Schedule II-Activities to be treated as Supply of Goods or Services

TRANSFER

1. Any transfer of title in goods is a supply of goods.

Transfer of title is the act of point in place or time at which ownership of a thing is passed from one person to another. Thus transfer of title for a consideration implies transfer of ownership, transfer of possession and control on goods i.e transfer of the property in goods.

Any transfer of title in goods is a supply of goods which is taxable as per Schedule II.

For Example- High Sea Sales

To understand what is high sale it is needed to understand the meaning of ‘high sea’. The term ‘High Sea’ means any location in the Sea/Air which is not covered in the territorial limit of India.

High Sea sale is a transaction, wherein there is transfer of ownership, when the goods are on high seas. After the High sea sale of the goods, the Customs declarations i.e. Bill of Entry etc is filed by the person who buys the goods from the original importer during the said sale.

Section 7(2) of CGST Act provides that the goods imported into territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-State trade or commerce.

Under GST inter-state transactions are subject to IGST. High sea sales of imported goods are akin to inter-state transactions.
The section 5 (1) of IGST Act says that the goods imported to India are subjected to IGST and collected according to:

• The section 3 provisions of customs tariff act 1975.
• When custom duties are applied on the said goods under the section 12 of the custom act 1962.
• On the values that are determined under the customs tariff act.

However , It has been clarified by GST Council vide Circular No- 33/2017- Customs dated 1st August 2017, that IGST on High Sea Sales transaction on imported goods, whether one or multiple, shall be levied and collected only at the time of importation i.e. when the import declarations are filed before the Custom authorities for the custom clearance purposes for the first time.

Hence, High sea sales will be taxable when the goods which have been sold on high seas brought into the territory of India.

2. Any transfer of right in goods or of undivided share in goods without the transfer of title thereof is a supply of services

The phrase “transfer of right to use intangible goods is of great significance to impose tax on it. The thrust is on the transfer of right to use the goods o use of tangible goods, including machinery, equipment and appliances, for use, with no legal right  of possession and effective control. Excavators, Cranes, dump trucks, high value and sophisticated machineries are usually supplied for use, without any legal right of possession and effective control.

It is important to understand here that in transfer of right to use goods all the rights except the ownership rights are transferred by the transferor to the transferee so as to enable him to use the goods at his own will to the exclusion of the transferor.

Example-(i) Supply of Equipment’s & Machinery to Contractor.

(ii) Renting of Machinery.

(iii) Rental service of transport vehicle

However, in case of rental service of transport vehicles including buses, coaches, cars, trucks, and other motor vehicle with or without operator are the services where the renter defines how and when the vehicles will be operated, determines schedules, routes, and other operational considerations. Where these conditions are not satisfied then it will not be termed as Renting service.

In an application filed before AAR under GST, Karnataka by Sharma Transports [2020 (32) G.S.T.L. 74 (A.A.R. – GST – Kar.)] The applicant is engaged in the business of transportation of passengers and other ancillary & other related services. The applicant has entered into agreement with M/s Volvo Group India Pvt Ltd for Operation and Maintenance of employee commutation Vehicles and Transportation service Agreement. The applicant pick up employees of the client from respective pick up and drop them in the Client factory.

Towards the same, the applicant is paid a minimum fixed cost and a variable cost, depending on the number of kilometres run. The applicant is the owner of the buses but permits in the name of M/s. Volvo (Private Service Vehicle. The applicant is responsible for the maintenance of the buses. Said services would not be renting as the renting services are not dependent on the distance covered.

Said service would be covered under heading 9964 cover Local land transport, service of passenger by bus. Further entry (iii) to this heading includes passenger transportation services over pre-determined routes on a pre-determined schedule within the confines of a single city for a specific segment of users. In this case employees of M/s Volvo, hence it will not be treated as Renting of Vehicle but it is treated as Passenger transportation services.

(c) any transfer of 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, is a supply of Goods- Example- Hire Purchase.

• Land & Building

– Any lease, tenancy, easement, licence to occupy land is a supply of services.

The term lease has not been defined anywhere in GST Act or Rules, GST does not differentiate between Finance & Operating Leases.

What is important is whether “transfer of title” involves in the lease transactions or not.

a) If the lease agreement stipulates transfer of title: Supply of goods

b) If the lease agreement does not stipulate transfer of title: Supply of services

A mere option to buy the assets at the end of lease period will not cover within the meaning of “Transfer of Title”.

