THIRUVANANTHAPURAM: Former Kerala Finance Minister Dr. T.M. Thomas Isaac has come under heavy fire over his controversial interpretation of Goods and Services Tax (GST) laws regarding advance payments and service supply. Financial analysts have questioned the former minister’s grasp of statutory tax provisions, particularly following his assertions regarding failed or canceled service deliverables.
The ‘Supply vs. Tax’ Controversy
The controversy erupted when Dr. Isaac defended a high-value transaction by claiming that if no actual service or event (such as an international exhibition match) took place, no GST liability arises—summarized by critics as the “No Supply, No GST” rule. Critics argue that this stance misleads the public and distorts basic tax principles.
Section 13: What Does the Law Actually Say?
Under Section 13 of the Central Goods and Services Tax (CGST) Act (Time of Supply of Services), the obligation to pay GST arises at the earliest of the following dates:
The date of issuance of the invoice, or
The date on which payment/advance is received by the service provider.
Tax experts emphasize that when millions are transferred as advance payment for a service—regardless of whether the event occurs in the future—the tax liability is legally triggered the moment the money changes hands.
Adjustments for Unperformed Services
The GST legal framework explicitly accounts for situations where services fail to materialize after an advance is received:
Credit Notes (Section 34): Service providers can issue credit notes to adjust their output tax liability in subsequent tax periods.
Refund Claims: Tax paid on canceled transactions can be claimed back directly from tax authorities via prescribed refund processes.
Critics have condemned the double standard, stating that while ordinary citizens pay GST on daily purchases, attempting to justify tax exemptions on large-scale corporate advances undermines financial accountability and compliance standards.
