Goods & Services Tax - 6 Factums & 5 Factors of GST Unveiled

GST is new to India but not to the other countries of the world. GST was first introduced in 1954 in France. Further, Singapore has the lowest GST @7% whereas India is still striving with the idea of the 4 tier rate structures.

For the GST in India, it is aid to introduce 6 factums as below:

First - The term GST means Goods & Services Tax. Most of the people still cannot comprehend that the term is "services" rather "service’’.

Second - The entire conception of GST rests on the seamless flow of Input Tax Credit (ITC) and combining the chain of movement of supplies. Thus, the fundamental aspect of avoiding overflow effect in taxation is not the aim of GST.

Third - The Courts of law in numerous countries have anticipated the GST to be a tax on the business and not a tax on the income.

Fourth - The conception of "manufacture" and "sale" will disappear. They will be recovered with the concept of supply of goods and /or supplies.

Fifth - The reverse charge mechanism will be on the CGST, SGST & IGST. Reverse charge mechanism must be applicable on the goods at mean what it is collected in some states as the purchase tax on the goods.

Sixth - The much discussed factum of the Place of Removal which will be recovered by the Place of Business. This will put rest to numerous disputes but alarmingly, in GST the Place of Business can be also a place where the books of accounts are maintained.

Whereas, the heart of GST is administered to rest on the following 5 Factors:

1.		Supply - Supply of taxable goods and/or services.
2.		Consideration - Any advantage accumulated in financial terms or in any manner having the value. Consideration can be also understood as a reasonable equivalent for other valuable benefit passed on by the promisor to the promisee or by the transfer of to the transferee.
3.		Supplier - One who supplies goods or services i.e. promisor. It includes his agent.
4.		Recipient - One who receives goods or services i.e. promisee. It also includes his agent. The recipient also includes that person who is liable to pay for the received service or goods.
5.		Business - Any trade, commerce, manufacture, profession, vocation or any other similar activity, whether or not it is for a pecuniary benefit. The business should be running.

These all 5 factors have strong linkage with each other and it can be understood in the following manner:

a.		Supply & Consideration - A taxable supply requires, among other things that a supply is made for consideration. Thus, there must be a supply, a payment, and the necessary nexus between the supply and the payment. Hence, where one party makes financial payment to another, something of economic value is contributed by the other party.
		In other words, sole receipt of payment by a person who cannot be administered to be at par consideration against a supply and vice versa.
		The Section 3 of draft GST Act, 2016 further chisel out certain exception where the consideration is not MUST. But, the barring those exceptions under numerous schedules, in order to call a taxable supply, a nexus with consideration is needed to be settled.
b.		Supplier & Recipient - The subject of GST, time of supply, place of supply, etc., are to be determined after proper identification of supplier, recipient, supply & consideration.
c.		Business - The fundamental of business will be dominating for the tax liability and availing of the ITC in the course of furtherance of the business.

The entire GST cycle for the purpose of duty, discharge & collection can be also understood in other words as below:

a.		The presence of a promisor and a promise
b.		Promise to pay i.e. consideration
c.		The two way transaction on an agreement to supply and pay a consideration, other than the exceptions enumerated under the Section 3.
d.		The transaction and the activities to be occurring in the course or furtherance of the business, except for the import.

Conclusion

If one intends to actually understand the significances of the GST then the factums and the factors of GST have to be understood first.

Since, the GST cycle comprising of the Taxable supply, GST payment, ITC an ailment etc have continuous signification one after the other.

Tax Assist is a professional income tax consultancy in India for both corporate houses and individual tax payers; the latter comprising Salaried Individuals, Seafarers, Professionals and Non Resident Indians.

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