However , in exercise of the powers conferred by section 11(1) of the Central Goods & Services Tax Act, 2017 the Central Government Vide Notification No 12/2017- Central Tax (rate) dated 28.06.2017 has notified following category of leasing of land which are exempt from Tax under GST.

• Leasing of Vacant Land for Cultivation and Rearing of animals vide Entry No 54 of Notification No 12/2017.

• Leasing of industrial plots or plots for development of infrastructure for financial business

Transfer of Tenancy right against Consideration in the form of Tenancy Premium is liable to GST is a supply of service under this Para of Schedule II

GST Council vide its Circular No. 44/18/2018-CGST dated 02.05.2018 has issued clarification that the transfer of tenancy rights to an upcoming tenant , consideration for which is in the form of Tenancy premium is liable to GST.

The scope of supply includes all forms of supply of goods and 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 and also includes the activities specified in Schedule II. The activity of transfer of tenancy right against consideration in the form of tenancy premium is a supply of service liable to GST. It is a form of lease or renting of property and such activity is specifically declared to be a service. The contention that stamp duty and registration charges is levied on such transfers of tenancy rights, and such transaction thus should not be subjected to GST, is not relevant.

The transfer of tenancy rights cannot be treated as sale of land or building declared as neither a supply of goods nor of services in para 5 of Schedule III to CGST Act, 2017. Thus, a consideration for the said activity shall attract levy of GST.

Transfer of tenancy rights to a new tenant against consideration in the form of tenancy premium is taxable. However, grant of tenancy rights in a residential dwelling for use as residence dwelling against tenancy premium or periodic rent or both is exempt vide S. no 12 of Notification No. 12/2017.

Land easement” is the legal term for the right to use or occupy another entity’s land for a specified purpose.

• Any lease or letting out of the building including a commercial, industrial, or residential complex for business, or commerce, either wholly or partly is a supply of services

Any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services. (schedule II of CGST Act, 2017). Accommodation service provided by hotels, Lodges and guest house and Rent income is a taxable supply under GST.

Services by way of renting of residential dwelling for use as residence is exempt under Serial No- 12 of Notification No- 12 Central Tax Rated dated 28.06.2017.

Letting out of residential complex for commercial purpose

Residential properties given on rent for business purposes come under the ambit of GST and therefore are subject to GST.

In an Application filed before AAR under GST, Karnataka by Taghar Vasudeva Amrbish [2020 (4) TMI 692]-

 Applicant has let out a Residential complex to M/s. D. Twelve Spaces Pvt. Ltd which is engaged in the business of providing affordable residential accommodation to students on a long term basis. M/s. D TweIve Spaces Pvt. Ltd. Has entered into sublease agreement students for providing residential accommodations with living amenities, security, entertainment facilities for a long stay for a period varying from 3 months to Il months. Held they are like hotel rooms and the entire leased premises have 42 rooms, which can by no imagination be termed as a residential dwelling. Even if the same is given for residential purposes, the services provided are not for use as a residence by the lessee. Hence it is not the nature of the property which determine taxability but the purpose of letting out the property which determine taxability.

• Treatment or Process

Schedule II of the CGST Act, which sets out the activities to be treated as supply of goods or supply of services, it provides that any treatment or process which is applied to another person’s goods is a supply of services.  Accordingly, the job worker is liable to GST at applicable rates on the processing charges paid by principal.

Section 2(68) of the CGST Act 2017 defines job work to mean any treatment or process undertaken by a person on goods belonging to another registered person and the expression “job worker” shall be construed accordingly.

Job work is merely a treatment or a process on goods. Such process may amount to manufacture or not. Also, a job worker may use his own materials while performing such process or he may not use any material at all. The law on these issues have now been settled as the ambit of job work has been enlarged by the phrase “Any treatment
or process. From the above it is clear that Job Work would amount to supply of services under Schedule II.

The said entry does not restrict itself only to such treatment or process which qualifies as ‘Job work’ under GST. It covers all transactions i.e. either Job work as per above mentioned definition or otherwise. Therefore, as discussed above, the activity of treatment or process not qualifying as ‘job work’ as the principal is un-registered, should amount to supply of service.

• Transfer of Business Assets
• Where goods forming part of the assets of a business are transferred or disposed of by or under the direction of a person carrying on the business so as no longer to form part of those assets, whether or not for a consideration, such transfer or disposal is a supply of goods by the person.

