In this Article we will discuss about the Eight Terms of Supply.
First we will understand the definition of Goods.
Goods:- As per the Section 2(52) of CGST Act, 2017 ‘goods’ means every kind of movable property other than money and
securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.
Analysis of Definition of Goods:-
1. All Kind of Movable Property (i.e. Immovable property is not covered)
2. EXCLUDE:- Money & Securities.
3. INCLUDE:- Actionable Claim & Crops & Grass attached to the land.
Now Understand Actionable Claim.
As per Section 3 of the Transfer of Property Act, 1882.
Actionable Claim is a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property, or to any beneficial interest in movable property not in possession either actual or constructive, of the claimant, which the civil courts recognize as affording grounds of relief whether such debt or beneficial interest be existent, accruing or conditional or contingent.
Analysis of Definition of Actionable Claim:-
1. Claim to any Debt.
2. EXCLUDE:- Debt Secured by Immovable property & Movable Property or Beneficial interest in Movable Property.
As per Section 7 of CGST Act, 2017, “Supply” INCLUDES all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.
Analysis:-
The Definition of Supply is Inclusive, law does not use the word “Means”, “Means & Includes”, “Shall Mean”, “Shall Include” that means law is very cautious about any transaction of supply that might escape form definition of supply. It is for this reason that despite being exhaustive, the law has used the word “Includes”.
Now Understand the EIGHT Terms of Supply.
SALE:-
Sales is lawful, permanent and absolute transfer of ownership of property in goods for money consideration under valid contract such that no rights are left behind with the transferor.
Here Title of goods are moving.
TRANSFER:-
Transfer means to pass over, convey, relinquishment of right, abandonment of a claim lawfully. Hence in simple term transfer means Lawful convey of property from one person to another person.
Here right in goods are moving not Title.
BARTER:-
Barter means “Things or Commodity” given in return of another. In other words no value is fixed. In simple term barter means consideration is in the form of goods or service or both (not in money) for sale or transfer. Therefore, barter will cover two supplies and not one. Each of these supply would need to be examined for its respective taxability.
Here exchange of movable property.
EXCHANGE:-
Exchange is similar to the barter where consideration is not in form of money but in form of Immovable property. Similar to barter exchange also involve two supplies.
Here exchange of Immovable property.
It can be noted that law has been excluded the Immovable property from the definition of the supply but exchange of Immovable property for sale or transfer considered as supply.
LEASE:-
Lease means transfer of possession along with right to use immovable property for consideration in the form of non-recurring premium only or along with recurring rent. Main essence of lease is delivery of possession with user right, hence lease is also used in the context of movable property.
Here supplier of lease does not have possession hence not enjoyed the right to use but retain right to repossess property subject to normal wear and tear after term of lease.
RENTAL:-
Rental is lease in respect of movable property. Since recurring payment in lease (of Immovable property) is called rental, transfer of possession with user rights for recurring payment of consideration is interchangeably applied for movable and immovable property.
LICENSE:-
License is similar to lease but difference is that possession of movable or Immovable property does not transfer but permission to enter and use the property is allowed. Supplier of license retains possession of the property during the term of license without right to use. (E.g. Software license or Use Copyright or Franchisee)
DISPOSAL:-
Disposal means distribution, transferring to new hands, extinguishment of control over, forfeit or pass over control to another but in respect of goods that are “unfit for sale”.
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