DECLARED SERVICES UNDER PROPOSED GST ACT, 2016

GST update 15.01.2016

GST DAILY DOSE OF UPDATION:-

DECLARED SERVICES UNDER PROPOSED GST ACT, 2016:-

In the present scenario wherein service tax on provision of services is being levied by the Central Government and sale tax/VAT on sale of goods is being levied by the State Government, need of declaring services was found as certain activities are of composite nature comprising elements of sale of goods and services both. Say for example- construction activities (works contract), restaurant activities etc. Accordingly, in order to levy service tax and VAT both on such activities, these were mentioned in the category of declared services. However, with the introduction of unified taxation reform GST, will there be need to specify declared services as in the present era because under GST there will be single tax for supply of both goods and services. The Draft GST Act, 2016 defines declared services under section 2 (25) as follows:-

Declared service means-
(a)             Renting of immovable property;
(b)             Construction of complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or before its first occupation, whichever is earlier.
(c)              Temporary transfer or permitting the use or enjoyment of any intellectual property right;
(d)             Development, design, programming, customization, adaptation, upgradation, enhancement, implementation of information technology software;
(e)              Agreeing to the obligation to refrain from an act, or to tolerate an act or situation or to do an act;
(f)               Works contract;

It is pertinent to note that presently, apart from the above declared services, the following are also covered under declared services:-
·        Transfer of goods by way of hiring, leasing, licensing or in any such manner without transfer of right to use such goods;
·        Activities in relation to delivery of goods on hire purchase or any system of payment by installments;
·        Service portion in an activity wherein goods, being food or any other article of human consumption or any drink (whether or not intoxicating) is supplied in any manner as a part of the activity.

The reason for excluding the above activities from the list of declared services is not understandable. Moreover, excluding restaurant activities from the declared services indicate as if the government seeks to consider it as sale of goods only and believes that no service is involved in the same. The inclusion of certain activities under declared services on ad-hoc basis is totally absurd. Furthermore, when there is unified taxation for goods and services, where is the need to mention declared services? The main motto of implementing GST is to make indirect taxation simpler but the provisions of the draft appear to complicate the issues furthermore. Another view can be that there is separate rate of GST for services and separate rate for goods. If this will happen then the dispute existing in current tax regime will continue in GST era also. But the definition of "Deemed services" strengthens this point of view.

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GST update 15.01.2016

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