Goods Vs. Services in GST: Concept and Open Issues
By: – Bimal jain
Goods and Services Tax – GST
Dated:- 5-9-2016
Dear Professional Colleague,
Goods Vs. Services in GST: Concept and Open Issues
As Goods and Services Tax (“GST”) is going to be levied on supply of goods and/or services, meaning of 'goods' and 'services' would also play vital role in levy and chargeability of GST after the key term 'supply'. It has to be clearly identified as to whether the supply constitutes supply of goods or services for leviability of GST. Importance of the terms 'goods' and 'services' would become all the more important if rates of GST on goods and services are going to be different.
This article attempts to decipher the main terms namely 'goods' and 'services' in the light of provisions contained in Model GST Law, to provide conceptual clarity as regards the meaning of goods and services in GST along with highlighting the key issues therein.
Meaning of 'goods' in GST:
The term '
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Explanation: Services include intangible property and actionable claim but does not include money.”
Apparently, the term 'service' has been defined in the widest sense possible as any transaction which is not goods, shall be services except money.
Whether Immovable property is service:
As the definition of the term 'service' is wide enough to cover anything other than goods, this would mean that even any rights or usage of immovable property would also constitute services under GST.
Actionable claim is a service:
It may be noted here that unlike the definition of 'service' as given under Section 65B(44) of the Finance Act, 1994 (“the Finance Act”), which excludes 'transaction in money' and 'actionable claim' from the taxable net of Service tax, the proposed definition of 'service' under GST only states exclusion of money and specifically includes actionable claim.
Thus, actionable claims would be service and exigible to GST unlike the Finance Act, where the same has been specifi
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over insurance money;
* Claim for arrears of rent etc.
Clarity required on exclusion of 'money':
As the definition of service only states that 'money' is excluded from its ambit, the same needs to be revisited to avoid any confusion as exclusion of money alone does not convey real nature of exclusion.
Examples of transaction in money:
* The principal amount of deposits in or withdrawals from a bank account.
* Advancing or repayment of principal sum on loan to someone, etc.
Whether intangibles are goods or services?
It may be noted here that the definition of 'goods' given under Article 366(12) of the Constitution of India is defined in inclusive manner to provide that “goods includes all materials, commodities, and articles”. Further, as per proposed Article 366(26A) “services” means anything other than goods”. Thus, the definition of 'goods' and 'services' in Model GST Law are different from the definitions given in the Constitution.
Further, from the settings of Article
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(the definition of goods under maximum State VAT Acts excludes securities). Thus, if no exemption is provided to securities transaction while finalising the Model GST Law, this could prove to be an additional burden, which in turn would blemish the domestic investments in India, as sale of securities outside India would qualify as export and can take over as preferred choice for attracting investments.
At the same time, one may also infer that securities are one of the forms of transaction in money, which are neither goods nor services as per the definitions provided under Model GST Law.
With the definition of goods and services provided under the Model GST Law, placed on public domain on June 14, 2016, it would be important for the Industry to appropriately understand and categorise the different types of the supplies made by them to assess the impact on taxability. However, considering the fact that both these crucial terms have been defined in extensive manner, the corresponding
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