What is a Taxable Event:
Every taxation system has a foundation stone which is called as ” Taxable Event “. Before levying any tax, a taxable Event is ascertained. Taxable Event means the point at which the tax would be charged. It means any transaction or occurance that triggers the charageability of tax.
Taxable Events Before GST Implementation:
Before the introduction of GST, there were frequent ambiguities and controversies about whether a particular event or activity is to be considered as a Taxable Event or not. These controversies were largely related to whether a particular process amounts to manufacture or not, whether a particular transaction amounts to sales of goods or provisions of service etc.
If a particular transaction was deemed as manufacturing and sales of goods, it was governed by the provisions of the Central Excise Act and the Sales of goods Act ( VAT) .
- On the other hand if any event or occurrence amounted to the provisions of service then that transaction was dealt with the provisions of the Service Tax Act.
This created complications as a single transaction could potentially fall under multiple categories which led to compliance burden.
Taxable Event After GST Implementation:
With the implementation of GST many of the taxes like Central Excise duty, VAT, Service Tax, CST etc. have been subsumed.
The GST has completely changed the taxable event by introducing only one comprehensive taxable event i.e. ” “Supply” – supply of goods or services or both
Various taxable Events namely manufacture , sale, purchase, provisions of service etc have been replaced with one taxable event i.e ” Supply “.
Let’s take an example :
Restaurant Supply Before GST vs After GST
Before GST:
The restaurant used to charge both service tax and VAT on the value of food served:
- VAT was charged on the sale of food (goods)
- Service tax was charged on the service provided ( Like table service, ambience etc.)
There were two taxable events taking place – Sales of goods and provision of service and accordingly two taxes ( i.e service tax and VAT ) were charged seperately on the invoice.
After GST:
Under GST, the entire value of supply of goods and / or services is taxed in an integrated manner. Therefore, the supply by a restaurant is treated as a composite supply. Hence, the supply of food and the supply of service are both considered a single taxable event, and only one tax—GST—is charged on the entire bill.
Conclusion
The introduction of GST has brought clarity and uniformity to the concept of taxable events by replacing multiple triggering points with a single, event—Supply. This has simplified tax compliance and reduced the scope for legal disputes.
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