Family in GST Law, Goods and Services Tax - GST

[VENU K]

In a father son transaction without consideration whom does Schedule 1 hit if one were to read Schedule 1 with explanation to Sec 15 as well as definition of Family in Sec 2(49)?

My father who is not dependent on me is not my family

Myself even if not dependent on my father is family to my Father.

So when we consider Schedule 1 transactions with respect to supplies without consideration it is with respect to which person ? Supplier or recipient ? or both ?

To make it more clear

1. If I supply something without consideration to my non dependent father he is not my family and as such not a related person as per GST Act. So is it possible to consider it as a deemed supply invoking Sch 1 ?

In my opinion it should be tested with respect to the supplier; that is the son. So his non-dependent father can receive something without consideration and still escape the deeming provisions of Schedule 1

Posts / Replies

[Sadanand Bulbule]

Dear Sir

Section 2[49] of the CGST Act reads as under:

(49) “family” means,––

(i) the spouse and children of the person, and

(ii) the parents, grand-parents, brothers and sisters of the person if they are wholly or mainly dependent on the said person;

In your case, admittedly father is not dependent on his son cum person as defined under the Act. As such I am of the opinion that, non-dependent father stands outside the definition of "family" and "related person". as well.

Section 2[49] and Section 15 have to be read conjointly to reach the clarity.

[KASTURI SETHI]

Sh. Sadanand Bulbule Ji & Sh.Veenu K Ji,

Dear Sirs, Section 2 (49)(ii) of CGST Act defines "family" as under :-

"(ii) the parents, grand-parents, brothers and sisters of the person if they are wholly or mainly dependent on the said person"

(i) The term, "wholly or mainly dependent" is not restricted to financial dependence only. The words, "wholly or mainly" signifies that it includes all kinds of dependence/support i.e. physical well-being and emotional well being also.

(ii) The issue has to be examined from this perspective also before arriving at correct, concrete and fool-proof decision.

This is my personal view and just for discussion sake with an intent to enrich my knowledge.

[Sadanand Bulbule]

Dear Sir. 

Agreed. Equally the authorities should also think in that direction. 

[VENU K]

It would be very  interesting to see how the proper officer would be able to overrule affidavits of non dependence provided by tax payers.

[KASTURI SETHI]

There is a plethora of case-laws wherein it has been held that affidavit is required to be supported with documentary evidences. Simply submission of affidavit will not click..

[KASTURI SETHI]

Dear Sir,

Can you produce documentary evidence regarding wholly non-dependence of physical well-being, emotional well-being and social well-being ? The words 'wholly' or 'mainly' cannot brushed aside.

The burden of proof is cast upon the person who claims the benefit of exemption notification---Honorable Supreme Court in the case of CC Vs. Dilip Kumar & Co. 2018 (7) TMI 1826 - SUPREME COURT (SC 5-member Constitution Bench)

[VENU K]

In my opinion this is not a claim of exemption notification . This is an issue that goes to the core of taxation in GST ie. whether there is a supply or not.

Naturally burden of proof rests with the person who makes an assertion or allegation (Evidence Law). GST has declared burden of proof on the person claiming eligibility to claim input tax credit. A person claiming benefit of exemption notification should also assume burden of proof. So in this case clearly the officer is bound to prove DEPENDENCE.It is just not enough for him to say that the recipient is the father of taxable person.

In practical situations the AO will give an SCN stating

Read with Schedule 1 and Explanation to Sec 15 you are bound to pay tax on supplies made to your father........

All it takes the assessee is to reply 

" No tax can be demanded without first establishing the transaction as a supply under the GST law.It is submitted that my father is not dependent on me and as such is not my family as per explanation to Sec 15 read with definition of family as per the GST law and therefore  Schedule 1 deeming provisions are not applicable to me. Further it is also necessary to prove that the giving of goods or services were  done in course or furtherance of business . Revenue has not brought any evidence to prove any of these  allegations  and as such it asserted that our self assessment is correct and the allegation is rejected and demand is disputed. We are attaching affidavits to the effect that my father is not dependent on me."

In such a scenario the allegation should automatically fall flat because show cause notice is the end of the investigation and no further enquiries or presentation of evidence not relied upon are permitted as far as the revenue is concerned.

Even otherwise it will be interesting to see how the adjudicating officer would  be able to prove or produce documentary evidence regarding dependence for physical well-being, emotional well-being and social well-being in spite of an assertion against it by the tax payer. No presumption runs against a person to allege his dependence, against his own assertion, unless appropriate evidence is brought in.

The revenue cannot make just an allegation and expect the tax payer to run around and disprove such an allegation.

The drafting of definition of family is

1. Either a deliberate or  intentional one to reflect the times we live in.

2. A drafting slip 

Remember the argument of drafting slip in case of "plant and machinery" and "plant or machinery" were not accepted by Supreme Court in case of Safary Retreats.

Moreover deeming fictions in the law as in Schedule 1 are to be construed strictly and not very loosely especially when it seeks to foist a tax liability on an otherwise non taxable transaction.

Further this father son transaction fails on both counts to establish a supply. The business test as well as the consideration test. Schedule 1 deems only consideration but not in course or furtherance test  from the side of supplier , which is also mandatory to even venture into examining applicability of taxes whether on forward charge or reverse charge.

At the most input reversals may be insisted on not output tax liability.