Business is the activity of producing and selling goods and services for profit. It is a critical component of the economy, driving growth and creating jobs. In India, the Goods and Services Tax (GST) was introduced in July 2017, replacing multiple indirect taxes levied by the central and state governments. The GST is a consumption-based tax that is levied on the value added at each stage of the production and distribution of goods and services.
The Revised Model GST Law, which was released in November 2016, defines various aspects of business and provides clarity on several issues related to the levy of GST. The law defines the term ‘business’ as any activity carried out by a person with the intention of making a profit. The definition is broad and includes all types of activities, such as manufacturing, trading, providing services, etc.
However, the definition of business does not include activities that are carried out without the intention of making a profit. This includes activities such as hobbies, charitable activities, etc. It is important to note that the definition of business is essential to determine whether a person is liable to register for GST or not.
Another critical aspect of the Revised Model GST Law is the definition of exempt supplies. Exempt supplies are goods and services that are exempt from GST. The law provides an exhaustive list of exempt supplies, including essential items such as food, education, healthcare, etc.
It is important to note that exempt supplies are different from zero-rated supplies. Zero-rated supplies are goods and services that are taxable but are charged at a rate of 0%. This includes exports and supplies made to Special Economic Zones (SEZs).
The Revised Model GST Law also provides for the reverse charge mechanism (RCM) for certain supplies. Under the RCM, the responsibility of paying the tax shifts from the supplier to the recipient of goods or services. This is applicable for supplies made by unregistered dealers to registered dealers.
One of the significant changes brought about by the Revised Model GST Law is the imposition of a penalty for non-compliance with the law. The penalty is 10% of the tax due or Rs. 10,000, whichever is higher. The penalty is imposed for late filing of returns, failure to register under GST, etc.
In conclusion, the Revised Model GST Law provides clarity on various aspects of business and exempt supplies. The law defines business broadly and includes all types of activities carried out with the intention of making a profit. Exempt supplies are goods and services that are exempt from GST, while zero-rated supplies are taxable but charged at a rate of 0%. Non-compliance with the law can lead to penalties. Understanding the provisions of the Revised Model GST Law is critical for businesses to ensure compliance with the law and avoid penalties.
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