Taxable event under GST

The taxable event under the Goods and Services Tax (GST) regime is the supply of goods or services or both. In the context of GST, “Supply” is a broad and comprehensive term that encompasses various forms of transactions involving goods and services. Understanding the concept of supply is crucial in determining when the tax liability arises and how the tax is to be calculated.

Understanding the taxable event and the concept of supply is fundamental for businesses to determine their GST obligations accurately. It helps businesses identify when GST liability arises, how it is calculated, and the associated compliance requirements. The unified approach to the taxable event for both goods and services under GST contributes to the simplicity and coherence of the indirect tax system in India.

• Supply under GST:

The term “supply” is defined under Section 7 of the Central Goods and Services Tax (CGST) Act, 2017. According to this section, supply includes all forms of supply of goods or services or both, such as sale, transfer, barter, exchange, license, rental, lease, or disposal made or agreed to be made for a consideration during the course of business. It also includes importation of services, even if made without consideration.

Components of Supply:

1. Goods:
   • The transfer of ownership of movable property is considered a supply of goods.
   • It includes all forms of tangible property, whether movable or immovable.
2. Services:
   • Any activity performed for a consideration is considered a supply of services.
   • Services include anything other than goods, money, and securities.
3. Barter and Exchange:

The exchange or barter of goods or services for other goods or services falls under the definition of supply.

4. Importation of Services:

Obtaining services from a supplier located outside India for a consideration is considered a supply, even if made without consideration.

Taxable Event:

The taxable event under GST is the supply of goods or services or both. It is important to note that under the previous indirect tax regime in India, the taxable events were different for goods and services. For goods, it was the sale of goods, and for services, it was the provision of services. However, GST brings about a unified taxable event for both goods and services.

When Does Tax Liability Arise?

The liability to pay GST arises at the time of supply. The time of supply is determined based on various factors, including the issuance of an invoice, receipt of payment, or the completion of the supply, whichever is earlier. The time of supply rules are specified under the GST law to ensure clarity on when the tax liability becomes due.

Exclusions and Exceptions:

While the definition of supply is broad, there are certain exclusions and exceptions. Some transactions may not be considered as supply, and consequently, may not attract GST. These include:

1. Activities Not in the Course of Business:

Activities undertaken by a person as a private individual and not as a business entity may not be considered as supply.

2. Gifts without Consideration:

Gifts made without consideration, up to a certain value and in the course of business, are excluded from the definition of supply.

3. Services by an Employee to the Employer:

Services provided by an employee to the employer in the course of or in relation to employment are not considered as supply.

4. Personal Use or Consumption:

Activities undertaken for personal use or consumption are generally not treated as supply.