5 Activities which are NOT taxable under the GST regime!

5 Activities which are NOT taxable under the GST regime! Introduction The new GST regime will bolster the rapid growth of our nation and also shall support the seamless flow of input tax credit. This is the reason behind very few exemptions under GST regime so that credit can be adjusted against the credit and it does not result into cascading effect. However, it is imminent that exemption will be there as to control the inflation and to remove the genuine hardship. So, there can be two types of cases where GST shall not apply:

• Case where GST is applicable but has been exempted via notification.
• Case where GST is not applicable at all.

Under this article, we shall discuss the cases where GST is not applicable at all. There are two types of activities which are not considered as supply under GST:

1. Activities specified in schedule III
2. Activities or transaction undertaken by the government

Let us discuss the schedule III first:

1. Services by Employee to Employers: Had it been covered under GST, then the whole country would have liable to GST registration. Hence, it is very natural that services by employee to employer should b excluded from list of taxable services.

However, the important question is the meaning of employee Who all are covered under the definition of employees Let us understand who all can be said to be covered under the term employees. In common parlance, when a person agrees to work for another person on full time basis or part time basis in return of a monthly salary. If we can analyze it in further details, then we can list down three factors which can decide whether person is a employee or not. However, no single factor can be conclusive evidence on deciding the case; each case should be check upon its merits.

1. Contract for Service: If a person is a employee then he must have signed the contract for service. Further, the person shall be paid fixed monthly remuneration, and the TDS shall be deducted under section 192 of the Income tax act.

 

1. In Charge of: Another check is that the employer should be in charge of the employee and he sets the terms out there like how the thing is to be done. Further, some employers let the employee dictates the term but that does not mean that there is no employer employee relationship.

 

1. No risk no reward: In case of employee-employer relationship, it is the employer who undertakes all the risk and also the related profit and loss. In any case, employee is not impacted by profit or loss.

 

1. Part time employee: No where it is written or understood that employee can only be full time. Employee can be part time or can work on casual basis as well. There may be following factors deciding whether a person working is a part time employee or a service provider:
   • In case of employee, there exists a master and servant relationship, however, between service providers the relationship is like between the professionals.

 

• In case of employees, the one person controls another person to fulfill his economic objectives, however, in case of service provider, both parties are independent.

 

1. Difference between agent and employee: Employee and agent may look similar but they are not. There is a difference between the two terms. Further, it is very important from the GST point of view because the taxability is very different in both the cases.

Fundamentally, under employer employee relationship, a servant master relationship is there, employee is bound by the employers terms and also work according to his instructions. However, in case of principle-agent relationship, the agent is only bound for the legal agreement between agent and the principle and he is not under the direct control of the principle.

2. Sale of land and Building: This is another very important point to be discussed as GST is not applicable on sale of land or building, however, it is applicable if a service of construction of building is provided by one person to another.

In other words, if building is sold during the construction period, then the same is regarded as supply of service and the same shall be liable to GST, however, if the sale of building is done after completion of building then the same shall not be liable for GST rather stamp duty shall be applicable which is a state matter.

3. Services by Member of Parliament, MLA and others: Services provided by MP, MLA, person holding constitutional post are not liable for GST on their remuneration. This is because services provided by them have been excluded from the definition of supply.

Few examples of posts in pursuance with the Constitution of India are following:

• Election Commission of India
• Committee on infrastructure
• Law Commission of India
• National Commission on Farmers (NCF)
• National Commission for Women (NCW)
• National Commission for Minorities (NCM)
• Competition Commission of India (CCI)

 

4. Service by Court or Tribunal: There are various types of court and tribunals working in our country. From Supreme Court of India to high court, district courts, tax tribunals etc are all example of courts and tribunal in India.

Further, it is also very important to note that court charges some fees for its working. Hence, they are supplying services to the general public, therefore their services has been excluded from the definition of supply and hence GST is not applicable on them.

5. Services of funeral, burial etc: The services of funeral, burial, crematorium or mortuary including the transportation of the deceased.

About the Author CA Paras Mehra is a thinker, writer, reader and speaker. He is also professionally associated with hubco.in, a brand for business and taxation support services including GST. Connect to him: Twitter Handle: @IamParasMehra Linkedin: https://www.linkedin.com/in/caparasmehra/ Email: [email protected]