Section 7 of the Central Goods and Services Tax (CGST) Act, 2017, delineates the expansive scope of supply, encompassing a myriad of transactions crucial for GST compliance. Understanding the definitions and interpretations under this section is paramount for businesses navigating the complexities of taxation. This article delves into Section 7(1) specifically, analyzing its implications, particularly concerning supply by way of transfer. By exploring case laws and legal precedents, it aims to provide comprehensive insights into taxable events, exemptions, and the intricate nuances of GST compliance essential for businesses operating within the ambit of the CGST Act.
Section 7: Scope of Supply
I. Definitions
II. Analysis of Section 7(1) of CGST Act
III. Interpretation of section 7(1)- Supply by way of Transfer.
IV. Case laws to interpret supply by way of Transfer.
I. Definitions : Section 2
(105) “supplier” in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied.
(52) “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.
(102) “services” means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.
(1)“actionable claim” shall have the same meaning as assigned to it in section 3 of the Transfer of Property Act, 1882 (4 of 1882).
II. Analysis of Section 7(1) of CGST Act,2017
For the purpose of this Act, the expression “Supply” includes-
a) All forms of supply of goods or services or both such as
– Sale
– Transfer
– Barter
– Exchange
– License
– Rental
– Lease or
– Disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.
III. Interpretation of section 7(1)- Supply by way of Transfer.
Schedule II (1) of CGST Act, 2017 deals with the Transfer.
A. Any transfer of title in goods is a supply of goods.
Now, can Transferring title in land amounts to supply, of course not because the GST on sale of freehold land has specifically excluded in Schedule III (5) but does not exclude long term leasehold land, it is treated as service and GST is applicable on transfer of leasehold right balance period of lease.
What if, Land is sold along with the grown crops; grass etc. is it liable for GST by dividing the transaction in two parts?
– One sale if Land and other (Exempt)
– Sale of grown crops and grass.(Taxable)except Agriculture produce as defined in GST.
As we have seen in the definition of goods, It includes , 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.
▶ To analyze the applicability of GST on grown crops and grass etc. , one need to understand the definition of Land , which has not been defined under CGST Act,2017 but
▶ As per Section 3(a) of Land Acquisition Act, 1894 The expression ‘land’ includes benefits that arise out of land and things attached to earth or permanently fastened to anything attached to the earth”
▶ As per Section 3(4) of Bombay Land Revenue Code, 1879 ‘land’ includes benefits to arise out of land and things attached to the earth or permanently fastened to anything attached to the earth and also shares in or charges on the revenue or rent of village or other defined portions of territory”
So from the above definition of land one can construed that land would include benefits arising out of land as well as things which are permanently attached to land.
Hence, The crops or grass attached to land are not divisible and hence not liable to GST.
▶ A nether point of argument can be taken as in this above particular situation is-
Section 2(30) “composite supply” means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply;
▶ Section 8:- Tax liabilities on composite and mixed supplies
(a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply;
Here the GST on sale of Land is Nil, hence GST on crops and grass is also Nil.
Whether sale of land after levelling, laying down of drainage lines etc., is taxable under GST – Circular No 177/09/2022- TRU.
Representation has been received requesting for clarification regarding applicability of GST on sale of land after levelling, laying down of drainage lines etc.
▶ As per Sl no. (5) of Schedule III of the Central Goods and Services Tax Act, 2017, ‘sale of land’ is neither a supply of goods nor a supply of services, therefore, sale of land does not attract GST.
▶ Land may be sold either as it is or after some development such as levelling, laying down of drainage lines, water lines, electricity lines, etc. It is clarified that sale of such developed land is also sale of land and is covered by Sr. No. 5 of Schedule III of the Central Goods and Services Tax Act, 2017 and accordingly does not attract GST.
▶ However, it may be noted that any service provided for development of land, like levelling, laying of drainage lines (as may be received by developers) shall attract GST at applicable rate for such services
B. Any transfer of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of services
SCHEDULE II (5)
▶ (c) temporary transfer or permitting the use or enjoyment of any intellectual property right;
▶ (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.
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.
Gift Vouchers/ Gift Cards can fall under this sub clause??
Yes. But with some restrictions.
Section 2(118) of CGST Act, 2017 defines “voucher” means an instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services or both and where the goods or services or both to be supplied or the identities of their potential suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument.
Section 12 (4): Time of Supply
In case of supply of vouchers by a supplier, the time of supply shall be-
(a) the date of issue of voucher, if the supply is identifiable at that point; or
(b) the date of redemption of voucher, in all other cases.
That means if the voucher is for specified item with specified value tax is payable at the time of issuance of Voucher otherwise it will be postpone at the time of redemption of voucher.
Voucher is an actionable claim as defined in Transfer of Property Act, 1882
[“actionable claim” means a claim to any debt, other than a debt secured by mortgage of immoveable property or by hypothecation or pledge of moveable property, or to any beneficial interest in moveable property not in the possession, either actual or constructive, of the claimant, which the Civil Courts recognize as affording grounds for relief, whether such debt or beneficial interest be existent, accuring, conditional or contingent:]
Actionable claims are neither supply of goods nor supply of services as per Schedule III (6) of CGST Act, 2017
IV. Similar view taken by the Madras High Court in case of Kalyan Jewellers India Ltd. Vs. UOI W.P.NO. 5130 OF 2022 AND W.M.P.NOS. 5227 AND 5228 of 2022
▶ If the “Gift Vouchers/Cards” is for a specified item of jewellery of specified value, tax is payable at the time of its issuance, as there is supply(i.e transfer)within in the meaning of Section 7(1-A). If there is no supply i.e. no transfer within in the meaning of Section 7(1-A), time of supply will get postponed to the actual time of red emption of the “voucher” to a future date of sale of merchandise or such goods when such Gift Voucher/Card is presented by the customer at the Counter of the petitioner.
But again Schedule III (6) amended through section 4 of CGST Amendment Act,2017 by deleting the word Actionable claim but it is yet to be notified.
Conclusion: GST Weekly Services entail a comprehensive understanding of Section 7(1) of the CGST Act, definitions, interpretations, and legal precedents. Clarifications on transfers, taxable events, and exemptions provided by Schedule III are essential for compliance. Businesses must navigate these nuances to ensure GST adherence and mitigate risks.
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