Comparative review : Under the erstwhile tax laws, Central Excise is levied on ‘manufacture of goods’, VAT / CST is levied on ‘sale of goods’ and service tax is charged on ‘service provided or agreed to be provided’. Unlike such different incidences, under the GST law, it is ‘supply’ which would be the taxable event. Under the erstwhile law, e.g.: while stock transfers are liable to Central Excise (if they are removed from the factory), it would not be liable to VAT / CST on production of necessary forms – however, under the GST law, it would be taxable as a ‘supply’ if such supplies are between distinct persons under section 25(4) or 25(5). Further, free supplies were liable to excise duty, while under the VAT laws, free supplies would require reversal of input tax credit; under the GST law, we have to be careful to analyse whether there is any non-monetary consideration (inducement) present in the supplies (free-marketed as), if yes then we have to get into valuation of such free supplies to arrive at a transaction value. If not, then the treatment would be similar to the erstwhile VAT laws, where the supplies are made without any consideration (monetary/ otherwise). However, where the free supplies are made between distinct persons or between related persons then such supplies may be regarded as supply under Schedule I, para 2.
In the erstwhile law, there are multiple transactions which apparently qualify as both ‘sale of goods’ as well as ‘provision of services’. E.g.: license of software, prov iding a right to use abrand name, etc. To avoid this situation, GST law clarifies as to whether a transaction would qualify as a ‘supply of goods’ or as ‘supply of services’ by introducing a deeming fiction. A transaction of supply under composite contracts would either qualify as supply of goods or as services, under the GST law (Schedule II of the Act, concept of composite supply and mixed supply).
The payment of VAT in the hands of the purchaser (registered dealer) on purchase of goods from an unregistered dealer and the circumstances where the Service Tax is payable under the reverse charge mechanism in respect of say, advocate services, import of services, sponsorship services etc. are comparable to the ‘reverse charge mechanism’ prescribed herein. However, the concept of partial reverse charge is not continuing in the GST regime, viz., every supply will be liable either to forward charge or full reverse charge, Further, under erstwhile law, the concept of reverse charge only exists in relation to services. The GST law, however, permits the supply of goods also to be subjected to reverse charge.