What elements are required for taxability of the transaction under GST
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A taxable event under GST is “Supply”. If a transaction falls under “Supply”, then it will trigger GST liability.
For taxability of any transaction under GST, the following elements are required to be satisfied:
- A transaction must be a transaction in a “Goods” or “Services” or both- In GST, a transaction should either falls under definition of Goods as defined under section 2(52) of CGST Act, 2017, “where “goods” means every kind of moveable property other than money and securities but include actionable claims, growing crops, grass and things attached to or forming part of land which are agreed to be served before supply or under contract of supply” or under definition of Services as defined under section 2(102) of CGST Act, 2017, “where services means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged”
- Transaction must falls within scope of “Supply” as defined under section 7 of CGST Act, 2017-
- Scope of supply has been defined under section 7 where supply includes all forms of supply of goods or services such as sale, transfer, barter, exchange, license, rental, lease or disposal agreed to be made for a Consideration by a Person in course or Furtherance of Business.
- In case of Importation of services for consideration would qualify as supply even if it is not made for business purpose.
- Activities as defined in Schedule I would also qualify as supply. Here these transactions would qualify as supply even if it is made without consideration.
- The Supply transaction must be taxable supply- Taxable supply is defined under section 2(108) of CGST Act, 2017, where a taxable supply means supply of goods or services or both which is leviable to tax under GST. Currently, supply of alcoholic liquor for human consumption and supply of 5 specified petroleum products kept out of scope of supply. These are non-taxable supplies on which no GST would be applied.
- Taxable Supply shall be made by Taxable Person- Definition of Taxable person has been defined under section 2(107) of CGST Act, 2017, where taxable person means a person who is registered or liable to be registered under section 22 or 24 of CGST Act.
If we summarize, a transaction should satisfy each step from left to right in order to qualify for taxability under GST-
Step1- Goods or Services or Both
Step2- Scope of Supply
Step3- Taxable Supply
Step4- Taxable Person
Once all above steps satisfied, then such particular transaction would be taxable under GST unless there is any specific exemption granted from GST payment.
We hope you may like our above article and hopefully you should gain some knowledge about important elements required for a transaction to taxed under GST.
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