Where goods forming part of the assets of a business are transferred or disposed, whether or not for a consideration, such transfer or disposal is a supply of goods by the person.

The transfer or disposal can be made to any person including to himself. It may or may not involve a consideration.

II Schedule refer the word” business assets”, it means assets may be Fixed or Current. Transfer of disposal of the same will be taxable under GST. The treatment will remain same whether:

1. Whether Transaction is done for consideration or without consideration,

2. Whether ITC has been availed on those goods or not,

3. Goods belong to Pre GST era or Post GST era

This clause of the Schedule II covers the transfer of business assets. It states that the transfer or disposal of assets should be treated as supply if the following conditions are satisfied:-

• There should be goods that form part of business assets.
  • The said goods are transferred or disposed of, so that the same will no longer form part of those assets.
  • The disposal should be by the businessman or on his direction.
  • The disposal may be with or without consideration.
• Where, by or under the direction of a person carrying on business, goods held or used for the purpose of the business are put 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, the usage or making available of such goods is a supply of services

Generally, there is no supply when goods acquired by a person are used for business purposes. However, if the goods are:

(i) Put to private or personal use; or

(ii) Made available for another person for use for any purpose other than a purpose of the business of owner.

(i) Private or personal use or Used for the purpose other than business

XYZ Enterprise, a sole proprietor, is in the business of selling furniture. Its owner took a set of furniture to furnish his house’s Delhi temporarily for 3 months. The personal use of the furniture by the owner, whether or not for a consideration, is deemed as a supply of services by the company to him.

(ii) Made available for another person’s use but not done in the course or furtherance of the business of the goods’ owner

ABC Ltd. bought a bulldozer to be used in its own construction business. However, it made the bulldozer available to be used in the construction business of its sister company, XYZ Ltd. In this case, the usage of bulldozer for any purpose other than its own business purpose, whether or not for a consideration, is a supply of services by ABC Ltd.

• Where any person ceases to be a taxable person, any goods forming part of the assets of the business carried on by him, 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, or
• The business is carried on by a personal representative who is deemed to be a taxable person

Section 2(107) of CGST Act 2017 defines “taxable person” means a person who is registered or liable to be registered under section 22 or section 24.

Cases where person ceases to be Taxable person under GST

• Where a person has surrendered the GST registration on account of various reasons:
• Where a person has now engaged in the business of exclusively supplying goods/and or services that are not liable to tax under this Act. Eg- Supply of tobacco, petroleum products or liquor for human consumption.
• Where the aggregate turnover of the business falls below the threshold limit under GST.
• Where the business has substantially suffered losses over the last year and the proprietor decided to close the business and retire.
• In case of death of the taxable person.

In such a case the assets of the business carried on by him, 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.

Example- Mr A is a GST registered sundry store owner. As his business has substantially reduced over the last year, he has decided to close the business and retire. At the time of de-registration, he has goods on hand valued at Stock RS 5, 000. Mr. A final GST return will show his supplies made during the last taxable period plus Stock in hand of RS 5,000 during the deregistration.it will be treated as supply.

Exceptions: However, in the following two cases, there is no liability of GST which is as follows:

• Where the person has transferred the business as a going concern to another, it will be treated as exempt supply of services under S.no 2 of Notification No. 12/2017 dated 28.06.2017.
• In the case of death of the person, the business is carried on by a legal heir who is deemed to be a taxable person under GST.
• Supply of Services
• Renting of Immovable Property

Renting as the word denotes is not limited to rent. Renting in relation to immovable property means allowing, permitting or granting access, entry, occupation, use or any such facility, wholly or partly, in immovable property, with or without the transfer of possession or control of the said immovable property and includes letting, leasing, licensing or other similar arrangements in respect of the immovable property;

The word Immovable Property has not been defined in the CGST Act, 2017 however the same term has been defined in General Clauses Act, 1977 u/s 2(19)- “Immovable Property” shall include land, benefits to arise out of the land, and things attached to the earth, or permanently fastened to anything attached to the earth.

Renting of immovable property involves:

• Renting of a commercial complex.
• Renting of precincts of a religious place.
• Renting of property to an educational institution
• Permitting use of immovable property for placing vending or dispensing machines.

