24th April 2017
With the advent of the GST regime, the dilemma existing in the current indirect tax framework when it comes to Service Tax vs. VAT on work contracts, AC Restaurant Service, Software, etc. would be eliminated.
Schedule II of the GST Model casts clarity on the determination of the type of supply, being a supply of a good or a service. Thus, overcoming the loopholes in the existing tax structure regarding the application of a Service tax or a VAT, by eliminating them.
This makes it mandatory for the businesses to know whether a particular ‘supply’ amounts to supply of goods or to supply of services and treat supply accordingly.
The law widely enlists transactions related to construction, work contracts, renting etc. and also stipulates a list of transactions related to transfers, land and building, treatment or process ( (applied on third party’s goods).
To illustrate, let us take a few examples of Supply of Goods.
Ibex furniture sold sofa sets to Mr. Ranjan, which is a supply of goods. Here, the tritle of the sofa set would be transferred to Mr. Ranjan on sale.
Ibex furniture supplied sofa set to MR. Ranjan in an agreement to receive the payment in 6 installments; this is a case of supply of goods. The title in property i.e. sofa set will be transferred to Mr. Ranjan on the completion of payment in 6 installments.
Supply of service:
The above enumerated points are briefed underneath
Any transfer of goods without transfer of title
When Ibex Furniture transfers the sofa set to Mr. Ranjan for usage. This is a case of supply of service, as the title of property is still possessed by Ibex furniture.
Mr. Ranjan lets out land on lease to Ibex Furniture. The letting out of land on lease amounts to a case of supply of services.
Mr. Ranjan lets out a part of building to Ibex Furniture to display and sell its products or furniture. This is a case of supply of service.
Ibex furniture also does the work of repairing and polishing the furniture for its customers. This activity accustoms to a case of supply of service.
For instance a car used for business is being used for personal us. This amounts to a supply of service
Giving shop premises on rent is a case of supply of services.
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