CS Deepak Pratap Singh

Implementation of ‘Goods and Service Tax’ (GST) is a dream project for recent and earlier governments. The business fraternity and all stakeholders in national economy wish that it will be implemented as soon as possible. GST will benefit all stakeholders and end users providing simple and hassle free way of taxation. Gone are the days when we bear cascading effects of taxes due to faulty taxations laws.

GST is a comprehensive Value Added Tax, which will be levied at all points in the supply chain by giving setoff facility of taxes paid on inputs.

France is the first country which has introduced GST in 1954, now GST has been implemented by more than 140 countries.

As explained above GST will be collected on each point of supply of Goods and Services by giving credit facilities of taxes paid on inputs used in supply of Goods and Services.

Meaning of Supply of Goods and Services;

Article 366(12A) has been amended through 122nd Constitutional Amendment Bill, 2014 to define GST as

“Goods and service tax” means any tax on supply of goods, or services or both except taxes on supply of the alcoholic liquor for human consumption.

Article 366(26A) defines service as “Services” means anything other than goods.

Let’s consider definitions from other countries;

The Australian New Tax System (Goods and Services Tax) Act, 1999 defined the meaning of Supply; Section 9.10 of Division 9 of Part 2-2

(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 advise 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)

Note: the above definition does not include a supply of money unless the money is provided as consideration for a supply that is supply of money.

(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.

Section 4 of the Malaysian GST, 2014 defines “Supply” as;

“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.

(1) Matters to be treated as supply of goods or a supply of services shall be specified in the First Schedule.

(2) Matters to be treated as neither supply of goods not a supply of services shall be specified in the Second Schedule.

(3) The minister may, by order published in the gazette, amend the First Schedule and Second Schedule.

(4) Any order made under sub section (4) shall be laid before the Dewan Rakyat.

Section 10 of the Singapore’s Goods and Services Tax Act, 1993 defines;

(1) The Second Schedule shall apply for determination what is, or is to be treated as, a supply of goods or supply of services.

(2) Subject to any provisions made by the Second Schedule and to orders made under subsection (3)-

(a) “Supply” in this Act includes all forms of supply, but not anything done otherwise than for a consideration;

(b) 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.

(3) The Minister may by order amend the Second Schedule and may also provide by order with respect to any description of transaction-

(a) That it is to be treated as a supply of goods and not as a supply of services;

(b) That it is to be treated as a supply of services and not as a supply of goods; or

(c) That it is to be treated as neither a supply of goods not a supply of services,

And without prejudice to the foregoing , such an order may provide that paragraphs 5(3) of the Second schedule is not to apply, in relation to goods of any prescribed description used or made available for use in prescribed circumstances, so as to make that a supply of services under that paragraphs.

(4) For the purposes of this section , where goods are manufactured or produced from any other goods, those other goods shall be treated as incorporated in the first mentioned goods.

From above some definitions and various papers, drafts and suggestions of various business bodied, we have came to the conclusion that a transaction should have following ingredients to be taxed in GST;

  1. Supply must be against a “ Consideration”;
  2. Supply be ‘ in the course of business or furtherance of business;
  3. Transaction must be either supply of goods or a supply of services;
  4. Supply should be by a taxable person; and
  5. Supply of goods or services should be a taxable supply.

Note: in case of some transactions we cannot find all ingredients of supplies, such as in case of Interstate Stock Transfer, supply of samples, gifts or self supplied etc., now in these cases, we shall consider these supply as deemed to be supply for GST purpose.

Meaning of “Supply of Goods”; this term has been defined in different ways by various GST legislations, the 122nd Constitution Amendment Bill, 2014 also does not define its meaning.

Article 10 of the VAT Code of the European Union Sixth Directive defines as; “ Supply of Goods” means the transfer of right to dispose of tangible property as an owner.

This means that transfer of both i.e. the title of any goods and possession thereof, or control over the goods. Now let’s understand definitions of Title, Possession and Control;

Title: Title is defined as the owernership of real property or personal property, which stands against the right of anyone else to claim the property. In case of real property the title is evidenced by Deeds, Agreements or other records.

Possession: means ownership, control or occupancy of a thing such as land, personal property by a person.

Control: means power to direct, manage, oversee and/or restrict the affairs or assets of a person or entity.

Meaning of Supply of Services;

Same as “Supply of Goods” the Supply of Services also does not have unique or similar definitions in all legislations implemented all over the world.

Article 18 of the VAT Code of the European Union Sixth Directive defines as;

“Supply of Services” means any transaction which does not constitute a supply of goods within the meaning of this code.

The UK VAT has also been adopted definition of EU for “Supply of Services”;

“Supply of Services” means anything that is not a supply of goods, but is done for consideration.

The Article 366(26A) of the Constitution of India as amended through 122nd Constitution Amendment Bill, 2014 defines; “ Supply of Services” means anything other than goods.

Now discussion paper 2009 proposed the definition of “ Supply of Services” means a supply which is not a supply of goods, but which is done for a consideration’( including ,if so done, the granting, assignment or surrender of any right).

Following Transactions will also be included in the definitions of “Supply of Services”;

  • Grant, assignment or surrender of right.
  • Hire/Purchase of immovable property.
  • Right to enter any property.
  • Assignment of intangible property.
  • Obligation to refrain from an act etc.

We hope that GST will be implemented soon by the government

(Author can be reached at cs.deepakpsingh@gmail.com)

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