However, it must be noted that renting out of a religious place owned and managed by a registered charitable or religious Trust for the public shall be exempt from GST. However, such an exemption may not be applicable to cases where:

• the room rent is Rs. 1000 or more per day
• rent for premises, community hall, open area etc is Rs. 10,000 or more per day
• the rent for shops or commercial spaces is Rs. 10,000 or more per day
• Construction of a complex, building, civil structure or a par thereof , including a complex or a building intended for sale to a buyer, wholly or partly, except where entire consideration has been received after the issuance of completion certificate, where required by the competent authority or after its first occupation, whichever is earlier.

Where consideration in respect of construction of complex, building, civil structure or part of it whether ‘even a part’ or “wholly” is received before issuance of completion certificate, then whole of consideration shall be considered as service, taxable under the act.

Here “Construction” means addition, alteration, replacement or remodelling of any existing civil structure.

The condition of first occupation will be relevant in cases where the builder faces procedural delays in getting the completion certificate. In such cases, builder can prove the physical occupancy and need not pay GST. Even occupation in violation of municipal laws will be occupation since the word “First occupation” has not been defined under the Act.

GST shall not be applicable on the sale of units of complex after completion certificate or before its first occupation whichever is earlier.

Where in respect of civil structure (for ex. Roads, bridges, railways), even if whole of consideration is received after issuance of certificate, tax can be levied as it is neither a land nor building.

Therefore, contracts for construction, building, modification, installation of immovable property (building, civil structure, railways, bridge, roads, etc) shall be considered to be services.

The expression “competent authority” means the Government or any

authority authorised to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely: —

(i) an architect registered with the Council of Architecture constituted under the Architects Act, 1972; or

(ii) a chartered engineer registered with the Institution of Engineers (India); or

(iii) a licensed surveyor of the respective local body of the city or town or village or development or planning authority.

• Temporary transfer or permitting the use or enjoyment of any intellectual property right

The term ‘Intellectual Property Right’ (IPR) has not been defined in GST Act. In a common parlance, Intellectual Property includes the following:

• Copyright
• Patents
• Trademark
• Designs
• Any other similar rights to an intangible property

Nature of IPR as to goods or service has been a major point of dispute and many cases are still going on at higher authorities or appellate levels. As per the definition given under GST law of Goods and Services, Goods include everything which is movable and movable is not defined under GST law. Goods cover both tangible and intangible. Therefore, IPR would qualify to be goods.

Now goods can be transferred by way of sale or licensing i.e. either permanent disposal or temporary disposal.

As per schedule II entry no.5(C) of CGST act temporary or permitting the use of enjoyment of any intellectual property right shall be treated as supply of service.

Permanent transfer of IPR is Goods:  Intellectual Property Right is a property of a creator and if the creator permanent transfers the right on property, it is considered as a supply of Goods.

Temporary transfer of right to use IPR is Services: – The creator of IPR temporary transfers the right to use of any Intellectual Property Right (IPR) is a supply of services. He may permit the use or enjoyment of IPR to others for consideration.

There is no condition that the intellectual property must be registered in India. Temporary transfer of a patent registered outside India would also be covered under this Entry. However it will become taxable only if the place of provision of service of temporary transfer of intellectual property right is in taxable territory.

Transfer of   IPR is Taxable under GST: – Both the permanent transfer of IPR and temporary transfer are subject to GST. Temporary transfer includes permitting use or enjoyment of IPR.

GST Rates of IPR: 

S.No	Description	Category	Rate	HSN Classification
1.	Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP) right in respect of goods other than Information Technology	Temporary Transfer- Supply of services Permanent Transfer- Supply of Goods	12 %	Heading 9973- (Leasing or rental services with, or without operator)
2	Temporary or permanent transfer or permitting the use or enjoyment of Intellectual Property (IP) right in respect of Information technology Software	Temporary Transfer- Supply of services Permanent Transfer- Supply of Goods	18%	Heading 9973- (Leasing or rental services with, or without operator)

• Development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software

GST liability on Software:- Software is a set of instructions that allows physical hardware to function and perform computations in a particular manner, be in word processor, web browser or the computer’s operating system.

Information Technology Software:  Information technology software means any representation instructions, data, sound or image, including source code and object code recorded in machine-readable form, where a user is capable to manipulate and get interactivity of all these instructions using a computer or an automatic data machine or any other device or equipment.

The software in physical form is goods under GST: Though the CGST Act defines the development of software as ‘service’, software in physical form (branded as well as tailor-made), ‘Information Technology Software’ is ‘goods’ in Customs Tariff Act under heading 8523 80 20.

