Definition of Goods

GST Update 29.06.2016

Definition of Goods

GST DAILY DOSE OF UPDATION:-

Definition of Goods:-

As the name indicates “Goods and Services Tax (GST)” is a tax on ‘goods’ and services; the definition of “goods” becomes crucial. Unless an item is a “Goods” as per definition given in the Act, the tax cannot be levied in GST regime. The draft GST act has proposed the definition of “Goods” under section 2(48) as follows:-

“(48) “goods’’ means every kind of movable property other than actionable claim and money but includes securities, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under the contract of supply;

Explanation.– For the purpose of this clause, the term ‘moveable property’ shall not include any intangible property.”

The proposed definition is similar to definition contained in section 2(7) of “Sale of Goods Act, 1930”, except the fact that securities are excluded from the definition of current definition of good while the proposed definition in the GST regime seeks to include the same. An analysis of the proposed definition makes it clear that it will broadly cover all types of movable properties except actionable claim and money. The items like securities, growing crops, grass and things attached to land which are agreed to be detached before or under contract of supply. Thus, all the items falling in the definition of goods will come under purview of GST.

Also, an explanation has been proposed in this definition which states that the term movable property will not include any intangible property. It is worthwhile to mention here that intangible properties have always been a subject matter of litigation. Whether the intangible properties will come under purview of goods and whether sales tax would be levied has been subject matter of dispute. Also, there is very thin line of demarcation between ‘goods’ and ‘services’; particularly, the intangible properties, which have been alleged as “goods” by sales tax department and “services” by service tax department. Thus, both the departments have tried their best to bring intangible properties under purview of their respective Acts and to collect the taxes on their very ends. One such dispute was in the name of “software” which was settled by the hon’ble Supreme Court in the case of TATA CONSULTANCY SERVICES Versus STATE OF ANDHRA PRADESH 2004 (178) E.L.T. 22 (S.C.). The explanation proposed in the above stated definition will definitely keep such disputes out of play in the GST regime.

Further, the proposed definition includes the “securities” within its ambit. Thus, for the purpose of GST, securities will be termed as goods and thereby will be subject to GST unless otherwise exempted. At present the trading the securities is already chargeable to a couple of taxes like securities transaction tax (STT), Swachh Bharat Cess (SBC) and Krishi Kalyan Cess (KKC) alongwith couple of other charges like exchange transaction charges, clearing member charges and SEBI turnover charges. If the trading in securities is not exempted in GST regime, according to proposed definition it will be leviable to one more tax namely GST; thereby making the trading in securities as a costlier issue. The experts are of the view that since trading in securities is already leviable to a no. of taxes imposition of one more tax is not desirable. Thus, it is quite possible that a separate exemption shall be granted to trading in securities in GST regime. However, as of now, since the exemptions are not certain, the government is facing opposition on this issue from the people at large.

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GST Update 29.06.2016

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