GST

Activities Clearly Classified As Goods or Services under GST

Activities Clearly Classified As Goods or Services under GST

Within the context of GST compliance, the proper categorization of operations as either goods or services is of utmost importance. The proper tax treatment and accompanying legal duties for both companies and individuals are determined by this difference, which acts as the cornerstone around which the whole GST structure is formed. A transparent and equitable taxation system is ensured by understanding and proper use of this categorization. GST divides transactions into two different domains: goods and services, with the goal of streamlining the taxes procedure and removing uncertainty. The financial features of transactions are influenced by accurate tax rate calculation, which is made possible by proper categorization. The proper categorization is the foundation for the equal distribution of tax responsibilities, whether it pertains to the exchange of tangible goods or the rendering of intangible services.

What constitutes “goods” under GST?

Section 2 (52) of The Central Goods and Services Tax Act, 2017 defines goods as movable property, which includes actionable claims along with growing crops, grass and things which are attached to the land or form a part of the land which was agreed to be ended either prior supply or under the contract of supply. Goods do not include securities and money.

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What constitutes “services” under GST?

Within the context of the Goods and Services Tax (GST), the term “services” is defined in great detail. It includes a broad variety of intangible acts or dealings that go beyond the exchange of actual assets like money and securities. Activities involving the use or exchange of money are included in the definition of services. This includes scenarios in which money is changed from one denomination, or currency into another. This conversion can take place in a number of ways, such as cash transactions or other payment methods. A distinct consideration (payment) must be made for the conversion in order for the activity to qualify as a service under this rule.

Schedule II of CGST Act

Schedule II of the Central Goods and Services Act of 2017, states the classification of the activities according to goods and services 1.

Transfer of Goods:

SPECIFICATIONSCONSIDERED AS
 When there is a transfer of title in the goods  Goods
 When only the transfer of right or shares takes places in goods and the title is not transferred   Services
 When the transfer of title is done with a agreement  Goods
 When the transfer will take place in future date after the full payment  Goods

Treatment or Process

SPECIFICATIONSCONSIDERED AS
 Application of a treatment or a process to another individual’s goods  Services

Land and Building

SPECIFICATIONSCONSIDERED AS
 Giving any building for commercial purpose or leasing Services
 Lease, easement, tenancy, license for occupying the land   Services

Transfer of Business Assets

SPECIFICATIONSCONSIDERED AS
 When irrespective of consideration the assets of business are transferred or disposed by the owner                                 Goods
 When the business assets are used by the owner for personal use  Services
 The business assets will be assumed to have been provided by the owner during their business activities just before they ceased to be a taxable individual if the owner is no longer regarded as a taxable individual.Exception: 1. When business is transferred to another person2. when a personal representative carries out the business as a taxable person      Goods

Renting immovable property

SPECIFICATIONSCONSIDERED AS
 When a immovable property is rentedException: A residential property when rented it is exempted from GST.   Services

Construction of building with the intention of sale

SPECIFICATIONSCONSIDERED AS
 When with the intention of sale of a property wholly or partially – a construction of a complex, building, civil structure or its part  Services

 

Permission to use any intellectual property right or temporary transfer

SPECIFICATIONSCONSIDERED AS
 When a permission is given to use any intellectual property right or the intellectual property right is temporarily transferred   Services

Development of information technology software

SPECIFICATIONSCONSIDERED AS
When the development of information technology software is there   Services

Agreeing to not do something i.e. a non competition agreement, tolerating act or performing an act

SPECIFICATIONSCONSIDERED AS
 When consent is given to refrain from an act – like a non competition agreement or do an act or tolerate an act.   Services

Transfer of rights of the goods

SPECIFICATIONSCONSIDERED AS
 When the goods are transferred for any purpose for consideration, within a specified period or in absence of it.  Services

 Composite Supply

SPECIFICATIONSCONSIDERED AS
 When service of foods and drinks is supplied in exchange of a consideration Exception: Alcohol   Services
 Work contract  Services

Conclusion

In conclusion, it is crucial for proper taxes and compliance to comprehend the precise classification of activities as commodities or services under GST. Tax liability, reporting, and general business operations are all impacted by proper classification. Although there are various classifications for tangible goods and intangible services, an activity’s classification is frequently determined by its predominant characteristics.

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Frequently Asked Questions

  1. What is classification under GST?

    The classification under GST is goods and services.

  2. What is Schedule 2 in GST?

    The schedule 2 of the GST gives information about the classification as goods and services of some activities.

  3. What are the activities included in Schedule 2?

    Activities included in schedule 2 are transfer of assets, renting of immovable property, composite supply, transfer of rights of goods, development of information technology software, temporary transfer or permission for using IPR, construction of building with intention to sale etc.

  4. What is an example of deemed supply?

    Samples or gifts are the example of deemed supply.

  5. What is Schedule 1 in GST?

    The activities which are to be treated as a supply with consideration are mentioned in schedule 1.

  6. What is Schedule III of GST Act 2017?

    The transactions or activities which are to be considered as neither a supply of goods nor a supply of services are mentioned in this schedule.

  7. Which code is used to classify goods and services under GST?

    The code which is used to classify goods and services under GST are HSN and SAC code.

  8. What is GST schedule?

    A GST schedule is a part of the act itself, which gives more detail about the working of some of the provisions of the act.

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References

  1. https://en.wikipedia.org/wiki/Goods_and_services

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