GST Rates & HSN for Software as services:-Temporary transfer of IPR of software is service. The GST rate is 18% (9% CGST and 9% SGST/UTGST) or 18% IGST. Temporary or permanent transfer or permitting use or enjoyment of Intellectual Property Right (IPR) in respect of software falls under service group 99733.

GST Rates & HSN for Software as goods:- Permanent transfer of IPR of software is ‘goods’ and GST rate is 18% [9% CGST plus 9% SGST] or 18% IGST. The HSN classification is ‘Any Chapter’- Sr. No. 452P of Schedule III of Notification No.1/2017-CT (Rate) and 1/2017-IT (Rate) both dated 28-6-2017 inserted w.e.f. 15-11-2017.

• Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act

Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act is a supply of service under Schedule II.

Under this scope, following activities are included:

• Demurrage charges for not clearing goods within prescribed period.
• Cancellation charges charged by Hotel and airlines.
• Liquidated damages recovered by Builders and Contractors.
• Non-Compete fees payable for agreeing not to compete for particular period.
• Forfeiture of deposit or advance as penalty ( Like quality, late delivery, violation of any terms of contract)
• Penalty for breach of contract.

Refundable security deposit is not taxable, however if deposit is forfeited then it would be taxable.

Notice Pay recovered from employee- If an employee leave job without giving required notice, Notice pay is recovered from employee. On such amount GST has to be charged and paid by the employer. This is actually supply of services of tolerating an act or a situation provided by employer to employee.

• 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

Transfer of Right to use goods for cash, deferred payment or valuable consideration is considered supply of services under Schedule II.

In the case of  M/s. Abbott Healthcare Pvt. Ltd. (GST AAR Kerala)

The placement of specified medical instruments to unrelated customers like hospitals, labs etc, for their use without any consideration, against an agreement containing minimum purchase obligation of products like reagents, calibrators, disposals etc for a specific period constitute composite supply. The principal supply is the transfer of right to use of any goods for any purpose and is liable to GST under SI No. 17 (iii) – Heading 9973 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017.

Similarly, in the case of M/s Ishan resins & Paints Limited, the applicant is engaged in the business of leasing out trucks or tankers without operator to GTA. The control and possession of the vehicle is transferred to GTA who will engage operator and bear the cost of repair & insurance.  It was found that Exemption No 22 i.e. exempt the services by way of giving on hire a means of transportation of goods to GTA will not apply in this case , since this exemption does not renting or leasing of vehicle where possession and control of the vehicle are transferred to the lessee.

The service is classifiable under SAC 997311 as leasing or rental services concerning transport equipment without operator. lt amounts to the transfer of the right to use the goods and taxable under Sl No. 17(iii) of the Rate Notification. A specific provision, however, is made under Sl No. 17(iii) of the Rate Notification. The service of transferring the right to use any goods for any purpose (whether or not for a specified period) is taxable under the said provision at the same rate as may apply to supply of the goods.

• Composite Supply

The following composite supplies shall be treated as a supply of services, namely: —

• works contract as defined in clause (119) of section 2; and

A works contract is essentially a contract of service which may also involve supply of goods in the execution of the contract. It is basically a composite supply of both services and goods, with the service element being dominant in the contract between parties.

In a general sense, a contract of works, may relate to both immovable and immovable property. E.g. if a sub-contractor, undertakes a sub-contract for the building work, it would be a works contract in relation to immovable property. Similarly, if a composite supply in relation to movable property such as fabrication/painting/annual maintenance contracts etc. is undertaken, the same would come within the ambit of the broad definition of a works contract.

The Works Contracts has been defined in Section 2(119) of the CGST Act, 2017 as

“works contract” means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract.”

Thus, from the above it can be seen that the term works contract has been restricted to contract for building construction, fabrication etc of any immovable property only. Any such composite supply undertaken on goods say for example a fabrication or paint job done in automotive body shop will not fall within the definition of term works contract per se under GST. Such contracts would continue to remain composite supplies, but will not be treated as a Works Contract for the purposes of GST.

 As per Para 6 (a) of Schedule II to the CGST Act, 2017, works contracts as defined in section 2(119) of the CGST Act, 2017 shall be treated as a supply of services. Thus, there is a clear demarcation of a works contract as a supply of service under GST.

As per section 17(5) (c) of the CGST Act, 2017, input tax credit shall not be available in respect of the works contract services when supplied for construction of an immovable property (other than plant and machinery) except where it is an input service for further supply of work contract services.

• supply, 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.

