ARTICLES ON GST INDIA

     Except wherever references have been provided, all other views expressed in the articles are our own views. Readers are advised to consult some expert on the subject before acting upon the views. We disown any kind of personal liability.

TAXABLE SUPPLY

     Clause (108) of section 2 of the Central Goods and Services Tax, 2017 (hereinafter referred to as the CGST Act) defines a "taxable supply" as under:
(108) “taxable supply” means a supply of goods or services or both which is leviable to tax under this Act; 

      So far as it is related to meaning of the word "tax", following definition of word "tax" has been recognized by the Constitution Bench of the Hon'ble Supreme Court in its judgment in the case The Commissioner, Hindu Religious Endowments, Madras vs. Sri Lakshmindra Thirtha Swamiar of Sri Shirpur Mutt., decided on April 16, 1954:
"A tax is compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered."
In this regard, the Hon'ble Court has made following obervations:
"A neat definition of what "tax" means has been given by Latham C. J. of the High Court of Australia, in Matthews v. Chicory Marketing Board. A tax", according to the learned Chief Justice, "is a compulsory exaction of money by public authority for public purposes enforceable by law and is not payment for services rendered". This definition brings out, in our opinion, the essential characteristics of a tax as distinguished from other forms of imposition which, in a general sense, are included within it. It is said that the essence of taxation is compulsion, that is to say, it is imposed under statutory power without the taxpayer’s consent and the payment is enforced by law. The second characteristic of tax is that it is an imposition made for public purpose without reference to any special benefit to be conferred on the payer of the tax. This is expressed by saying that the levy of tax is for the purposes of general revenue, which when collected revenues of the State. As the object of a tax is not to confer any special benefit upon any particular individual, there is, as it is said, no element of quid pro quo between the taxpayer and the public authority. Another feature of taxation it; that as it is a part of the common burden, the quantum of imposition upon the taxpayer depends generally upon his capacity to pay."
 

     Under a tax law, an event of specified description is said to be leviable to tax if it satisfies the following conditions-
1. The event is one on which the tax law provides for levy of tax;
2. In respect of the event, tax base and rate of tax have been provided for the event and amount of tax is neither indeterminate nor zero;
3. In respect of the event, person who shall be liable for payment of tax has been specified;
4. The event is not generally exempt from whole amount of tax; and
5. Object of levy is to augment the general revenue of the State and amount when paid or collected becomes part of general revenue of the State.
     Where all above conditions are not satisfied, it cannot be said that the event is leviable to tax. Where a supply is exempt from tax on fulfillment of certain condition(s), supply cannot be said generally exempt from tax. In this case, where condition(s) will not be fulfilled, the supply will not remain exempt and supply will become assessable to tax.

      Where any amount is not leviable as tax, tax payer cannot be asked to pay it first and to claim refund of such amount latter. Taxes are levied to augment the general revenue of the State. Where any amount is collected from a tax payer for allowing refund at some later stage either to the tax payer or to some other person, amount collected does not become tax. The Hon'ble Supreme Court has, in its judgment in the case M/s Bhawani Cotton Mills Ltd. vs. State of Punjab & Anr, decided on April 10, 1967, held as follows:
"If a person is not liable for payment of tax at all, at any time, the collection of a tax from him with possible contingency of refund at a later stage will not make the original levy valid."
     The Hon'ble Supreme Court has followed above quoted principle in other cases including the case Steel Authority Of India Ltd vs State Of Orissa & Ors., decided on 25 February, 2000. In this case, following observations of the Hon'ble Court are important:
"In Bhawani Cotton Mills Ltd. vs. State of Punjab & Anr., (1967) 3 SCR 577, this Court said, - If a person is not liable for payment of tax at all, at any time, the collection of a tax from him, with possible contingency of refund at a later stage, will not make the original levy valid; because, if particular sales or purchase are exempt from taxation altogether, they can never be taken into account, at any stage, for the purpose of calculating or arriving at the taxable turnover and for levying tax."

     Where is respect of any event, facility of rebate of whole amount of tax is available generally to all tax payers, the event cannot be said leviable to tax.

DISCLAIMER: Views expressed here in this Article, except the references of judgments of the Hon'ble Supreme Court, are my personal views. Readers can use them on their own risk. They are advised to seek opinion of some expert on the subject before acting upon the views. I disown any liability on account of use the views expressed.