Introduction: Today’s hot subject in India among the traders,
manufacturers, tax consultants, bureaucrats and politicians next to abolition
of Rs. 500 and Rs. 1000 currencies is Goods and Services Act, and its
implementation, registration procedures, pros and cons of revenue to the State
Government’s kitty, GST rates and its impacts on the industry as a whole.
But in the GST regime, people forget that one very old and important Act viz.,
the Sale of Goods Act, 1930 will be no more valid to decide a particular
transaction is sale or not, to fix the liability of paying tax, as the GST Act
has renamed the wordings “Supply of goods and Services” and one has to
discharge the same rate of GST whether it is a transaction is sale or transfer,
with consideration or without consideration. So, Sale of Goods Act, 1930 is
not to be referred under the GST regime. The very crux of the sale definition
under Sale of Goods Act is gone.
Supply of goods and services: In this article let us see the
important definitions and explanations for certain words in the GST law from
the definition clause and also from the FAQ released by the Government.
The necessary elements that constitute supply under Model GST Law (MGL)?
In
order to constitute a ‘supply’, the following elements are required to be
satisfied, i.e.-
(i)
supply of goods and/ or services;
(ii)
supply is for a consideration;
(iii)
supply is made in the course or furtherance of business;
(iv)
supply is made in the taxable territory;
(v)
supply is a taxable supply; and
(vi)
Supply is made by a taxable person.
FAQ. Can a transaction in which any one or more of the above
criteria is not fulfilled, be still considered as supply under GST?
Ans.
Yes. Under certain circumstances such as importation of service (Section 3(1)
(b)) or supplies made without consideration, specified under Schedule-I
of MGL, where one or more ingredients specified in answer to the above question
are not satisfied, it shall still be treated as supply under GST Law.
FAQ. What do you mean by “supply made in the course or
furtherance of business”?
Ans.
No definition or test as to whether the activity is in the course or
furtherance of business has been specified under the MGL. However, the
following business test is normally applied to arrive at a conclusion whether a
supply has been made in the course or furtherance of business:
1. Is the activity, a serious
undertaking earnestly pursued?
2. Is the activity is pursued with
reasonable or recognisable continuity?
3. Is the activity conducted in a
regular manner based on sound and recognised business principles?
4. Is the activity predominantly
concerned with the making of taxable supply for consideration/ profit motive?
The test may ensure that occasional supplies, even if made
for consideration, will not be subjected to GST.
So,
it is clear that for occasional supplies even if made for consideration GST is
not subjected, at the same time even if consideration is not received it shall
be treated at supply of goods or services. Here, the old definition of
Sales of Goods Act, 1930 is very important. It states that it is a
contract whereby the seller transfers or agrees to transfer the property in
the goods to the buyer for price.
In
the new definition, the transfer of property in the goods is missing for supply
of goods. It indirectly states that for treating the supply of goods,
there is no need that the transfer of property in goods should take place for
price from the seller. The word “seller” or “transferor” is gone and it
replaces the word “supplier”.
“continuous supply of goods” means a supply of goods which is
provided, or agreed to be provided, continuously or on recurrent basis, under a
contract, whether or not by means of a wire, cable, pipeline or other conduit,
and for which the supplier invoices the recipient on a regular or periodic
basis.
There
is no definition for continuous supply of goods in the VAT Act and only GST,
there is separate definition.
“consideration”
in relation to the supply of goods and/or services to any person, includes (a)
any payment made or to be made, whether in money or otherwise, in respect of,
in response to, or for the inducement of, the supply of goods and/or services,
whether by the said person or by any other person; (b) the monetary value of
any act or forbearance, whether or not voluntary, in respect of, in response
to, or for the inducement of, the supply of goods and/or services, whether by
the said person or by any other person: Provided that a deposit, whether
refundable or not, given in respect of the supply of goods and/or services
shall not be considered as payment made for the supply unless the supplier
applies the deposit as consideration for the supply;
“services’’ means anything other than goods;
Section 2(88) of the Act define “service” to mean anything
other than the “goods”. This definition does not define anything and,
therefore, one needs to look to various shades, color and dimension of the word
“Goods”. Section 2(48) of the GST Act defines “goods” thus:
“Goods” means “every kind of movable property other than
actionable claim and money but includes securities, growing crops, grass and
things attached to or forming part of the land which are agreed to be severed
before supply or under the contract of supply.”
Explanation: For the purpose of this Clause, the term “moveable
property” shall not include any intangible property.
At the same time, Section 2(7) of the Sale of Goods Act
defines the “goods” as follows :–
“Goods” means every kind of moveable property other
than actionable claims and money; and includes stock and shares, growing crops,
grass and things attached to or forming part of the land which are agreed to be
served before sale or under the contract of sale.
So,
under GST regime, instead of contract of sale, the word contract of supply is
substituted.
Meaning and scope of supply (1) Supply includes (a) all forms
of supply of goods and/or services such as sale, transfer, barter, exchange,
license, rental, lease or disposal made or agreed to be made for a
consideration by a person in the course or furtherance of business, (b)
importation of service, whether or not for a consideration and whether or not
in the course or furtherance of business, and Page 24 of 190 (c) a supply
specified in Schedule I, made or agreed to be made without a consideration.
(2)
Schedule II, in respect of matters mentioned therein, shall apply for
determining what is, or is to be treated as a supply of goods or a supply of
services. (2A) Where a person acting as an agent who, for an agreed commission
or brokerage, either supplies or receives any goods and/or services on behalf
of any principal, the transaction between such principal and agent shall be
deemed to be a supply.
(3)
Subject to sub-section (2), the Central or a State Government may, upon
recommendation of the Council, specify, by notification, the transactions that
are to be treated as—
(i)
a supply of goods and not as a supply of services; or
(ii)
a supply of services and not as a supply of goods; or
(iii)
neither a supply of goods nor a supply of services.
It
can be understood that the Government upon recommendation of the GST Council
would specify by notification whether the transaction is supply of good or
service or neither.
Conclusion: In fine, the author would like to state that the
concept of sale of goods act and the definition clauses are not the same in the
propose GST law and indirectly states that Sale of Goods Act is gone.
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