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Daily Dose of GST Update By CA Pradeep Jain

Definition of Turnover in a State and Zero rated supply

Taking further to our discussion, we are continuing our discussion the definitions given under Section 2 of revised GST law and comparing the same with old model GST law to know the changes made in revised law:-

2(107): Turnover in a State: The new definition reads as follows:

Turnover in a State means the aggregate value of all taxable supplies, exempt supplies, exports of goods and / or services made within a State by a taxable person and inter-state supplies of goods and / or services made from the State by the said taxable person excluding taxes, if any charged under the CGST Act, SGST Act and the IGST Act, as the case may be;

Explanation.- Aggregate turnover does not include the value of inward supplies on which tax is payable by a person on reverse charge basis under sub-section (3) of Section 8 and the value of inward supplies.;

The amendment bought in this definition is that earlier the turnover in a state included the non taxable supplies too. In the old draft non taxable supplies were not defined. In the revised draft, the non taxable supplies have been excluded from the definition of ‘turnover in a state’. It has also been defined in section 2(100) to mean a supply of goods or services which is not chargeable to tax under this Act;

As a result the taxable person opting for composition levy, while calculating the limit of 50 lakhs as turnover in a state won’t have to include such non taxable supplies giving the benefit of additional margin of turnover.

Also the Input service distributors, while calculating the ratio of the units where the cenvat has to be distributed, won’t have to include the value of non taxable supplies to the total turnover.

But there is definition of “exempt service” given under Section 2(44) which reads as follows:-

“exempt supply” means supply of any goods and/or services which are not taxable under this Act and includes such supply of goods and/or services which attract nil rate of tax or which may be exempt from tax under section 11

Thus, the definition of exempt supply include the supplies which are not taxable under this Act. It implies that non taxable supply has been excluded from the definition of “Turnover of a state” but it is included under the definition of “exempt service”. Hence, there will not be material effect of this exclusion. To the mind of authors , it seems that it has been done to clarify the situation where the “non taxable supply” was included twice in “Turnover in a state” in Model GST law. Firstly, in the main definition and secondly as a part of exempt service. Now, “non taxable supply” will be included in aggregate turnover in a state as part of “exempt service”.

2(111) Zero rated supply: the new definition reads as follows:
Zero rated supply means supply of any goods and/or services in terms of section 15 of the IGST Act 2016
In the IGST act it is defined as any of the following taxable supply of goods and/or services, namely –
(a) export of goods and/or services; or
(b) supply of goods and/or services to a SEZ developer or an SEZ unit

First of all it should be noted that reference is given that of section 15 whereas it should have been section 16. There seems to be a clerical error. Further if compared to the old definition, it can be noted that supply to SEZ unit or developer have been included in the scope of zero rated supplies. Also the old definition had the condition that cenvat shall be allowed against zero rated supply which is now been given in the form of section 16(2). There is no mention of the EOU or export through merchant exporters which might mean that duty will have to be paid on the supplies made to these entities and subsequently if law provides, refund may be available. This will increase the need of working capital for these sectors and consequently the cost of exports.

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May 2024