DEFINATION OF PERSON PROPOSED IN GST ACT, 2016:-

GST Update 20.01.2016

GST DAILY DOSE OF UPDATION:-

DEFINATION OF PERSON PROPOSED IN GST ACT, 2016:-

Section 2(50) defines person as follows:-

‘Person’ includes-
(a)             An individual;
(b)             A Hindu Undivided Family;
(c)              A Company;
(d)             A Firm;
(e)              An association of persons or a body of individuals, whether incorporated or not, in India or outside India;
(f)               Any corporation established by or under any Central, State or Provincial Act or a government company as defined under section 2(45) of the Companies Act, 2013
(g)             Any body corporate incorporated by or under the laws of a country outside India;
(h)             A co-operative society registered under any law relating to co-operative societies;
(i)                A local authority;
(j)                Government;
(k)              Society registered under the Societies Registration Act, 1860;
(l)                Trust; and
(m)           Every artificial juridical person, not falling within any of the preceding sub-clauses;

It is worth mentioning that the proposed defination seeks to specifically mention trust as a person for the purpose of GST levy which is not mentioned in the present defination. Furthermore, the defination of the person proposed is wider in scope as it includes within its ambit the body corporate incorporated outside India. However, body corporate incorporated outside India was not specifically mentioned in the present defination. It means that if the body corporate incorporated outside India renders services/supplies goods to any person in India including its subsidiary, it will tantamount to involvement of 2 persons. It is worth noting that presently the explanation to the defination of service 3(b) clearly states that the establishment of a person in taxable territory and any of his other establishment in any territory shall be treated as establishments of distinct persons.

Furthermore, inclusion of the clause (e) by treating an association of persons or a body of individuals, whether incorporated or not, in India or outside India seeks to nullify the concept of mutuality of interest pronounced by various High Courts. In the past, several service tax demands have been quashed solely on the grounds that for provision of service, involvement of 2 persons is a pre-requisite. It has been concluded that for service tax to be levied on a service it is essential that there are two persons as one cannot provide service to oneself and this is called the concept of mutuality of interest. Accordingly, it has been concluded that services provided by a club to its members is not leviable to service tax in the absence of 2 persons because club and its members are one and the same. Reliance may be placed on the following judicial pronouncements:-

·        UNION OF INDIA VS KARNAVATI CLUB LTD. [2010 (20) S.T.R. J44 (S.C.)]

·        RANCHI CLUB LTD. VERSUS CHIEF COMMR. OF C. EX. & S.T., RANCHI ZONE [2012 (26) S.T.R. 401 (Jhar.)]

·        SPORTS CLUB OF GUJARAT LTD. VERSUS UNION OF INDIA [2013 (31) S.T.R. 645 (Guj.)]

·        SATURDAY CLUB LTD. VERSUSASSTT. COMMR., SERVICE TAX CELL, CALCUTTA [2006 (3) S.T.R. 305 (Cal.)]

However, by including the association of persons, body of individuals, trust etc. in the defination of person, the government seeks to nullify the ratio laid down by the Apex Court and various High Courts that no service tax is leviable if services are provided by a club to its members.

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GST Update 20.01.2016

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