February 23, 2023

GST on Self Supplies: Anomaly in case of businesses dealing in Nil-rated goods

Goods and Services Tax (GST) is the biggest tax reform in India that aims to create a unified market by subsuming a plethora of indirect taxes levied by the Centre and states. However, there are certain anomalies in the GST law that continue to baffle businesses, especially the ones dealing in nil-rated goods.

One such anomaly pertains to the GST on self-supplies. When a business supplies goods or services to itself, it is called a self-supply or self-consumption. In such cases, the business is required to pay GST as if there was an actual sale, even if there was no actual revenue or profit involved.

This anomaly becomes particularly relevant in the case of businesses dealing in nil-rated goods. Nil-rated goods are those that attract a GST rate of 0%. Examples include fresh fruits and vegetables, milk, curd, natural honey, jaggery, etc. Such goods are essential items consumed by the masses and are thus exempted from GST to make them more affordable.

However, the GST law has not made any specific provisions for self-supplies of nil-rated goods. As per the current provisions, businesses dealing in nil-rated goods are required to pay GST on their self-supplies at the applicable rate. This means that a business dealing in fresh fruits and vegetables will have to pay GST on the fruits and vegetables it consumes in-house, even though there was no actual sale or revenue involved.

This is a clear case of an anomaly in the GST law that needs to be addressed. Businesses dealing in nil-rated goods are already facing challenges due to the COVID-19 pandemic, and such provisions only add to their burden. The GST council needs to relook at the provisions related to self-supplies and make specific provisions for nil-rated goods.

One possible solution could be to exempt self-supplies of nil-rated goods from the purview of GST. This would ensure that businesses dealing in essential items do not have to bear the additional burden of GST on their self-supplies. Another solution could be to allow such businesses to claim input tax credit (ITC) on the GST paid on their self-supplies, which would help offset the additional cost.

In conclusion, the current provisions related to GST on self-supplies need to be reviewed, especially in the case of businesses dealing in nil-rated goods. The GST council should take proactive steps to address this anomaly and provide relief to businesses that are already struggling due to the pandemic.


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