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Taxable person and Business

In this Mail, we shall deal with Taxable person, an agency through which Transaction based tax would be collected.

Meaning of Taxable person [Section 9 of Model Law]

Meaning

It means:

  • a person
  • carrying on business at any place in India or State,
  • who is registered or obliged to obtain registration under Law.

Thus, essence is that Taxable person must be carrying on business.

Person [Section 2(74) of Model Law] is inclusively defined and includes:

  • An individual
  • a Hindu undivided family
  • a company
  • a firm
  • a Limited liability partnership
  • an association of persons (whether incorporated or not, in or outside India)
  • a body of individuals (whether incorporated or not, in or outside India)
  • any corporation established by Central State or Provincial Act
  • a body corporate incorporated outside India
  • a registered cooperative society
  • a local authority
  • government
  • society, as defined under the Societies Registration Act
  • trust, and
  • every artificial juridical person, not covered above

Thus, all forms of organisations or entities (through which business may be carried on) are covered and even includes government.

Business [Section 2(71) of Model law]

It is inclusively defined. Generally, "business" means: activity of making, buying and selling goods or providing service in exchange for money.

It includes:

  • Any of the following activities (included activities):
    • any trade,
    • commerce,
    • manufacture,
    • profession,
    • vocation or
    • any other similar activity.
  • Any transaction connected with or incidental or ancillary to the above.
  • Supply or acquisition of goods (including capital assets) and services in connection with starting or closure of business.
  • Provision by a club, association, society, or any such body (for a subscription or another consideration) of facilities or benefits to its members as the case may be.
  • Admission, for a consideration, of persons to any premises; and
  • Services supplied by a person as holder of office, accepted in course or furtherance of his trade, profession or vocation (like directorship of a company).

To determine whether an activity constitutes business or not, following are not relevant:

  • whether or not it is for a pecuniary benefit,
  • whether or not there is volume, frequency, continuity or regularity of such transaction.

Based on above, it can be inferred that:

Any person,

  • carrying on any activity classified as trade, commerce, profession etc,
  • carrying on any transaction included in definition,
  • irrespective of existence of irrelevant considerations,
  • registered or obliged to obtain registration under Law (liability to register and related matters including person is not obliged to obtain registration would be detailed in a subsequent communication),

would be regarded as taxable person (responsible for collection and payment of Tax).

Thus, even a government when carries on any trade, commerce etc or included activities, it would be regarded as a taxable person. A non-profit organisation carrying on business may be considered as taxable person.

Having regard to above, it can be inferred:

Any person:

  • not carrying any trade, commerce, profession or the like, or
  • nor carrying on any included activity, or
  • not registered or obliged to obtain registration,

cannot be considered as taxable person.

Accordingly, any charitable or religious organisation or a government discharging certain functions may not be regarded as Taxable person. Similarly, any individual, when sells personal effects or goods, he may not be regarded as Taxable person.

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