In the pre-GST indirect tax regime, there was a dispute as to whether an activity shall be taxed under Central Excise/ Service Tax or VAT and it was leading to taxability under both the laws. The issue has been settled by Schedule II by specifying which activities shall be treated as supply of goods or supply of services provided the rate of tax for goods and services are same.
As per Schedule II of CGST Act. 2017, the following activities shall be treated as Supply of Goods or Supply of Services under Section 7(1)(d):
|Transaction||Type of activity||Nature of Supply|
|1.||Transfer of||(a) title in goods|
Example: X of Delhi deals in Electronic Goods. He transfers the title of a television set for an agreed consideration to Y of Delhi in August. 2018. In the given case, the transfer of title in television shall be considered as supply of goods.
|Supply of goods|
|(b) right in goods or of undivided share in goods without the transfer of title thereof|
Examples : X transfers right to use of a generator for a period of 2 months for an agreed consideration to G in August, 2018. The foregoing transfer of generator without transfer of title in generator shall be treated as a supply of service.X agrees to share use of photocopier machine with his neighbour Y for a period of one month for an agreed consideration. After expiry of period of one month. G shall have no license to use the said photocopier. The foregoing license to use said photocopier without transfer of title in goods shall be considered as a supply of service.
|Supply of services|
|(c) title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed Supply of goods on hire purchase shall be treated as supply of goods as there is transfer of title, although at a future date. Example: Under a scheme of finance, a supplier of a car gives the possession of car to the buyer in August 2018. He, agrees to transfer the ownership of the car to the buyer in August 2020 upon payment of full consideration of Rs. 26.60,000. in instalments as agreed. The aforesaid transaction shall be treated as supply of goods.||Supply of goods|
|2.||Land and Building||(a) any lease. tenancy. easement, license to occupy land Example: X. the owner of a specific piece of land in Delhi, leases the same to Y for one year for an agreed consideration in August, 2018. The aforesaid lease of land shall be treated as a supply of services.||Supply of services|
|(b) lease or letting out of the building including a commercial, industrial or residential complex for business or commerce. either wholly or partly Critical appraisal of above reveals that following three conditions need to be satisfied to be covered in this entry and therefore to qualify as supply of service: Any lease or letting out of the building:Such building includes not only commercial or industrial but also residential complex: andSuch leasing or letting either wholly or partly shall be for business or commerce.||Supply of services|
|3.||Treatment or process||Applied to another persons goods Thus, any job-work carried out by a job-worker on another person’s goods shall be treated as a supply of services. Further, it shall be immaterial, whether the job-work is to be carried out by a job-worker with or without any material. Example: X is a manufacturer of goods. lie sends his goods for the purpose of special packaging to Y on job work. In the given case, the activity of special packing by Y shall be treated as supply of services. Further, it shall be immaterial whether Y uses his own packing material or the same is provided by X.||Supply of services|
|4.||Transfer of business assets||(a) goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration Examples :|
(i) R is carrying on the business of consumer durable products. He disposed of a defective refrigerator for Rs. 50,000 to G whereas its normal price is Rs. 3,50,000. Aforesaid disposal shall be considered as supply of goods by R. (ii) Assume in the above example, R donated the above- refrigerator to an NGO and he has claimed the input tax credit on such refrigerator at the time of purchase. The aforesaid donation shall be considered as supply of goods by R. Valuation of the defective refrigerator for payment of GST shall be done on fair market value basis in accordance with CGST Rules, 2017 concerned with Determination of Value.
|Supply of goods|
|(b) goods held or used for the purposes of the business are put Supply of services to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business. whether or not for a consideration|
Examples : R deals in home appliances like washing machines, refrigerator, etc. He uses computers in his shops for keeping track of inventory and for other business purposes. Out of 2 computers, R takes home one computer to be used by his son for his studies during the month of August. 2018 and thereafter computer is brought back to the show room of R. The aforesaid private use of a computer by R/his son shall be treated as a ‘supply of services.’R gives generator-sets on rental basis to various customers. He givesa generator-set to his brother-in- law for a period of one month in September, 2018 on the occasion of some function in the home of his brother-in-law and thereafter generator is brought back to the show room of R. The activity of making available the said generator for the private use of brother-in-law of R shall be treated as a ‘supply of services’.
|Supply of Services|
|(c) goods forming part of the assets of any business carried on Supply of goods by a person shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person, unless— the business is transferred as a going concern to another person: orthe business is earned on by a personal representative who is deemed to be a taxable person, Example :|
R has closed down his business but was left with certain capital goods and inputs forming part of the assets of the business carried on by him. The closure of the business is due to his ill health. In this case, such goods shall deemed to be supplied by him in the course of furtherance of his business immediately before he ceases to be a taxable person. Thus, the capital goods which have some useful life and such inputs lying with him on which credit has been availed should be treated as deemed supply and shall be subject to GST. However, the above capital goods and inputs shall not be treated as deemed supply by him in the following two situations: the business is transferred as a going concern to another person: orthe business is carried on by a personal representative who is deemed to be a taxable person.
|Supply of Goods|
|5||(a) renting of immovable property; • Unlike entry 2 above, renting of immovable property under this entry does not use the phrase ‘for business or commerce’. This entry covers renting of all types of immovable properties for any purposes. The said entry provides that any renting of immovable property shall be considered as a supply of services and shall be charged to tax under GST as a supply of service. Supply of services However, the Central Government has, vide Notification No. 12/2017 dated 28/06/2017, exempted the supply of services by way of renting of residential dwelling for use as residence from whole of the tax leviable thereon. (b) construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after Issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier. (c) temporary transfer or permitting the use or enjoyment of any intellectual property right: The reading of this clause makes it absolutely clear that sale/permanent transfer of IPR is not envisaged under the scope of this ‘entry’. Temporary transfer or permitting the use or enjoyment of any intellectual property right shall be treated as supply of service. whereas permanent transfer of title in IPR shall be treated as supply of goods and shall be subject to tax under the Act. accordingly. (d) development, design, programming, cuslomisation, adaptation. upgradation, enhancement, implementation of information tech nolog’ softb are: • However, it would not include sale of e-packaged or canned software as ii is in the nature of supply of goods and not supply of service. (e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act.|
R who is interested in taking loan from some bank but does not have any collateral security, approaches G who agrees to mortgage his property as collateral security to the bank for advancing loan to R’. G charges some consideration from ‘R’ for providing such collateral security. Consideration received by G shall be covered under the scope of this entry and shall be subject to tax as a supply of services. In case of a non-compete agreement, one party agrees, for consideration, not to compete with the other in any specified products, services, geographical location or in any other manner. Such action on the part of one person is also an activity for consideration and is covered under this entry and liable to tax as a Supply of Services. (f) transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration.
|Supply of Services|
|6.||Certain composite supplies||works contract as defined in section 2(119); andsupply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption). where such supply or service is for cash, deferred payment or other valuable consideration.||Supply of services|
Goods by an unincorporated association or both’ of
|Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration. This entry deals with the supply of goods only and that too when made to members of such unincorporated association or body of persons.||Supply of goods|