HSN	Category of Service	Rate of Tax
(Accommodation, food and beverage services)	(i)Supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied, other than those located in the premises of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes having declared tariff of any unit of accommodation of seven thousand five hundred rupees and above per unit per day or equivalent. Explanation 1.- This item includes such supply at a canteen, mess, cafeteria or dining space of an institution such as a hospital, industrial unit, office, by such institution or by any other person based on a contractual arrangement with such institution for such supply, provided that such supply is not event based or occasional. Explanation 2.- This item excludes the supplies covered under item 7 (v). Explanation 3.- “declared tariff” includes charges for all amenities provided in the unit of accommodation (given on rent for stay) like furniture, air conditioner, refrigerators or any other amenities, but without excluding any discount offered on the published charges for such unit.	5 %
	ia) Supply, of goods, being food or any other article for human consumption or any drink, by the Indian Railways or Indian Railways Catering and Tourism Corporation Ltd. or their licensees, whether in trains or at platforms.	5 %
	(iii) Supply, 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, where such supply or service is for cash, deferred payment or other valuable consideration, provided by a restaurant, eating joint including mess, canteen, whether for consumption on or away from the premises where such food or any other article for human consumption or drink is supplied, located in the premises of hotels, inns, guest houses, clubs, campsites or other commercial places meant for residential or lodging purposes having declared tariff of any unit of accommodation of seven thousand five hundred rupees and above per unit per day or equivalent. Explanation.- “declared tariff” includes charges for all amenities provided in the unit of accommodation (given on rent for stay) like furniture, air conditioner, refrigerators or any other amenities, but without excluding any discount offered on the published charges for such	18%
	(v) Supply, by way of or as part of any service, of goods, being food or any other article for human consumption or any drink, at Exhibition Halls, Events, Conferences, Marriage Halls and other outdoor or indoor functions that are event based and occasional in nature.	18%
	(vii) Supply, by way of or as part of any service or in any other manner whatsoever, of goods, including but not limited to food or any other article for human consumption or any drink (whether or not alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration, in a premises (including hotel, convention center, club, pandal, shamiana or any other place, specially arranged for organising a function) together with renting of such premises.	18%

• Supply of Goods

The following shall be treated as supply of goods, namely: —

Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.

According to section 7 of CGST Act, 2017, the expression “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, and includes activities specified in Schedule II to the CGST Act.

According to Sec 2(17) of CGST Act, definition of business includes provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members;

The term person is defined in section 2(84) of the CGST Act, 2017 to include an association of persons or a body of individuals, whether incorporated or not, in India or outside India.

 A conjoint reading of the above provisions of the law implies that supply of services by an unincorporated association or body of persons (AOP) to a member thereof for cash, deferred payment or other valuable consideration shall be treated as supply of services.

Therefore, the law with regard to levy of GST on service supplied by member of an unincorporated joint venture (JV) to the JV or to other members of the JV, or by JV to the members, essentially remains the same as it was under service tax law. GST Council vide Circular No. 35/9/2018 dated 05.03.2018 has clarified the taxability of Cash calls. It is reiterated that the question whether cash calls are taxable or not will entirely depend on the facts and circumstances of each case. /Cash calls’ are raised by an operating member of the joint venture on other members in proportion to their participating interests in the joint venture(unincorporated) to meet the expenditure on the operations to be carried out as per the approved work programme and budget. Taxability of cash calls can be further explained by the following illustrations:

Illustration A: There are 4 members in the JV including the operating member and each one contributes Rs 100 as part of their share. A total amount of Rs 400 is collected. The operating member purchases machinery for Rs 400 for the JV to be used in oil production.

Illustration B: There are 4 members in the JV including the operating member and each one contributes Rs 100 as part of their share. A total amount of Rs 400 is collected. The operating member thereafter uses its own machine and performs exploration and production activities on behalf of the JV.

 4.1 Illustration A will not be the subject matter of `ST/GST’ for the reason that the operating member is not carrying out an activity for another for consideration. In Illustration A, the money paid for purchase of machinery is merely in the nature of capital contribution and is therefore a transaction in money.

4.2 On the other hand, in Illustration B, the operating member uses its own machinery and is therefore providing ‘service’ within the scope of supply of CGST Act, 2017. This is because in this scenario, the operating member is recovering the cost appropriated towards machinery and services from the other JV members in their participating interest ratio.

Thanks & Regards

CA Geetanjali Pandey Rawal