ARTICLES ON GST INDIA

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GST : Supplies Leviable to Tax and Exempt Supplies are Mutually Exclusive

     In clause (47) and clause (108) of section 2 of the Central Goods and Services Tax Act, 2017 (hereinafter referred to as the CGST Act), expressions 'exempt supply' and 'taxable supply' have been defined as under:
(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;
      Clause (6) of section 2 of the CGST Act defines 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;
      We all know that aggregate turnover cannot include turnover of same supply more than once. Inclusion of value of any supply more than once in the definition of 'aggregate turnover' will render the expression impractical. Now let us suppose that those supplies which attract nil rate of tax or which are wholly exempt from tax are also covered under the expression 'taxable supply' which has been defined as a supply of goods or services or both which is leviable to tax'. Then─
(a) definition of expression 'taxable supply' will also include within it all supplies which attract nil rate of tax or which are wholly exempt from tax;
(b) definition of expression 'exempt supply' already includes supplies which attract nil rate of tax or which are wholly exempt from tax.
      We see that definition of expression 'aggregate turnover' includes value of all taxable supplies as well as value of all exempt supplies. If our assumption is true then definition of expression 'aggregate turnover' will result in two times inclusion of the value of supplies which attract nil rate of tax or which are wholly exempt from tax. This will make the definition of 'aggregate turnover' unworkable or impractical. Therefore, our assumption that the expression 'taxable supply' includes supplies which attract nil rate of tax or which are wholly exempt from tax is false.
      We know that the State does not receive any amount of tax from the supplies which attract nil rate of tax or which are wholly exempt from tax. Word "tax" is defined as compulsory exaction of money by public authority from the public for public purpose. Where 'compulsory exaction of money is not involved' we cannot say that any tax is leviable or any event is leviable to tax. Therefore, in respect of supplies which attract nil rate of tax or which are wholly exempt from tax or in respect of any other supply on which any amount of tax is not payable, it cannot be said that on such supplies are leviable to tax.
      In clause (82) of section 2 of the CGST Act, term 'output tax' has been defined as follows:
(82)“output tax” in relation to a taxable person, means the tax chargeable under this Act on taxable supply of goods or services or both made by him or by his agent but excludes tax payable by him on reverse charge basis;
      Output tax is computed for the purpose of ascertaining the amount of tax payable. It is computed in respect of taxable supplies. It is not computed in respect of supplies which attract nil rate of tax or which are wholly exempt from tax or any other supply in respect of which any amount of tax is not chargeable.
      In view of the above, we can conclude that 'taxable supplies' and 'exempt supplies' are mutually exclusive. Any supply, which is exempt supply, is not a taxable supply and similarly any supply, which is taxable supply, is not an exempt supply.




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