GUEST COLUMN

 

GST KNOWLEDGE SERIES

 

CA Pradeep Jain

 

As you are aware of the fact that revised draft GST law is published by the Government. Many changes have been made in the revised draft GST law in comparison to earlier draft GST law. If we compare the old draft GST law with the new revised draft GST law then we can study the changes which have been made and their impact on the trade and industry.

 

To start with we are discussing about the definition of “supply” given under revised GST draft law. The definition of “supply” given under section 3(a) of draft GST law. The first part of definition of revised GST law is inclusive as well as is similarly worded as given under earlier draft GST law.

 

Further import of service for furtherance of business is retained in the definition of supply. But when we compare the same with old entry in old draft GST law then the words “ whether or not for a consideration“ has been deleted. This implies that “supply” will include only those supplies which are for business only. But to reach the conclusion, we have to first study the complete definition of “supply”. Schedule I specifies those services which are without consideration. But there are many changes made in schedule I.

The first point in schedule I is same as in earlier law is “Permanent transfer/ disposal of business asset”. But the words “credit availed on such asset” has been added into it. It implies that only those asset on which credit is taken are transferred without consideration then only it will be covered under GST.

Second entry in schedule I is a new entry wherein supply of goods or services to related person without consideration will be termed as "supply". Also, if you have separate registration under section 10 then also supply without consideration will be termed as “supply”. GST provides that every person has to take separate registration in each state. Hence, this entry intends to cover those transaction between separate registration though they are same person. The supply will be “without consideration” as he is same legal person but since separate registration is taken, hence it will be termed as deemed supply and GST is payable.

 

Further supply between principal and agent and agent and principal without consideration is deemed supply. Also, import of service from related person or other establishment without consideration is also termed as supply. As we have seen in main definition, scope of import of service is limited to furtherance of business and “without consideration” was deleted. But here the import of service from relative or other establishment is deemed supply even though it is without consideration. Hence, though import of service without consideration is deleted but it is again added in the Schedule I but to a limited extent.

Now, importation of service without consideration is deemed supply only when it is from related party or other establishment. All other import of service without consideration will not be termed as “deemed supply”. It is major deviation from earlier definition.

 

If we compare the schedule I in old draft GST law and schedule I in new revised draft GST law then only of “temporary transfer of business asset for private or non business use” has been deleted. This is big relief for trade and industry as it was creating havoc for industry. Similarly, entry of “asset retained after deregistration” is also deleted. To have a complete picture we will study schedule II in our next GST update.

 

CHANGES MADE IN SCHEDULE-II OF REVISED GST LAW:-

 

Continuing the series of updates on the revised GST draft law, we had discussed on changes made in schedule I after amendments in the definition of Supply and the consequences of the same. Today we will discuss the changes in schedule II and implications of the same.

 

Schedule II prescribes such transactions which will be deemed to be supply of goods and services. There is not much change in this schedule. But it is worth noting that as per our previous discussion on supply and schedule I, the transactions without consideration have been removed from the list. But the schedule II in the revised draft states that transfer of any business asset, with or without consideration, shall be treated as supply only.

 

We had also discussed that temporary transfer of business asset without consideration has been removed from the ambit of supply in the revised draft. But it has been retained in the schedule II resulting in it be termed as supply and GST becoming payable on it too.

Similarly the use of business asset for private use with or without consideration has also been retained in the revised draft, though it has been removed from the main definition of supply. The result is that GST will still be payable on this transaction too.

 

Another example is that earlier law stated that on deregistration of business, the asset retained will also be termed as supply and GST was payable on the same. In the revised draft, this entry was removed from the schedule I due to which it seemed that no GST shall be payable on it. But again this entry has been retained in the schedule II resulting in taxability on this transaction. The entry 4(c) states that if a person ceases to be a taxable person, then retention of business assets will be termed as supply. This rule will be subject to the fact that the business is transferred as a going concern or a personal representative runs the business. In remaining all cases, such retention will be supply and GST will be payable on the same.

 

Another change made in the schedule II is that entry 4(3) of the previous draft has been deleted. This entry stated that if a third person sells any goods of a taxable person to recover his dues from such taxable person, then the transfer of goods by the taxable person shall be treated as supply in the course of furtherance of business and GST will be payable on the same. In the revised draft this entry is deleted and as a result this type of transaction shall not be liable to tax under GST.

 

We can conclude that the abovementioned transactions, though removed from the definition of supply or schedule I, will still attract GST in view of the entries in schedule II.

 

[Views expressed are strictly personal]