the supply.
(3A) For the avoidance of doubt, the delivery of:
(a) livestock for slaughtering or processing into food; or
(b) game for processing into food;
under an arrangement under which the entity making the delivery only relinquishes title after
food has been produced, is the supply of the livestock or game (regardless of when the entity
relinquishes title). The supply does not take place on or after the subsequent relinquishment of
title.
(4) However, a supply does not include a supply of money unless the money is provided as
consideration for a supply that is a supply of money.
In majority of these jurisdictions, the term ‗supply‘ has been stated to be – ‗supply‘ in all forms or in
any form or in any manner.
3. Meaning of the term „supply‟
The word ―supply‖ is defined in the Standard Dictionary as ‗that which is or can be supplied;
available aggregate of things needed or demanded; an amount sufficient for a given use or purpose‖.
In the Imperial Dictionary, ‗that which is supplied; sufficiency of things for use or want; a quantity of
something furnished or on hand‖.10
7 Goods and Services Tax Act, 2014
8 Section 9.5 of A New Tax System (Goods and Services Tax) Act, 1999
9 Section 9.10 of A New Tax System (Goods and Services Tax) Act, 1999
10 P Ramanatha Aiyar‘s Advanced Law Lexicon, Fourth Edition, 2013
3
Apex Court while dealing11
with the words 'duty on supply of electricity‘ employed in charging
Section 3 of the Kerala Electricity Surcharge (Levy and Collection) Act, 1989, in light of Entry 53 of
State List of Seventh Schedule to the Constitution of India viz., ‗Taxes on the consumption or sale of
electricity‘; held that the word `supply' used in the charging Section 3 should, receive liberal
interpretation to include sale or consumption of electricity as envisaged in Entry 53 of the State List.
From the sub-station, electricity is connected to the industrial units through the meter put up in the
factory. Continuity of supply and consumption starts from the moment the electrical energy passes
through the meters and sale simultaneously takes place as soon as meter reading is recorded. It is
true that from the place of generating electricity, the electricity is supplied to the sub-station
installed at the units of the consumers through electrical high-tension transformers and from there
electricity is supplied to the meter. But the moment electricity is supplied through the meter,
consumption and sale simultaneously take place. It is true that in the definitions given in the New
Encyclopaedia Britanica, Vol. 4, p.842 cited before us, distinction between supply and
consumption is stated but adopting a pragmatic and realistic approach, we are of the considered
view that as soon as the electrical energy is supplied to the consumers and is transmitted through
the meter, consumption takes place simultaneously with the supply.
Under Section 9A of the Representation of the People Act, 1951, a person is disqualified if, and for so
long as, there subsists a contract entered into by him in the course of his trade or business with the
appropriate Government for the supply of goods to, or for the execution of any works undertaken by
that Government. The Orissa High Court, held12
that in the context of its use in the provision, the
word ‗supply‘ has to be construed as a form of sale and despatch.
The word "supply" means "to give", or "to provide or to afford something that is necessary". In the
context of its use in the provision, it has to be construed as a form of sale and despatch. The
conception of supply of goods must be interpreted in the conception of sale. For the purpose of
Section 9A, there can be no supply of goods unless there is a sale to the State. As observed in West
Survey Water Co. v. Chertsey, (1894) 3 Ch 519: ―To 'supply' anything --e.g., water -- means
passing it from one who has it to those who want it; you may 'provide' a thing for yourself, but that
is not 'supplying it'‖.
In the context of definition of ‗supply‘ in Australia, it has been clarified13
that -
The words ‗A supply is any form of supply whatsoever' in subsection 9-10(1) cover all supplies
regardless of whether they concern goods or services. This is defined broadly and is intended to
encompass supplies as widely as possible. The intended scope of subsection 9-10(1) is more
fully illustrated in subsection 9-10(2), which provides a list of things that are included as
supplies. It is not an exhaustive list. It does not limit the possible breadth of the definition of
supply in subsection 9-10(1). Something that is not listed in subsection 9-10(2) but falls within
subsection 9-10(1) will be a supply.
For the purpose of GST / VAT, the word ‗supply‘ is not only likely to be defined broadly but would
encompass supplies as widely as possible. It appears that the word ‗supply‘ for a tax consequence
would not have a restrictive meaning.
4. “Supply” – meaning as assigned in Indian Model GST Law14
11
Indian Aluminium Co. Etc. vs State of Kerala & Crs AIR 1996 SC 1431 12
Somnath Rath v. Bikram Keshari Arukh AIR 1999 Ori 119 13
Goods and Services Tax Ruling on ‗Goods and services tax: supplies‘ – GSTR 2006/9EC – issued by
Australian Taxation Office 14
Model GST Law released by the Empowered Committee of State Finance Ministers in June 2016