Concept of Deemed Sales and GST
By: – Shripada Hegde
Goods and Services Tax – GST
Dated:- 1-4-2017
Clause 29A of Article 366 of the Constitution of India, inserted by 46th amendment to the Constitution gains very much importance as the same lays down the concept of deemed sale and enables the states to tax certain transactions. This was important as taxes were levied either on “Sale of Goods” or on “Provision of Services”. However in the GST Regime tax is levied on “Supply of Goods and Services” and the supply need not necessarily be sale. In the light of the above it is important to know how GST Regime takes care of the controversies or confusions which lead to the insertion of Clause 29A. This article tries to gather the information relating to the same.
Issues Covered in Clause 29A
* Transfer of controlled commodities for consideration
* Transfer of property in goods involved in the execution of works contract
* Hire purchase system or instalment purchase sys
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contract is a supply of service as per sub-clause (f) of clause 5 of Schedule II. The said entry reads as follows:-
“(f) works contract including transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;”
Hence, it is clear that the value of works contract including the value of property in goods is supply of service.
* Hire purchase system or installment purchase system & Transfer of Right to use
It has been specifically provided in sub-clause (c) to clause 1 of Schedule II that transfer of title in goods under an agreement which states the property in goods will pass on to the buyer at a future date upon payment of full consideration is a 'supply of goods'.
* Transfer of right to use any goods for consideration
Sub-clause (b) to clause 1 of Schedule II is inserted to take care of these kinds of transactions. The said sub-clause reads as following:
“(b) Any transfer of goods or of right in goods or of undivided share
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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"
Controversy in the case of supply of food in the course of provision of service was that, it is not a sale as there is neither the intention nor the agreement is to sell those goods. The affected transfer is just incidental. However, in the GST Regime with the insertion of the above clause it has been specified to be treated as 'Supply of Service'.
In the manner described above the GST Regime has addressed the issues connected with the said Clause 29A. However, only time can answer the question as to whether there will be confusions and complications in these areas in the GST Regime.
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