How GST has simplified the taxable event

Those who are quite critical about the actual operation of GST on the field have ignored the continuous and chronic litigation regarding the taxable event in the erstwhile system of central excise. In central excise, the taxable event was manufacture and in sales tax, the taxable event was the sale of goods. And the items to be taxed had to be goods. There were such a large number of litigation on the issue of what was the meaning of goods and what was excisable that any single article cannot take into account all such issues. There was a large number of Supreme Court judgements on what was excisable. The consensus was that goods are to be marketable in order to be excisable. The government tried to solve this issue by specifically en­tering controversial items in the central excise tariff. But even then the Supr­eme Court did not agree that just because an item was specifically entered in the tariff, it could be regarded as excisable.

The issue was fundamental. When some goods were mentioned in the tariff specifically but it was not really a manufactured product, could the Revenue charge excise? There were two views on the matter. The first view, one championed by the Revenue almost always was that once Parliament enacted a law and mentioned an item as part of the tariff, Parliament had obviously thought that item was manufactured. Therefore, the question of considering once again whether it is manufacture or not could not arise. The other view, which was always subscribed to by manufacturers, was that even if the central excise tariff had mentioned it by name, it was still not excisable if it did not satisfy the definition of goods, which meant that it had to be manufactured and had to be marketable. If it was not manufactured, it could not be covered by Entry 84 of List I of Seventh Schedule of the Constitution, which allowed the imposition of excise duty only on manufactured goods. The Supreme Court upheld this unorthodox view in the cases of Moti Laminates vs CCE, 1995(76) ELT241(SC), Hyderabad Industries vs UOI, 1995(78) ELT641 (SC), and CCE vs Markfed Vanaspati, 2003(153)ELT491 (SC). All these judgments clearly enunciated the position that it was not possible to accept the contention that merely because an item fell in a tariff entry, it must be deemed that there is manufacture. So the conclusion was that goods are excisable not by tariff entry alone. They have to be, first and foremost, manufactured and marketable products.

However, it became a serious practicable problem for the excise officials to take a decision that the goods are not marketable when the item found a specific mention in the central excise tariff. Therefore, they used to always charge excise duty on such goods and fought it out up to the Supreme Court. Thus, the very concept of goods and marketability became a highly litigation prone subject.

With the introduction of GST, this problem now has been solved because the concept of manufacture itself is not there any more. Whether they are manufactured or not is no longer the issue. The taxable event under GST is the supply of goods or services or both. CGST and SGST/UTGST are levied on intra-state supplies. IGST, which is basically a summation of CGST and SGST/UTGST, is levied on inter-state supplies. A taxable person has been defined under Section 2(107) of the CGST Act, as a person who is registered or liable to be registered under Section 22 or Section 24 of the said Act. Section 2 (52) defines goods as follows: “Goods means every kind of moveable property other than money and securities but includes actionable claims growing crops, grass and things att­ached to and forming part of the land which are agreed to be severed before supply or under a contract of supply.”

The conclusion is that the chronic controversy about the definitions of ex­cisability, goods, marketability and all is now a matter of the past. The pre­sent definition of a taxable event is simple because it does not depend on the previous concepts. It will be ha­rd for lawyers to find an excuse to litigate by creating a controversy on this issue.

The writer is member, Central Board of Excise & Customs (retired)

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