GST INDIA DAILY

SCOPE OF SUPPLY SERIES – PART 8 Last week we have gone-through the topic SCHEDULE I services under GST. Read Part 7 of Scope of Supply under GST, in the following link:

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SCHEDULE II OF THE GST ACT, 2017

Schedule II of the GST Act has certain activities clearly classified as goods or services under GST to avoid any such confusion

In this article we will try to understand entry 1& 2 of Schedule II. The first entry is as follows:

Transfer of

(a) any transfer of the title in goods is a supply of goods;

(b) any transfer of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of 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.

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.

Now let us understand the above entry with the help of illustrations:

The first part of the entry deals with transfer of title of goods to be considered as supply of goods.

For example A of Chennai deals in Electronic Goods. He transfers the title of a television set for an agreed consideration to Y of Delhi in August. 2020. In the given case, the transfer of title in television shall be considered as supply of goods.

The second part of the entry deals with right in goods or of undivided share in goods without the transfer of title thereof

For example: A transfers right to use of a generator for a period of 6 months for an agreed consideration to M in August, 2020. The foregoing transfer of generator without transfer of title in generator shall be treated as a supply of service.

Another classic example for the said entry is A agrees to share use of Xerox machine with his neighbour B for a period of one month for an agreed consideration. After expiry of period of one month, B shall have no license to use the said photocopier. The foregoing license to use said photocopier without transfer of title in goods shall be considered as a supply of service.

The third part of the entry deals with title in goods under an agreement

Supply of goods on hire purchase shall be treated as supply of goods as there is transfer of title, although at a future date.

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.

For example: Under a scheme of finance, a supplier of a car gives the possession of car to the buyer in August 2019. He agrees to transfer the ownership of the car to the buyer in August 2020 upon payment of full consideration of Rs. 8,60,000/- in instalments as agreed. The aforesaid transaction shall be treated as supply of goods.

The second entry of the schedule is as follows:

Land and Building

(a) any lease, tenancy, easement, licence to occupy land is a supply of services;

(b) 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.

Now let us understand each part of this entry with example

The first part of the entry deals with lease, tenancy, easement, license to occupy land

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

For example: Y the owner of a specific piece of land in Delhi, leases the same to Z for one year for an agreed consideration in August, 2020. The aforesaid lease of land shall be treated as a supply of services.

The second part of the entry deals with lease or letting out of buildings.

Critical appraisal of above reveals that following three conditions need to be satisfied to be covered in this entry and therefore to qualify as supply of service:

1. Any lease or letting out of the building:
2. Such building includes not only commercial or industrial but also residential complex: and
3. Such leasing or letting either wholly or partly shall be for business or commerce.

Accommodation service provided by hotels, Lodges and guest house and Rent income is a taxable supply under GST.

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MANIMARAN KATHIRESAN ( ON BEHALF OF GST INDIA DAILY TEAM)