ARTICLES ON GST INDIA

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GST : INAPPROPRIATE DEFINITION OF AGGREGATE TURNOVER

             Turnover, of a business carried on by a person in one year, is normally made the basis for determining the status of a business. In view of the socio-economic conditions and complexities, it is not desirable to keep petty businesses in the tax net. To keep petty businesses outside the tax net, it is desirable to fix a limit of annual turnover below which a person may be exempt from tax. In the Goods and Services Tax Laws, a taxable person has been made liable for payment of tax. A taxable person is a person who either is registered under the Act or is liable to be registered. Certain persons have been made liable for obtaining registration irrespective of their turnover. Certain specified persons have been exempted from obtaining registration. All other persons have been made liable for obtaining registration if their aggregate turnover during a financial year exceeds Twenty lakh rupees (Ten lakh rupees in case of special category States).
      The definition of the expression "aggregate turnover" tells us that what will constitute the aggregate turnover i.e. how the aggregate turnover will be computed. Clause (6) of section 2 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act), defines the expression "aggregate turnover" as follows:
(6) “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess;
       Expressions "exempt supply" and "taxable supply", used in this definition, have been defined in clauses (47) and (108) of section 2 of the CGST Act as follows:
(47) “exempt supply” means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply;
(108) “taxable supply” means a supply of goods or services or both which is leviable to tax under this Act;
      Expression "non-taxable supply", used in the definition of expression "exempt supply, has been defined in clause (78) of section 2 of the same Act as follows:
(78) “non-taxable supply” means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services tax Act ;"
      In my opinion, the definition of the expression "aggregate turnover", provided in clause (6) of section 2 of the CGST Act, includes within it values of certain transactions of supplies more than once. Section 9(1) of the CGST Act, read with subsection (2), provides for levy and collection of tax on all intra-State supplies of goods or services or both except on supply of alcoholic liquor for human consumption, petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel.
       Definition of expression "intra-State supply" as provided in section 8 of the Integrated Goods and Services Tax Act, 2017 (hereinafter referred to as the IGST Act) has been adopted for the purpose of the CGST Act. Section 8 of the IGST excludes following supplies from intra-State supplies:
(i) supply of goods to or by a Special Economic Zone developer or a Special Economic Zone unit;
(ii) goods imported into the territory of India till they cross the customs frontiers of India; or
(iii) supplies made to a tourist referred to in section 15 of the Integrated Goods and Services Tax Act, 2017.
(iv) supply of services to or by a Special Economic Zone developer or a Special Economic Zone unit.
       Therefore, following supplies of goods or services or both, made within the State, are not leviable to tax:
(a) supply of alcoholic liquor for human consumption, petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel.
(b) supply of goods to or by a Special Economic Zone developer or a Special Economic Zone unit;
(c) goods imported into the territory of India till they cross the customs frontiers of India;
(d) supplies made to a tourist referred to in section 15 of the Integrated Goods and Services Tax Act, 2017.
(e) supply of services to or by a Special Economic Zone developer or a Special Economic Zone unit.
      Apart from aforesaid supplies, following supplies are also not leviable to tax in view of the charging section of the CGST Act:
(f) supplies taking place outside the State;
(g) supplies taking place in the course of import into the territory of India;
(h) supplies taking place in the course of export out of the territory of India; and
(i) supplies taking place in the course of inter-State trade or commerce.
      Therefore, in view of charging section of the CGST Act, supplies mentioned in clauses (a) to (i) above, are not leviable to tax. Consequently, all other intra-State supplies of goods or services or both are leviable to tax. Where any supply is declared leviable to tax, it becomes essential to provide measure of tax and rate of tax.       So far as it related to rates of tax, either law may itself provide rates of tax or it may, with necessary guidelines, delegate powers to the Government for notifying rates. Where tax is not to be realised on any supply, nil or zero rate of tax may be notified. The law, in public interest, also provide for granting exemption from tax in notified cases. Such exemption may be of general nature or on fulfillment of certain conditions, of whole amount of tax leviale or partial amount of tax leviable, as may be specified in the notification. Supplies, partially exempted from tax or fully or partially exempted from tax on fulfillment of certain conditions, cannot be treated supplies exempt from tax. Because─
(i) in case of partial exemption from tax, tax payer has to pay remaining amount of tax; and
(ii) in case of conditional exemption from tax, where tax payer fails to fulfill the condition, he is required to pay tax.
      A tax payer is not required to pay any amount as tax where supply attracts nil or zero rate of tax or where supply is wholly exempt from tax. Supply being covered under the charging provisions remains a supply leviable to tax under the Act. Supply leviable to tax has been defined a taxable supply in clause (108) of section 2 of the CGST Act. Under the CGST Act, a supply wholly exempt from tax can be notified under section 11 of the CGST Act. Now the "exempt supply" has been defined as supply which attracts nil rate of tax or which is wholly exempt from tax under section 11 of the CGST Act or under section 6 of the IGST Act. Therefore, a supply which either attracts nil rate of tax or is wholly exempt from tax under section 11 of the CGST Act is covered under "taxable supply" as well as under "exempt supply".
      Definition of expression "aggregate turnover" includes values of "taxable supplies" and "exempt supplies" both. Therefore, while computing aggregate of values of all taxable supplies, exempt supplies, etc., value of supply which attracts nil rate of tax or which is wholly exempt from tax will be included in the aggregate twice. This will defeats the purpose and makes the definition of "aggregate turnover" unworkable. Similar is case with inter-State supplies which attract nil or zero rate of tax or which are wholly exempt from tax under section 6 of the IGST Act.