Definition of Continuous supply of service

GST Update 22.06.2016

GST DAILY DOSE OF UPDATION:-

Definition of Continuous supply of service:-

Continuous supply of service is governed by special provisions under service tax law. As the name indicates, it is supply of taxable services which may run for a longer period of time as compared to other services. Since special provisions are applicable, the definition of ‘continuous supply of service’ becomes important. Proposed section 2(31) of draft GST Act, 2016 defines the term “continuous supply of service” as follows:-

(31) “continuous supply of services” means a supply of services which is provided or agreed to be provided, continuously or on recurrent basis, under a contract, for a period exceeding three months with periodic payment obligations and includes supply of such service as the Central or a State Government may, whether or not subject to any condition, by notification, specify;

The analysis of this definition makes it clear that a service will come under purview of “continuous supply” if the following conditions are satisfied:-
·        The service should be provided/ agreed to be provided under a contract.
·        The said provision of service should be either continuous or on recurrent basis.
·        The tenure of service should be exceeding three months.
·        There should be period payment obligations.
·        Any service specified by government by way of notification as continuous supply of service will be included in this definition whether or not it meets the other criteria laid down in the definition.

Thus, the service will be included in the definition of ‘continuous supply of service’ if the above stated conditions are satisfied. It is worthwhile to mention here that at present the definition of “continuous supply of service” is given in rule 2(c) of Point of taxation Rules, 2011. The proposed definition has been imported from this rule with slight grammatical variations, the main concept being the same. It is worthwhile to mention here that the definition given in rule 2(c) of Point of taxation rules is not the same as was there when these rules were introduced. It has undergone several changes since last five years. The present definition is somewhat precise and clear and this seems to be the reason of importing the same in the proposed GST regime.

A no. of services are there which are run for a longer period of time like construction services, renting of immovable property, etc. These services will continue to be covered in the definition of “continuous supply of service” and will be governed by the special provisions framed in this regard. Also, the government has proposed to keep the power with it to notify any service to be covered in this definition. This has been done to keep the litigation away which is a welcome step.

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GST Update 22.06.2016

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