INTERPRETATION OF CENTRAL GOODS AND SERVICES TAX (CGST) ACT (PART-11) (Meaning of Important Terms)

[Dr. Sanjiv Agarwal]

This part of the series contains meanings of certain terms covered in Section 2 of the CGST Act, 2017.  These are Securities, Services, State, Supplier, Tax period, Taxable Person, Taxable Supply, Taxable Territory, Telecommunication Service, Turnover in State, Usual Place of Residence, Union Territory, Valid Return, Voucher and Works Contract.

Securities [Section 2(101)]

Securities shall have the same meaning as assigned to it in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956.

Securities shall have the same meaning as in Securities Contracts (Regulation) Act, 1956. As per section 2(h) of the Securities Contracts (Regulation) Act, 1956, securities include-

(i)     shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of a like nature in or of any incorporated company or other body corporate;

(ia)    derivative;

(ib)   units or any other instrument issued by any collective investment scheme to the investors in such schemes;

(ic)    security receipt as defined in clause (zg) of section 2 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002;

(id)   units or any other such instrument issued to the investors under any mutual fund scheme;

(ii)      Government securities;

(iia) such other instruments as may be declared by the Central Government to be securities; and

(iii)     rights or interest in securities.

Securities will also include derivatives and collective investment schemes as included recently in the definition under Section 2(h) of the Securities Contracts (Regulation) Act, 1956.

A Government security means a security created and issued, by the Central Government or a State Government for the purpose of raising a public loan. Securities are not considered as goods.

Services [Section 2(102)]

Services means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.

The term ‘Services’ have been defined to mean anything other than the goods. Thus, it would be important to analyse the receipt of any credit / payment on which tax has not been charged and need to determine the basis of non charging of tax as supply of goods and / or supply of services.

Only in the cases of non taxability under GST law or goods and services declared exempt in GST law, all the credits / payments may have GST implication. Service shall exclude goods, money and securities.

Activities relating to use of money or its conversion by cash or by any other mode (form, currency or denomination) for which separate consideration is charged, will be covered.

State [Section 2(103)]

'State' includes Union Territories with legislature.

Delhi and Pondicherry are two such States. These shall have SGST rather than UTGST. State Tax means tax under SGST Act.

Supplier [Section 2(105)]

Supplier in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied.

'Supplier' in relation to any goods and/or services shall mean:

• the person supplying the said goods and/or services, and
• an agent acting as such on behalf of such supplier in relation to the goods and/or services supplied.

Thus, supplier would include agent of supplier also.

Tax period [Section 2(106)]

Tax period means the period for which the return is required to be furnished. Under GST law, returns are required to be filed for 'tax period' i.e., period covered under the return.

Taxable Person [Section 2(107)]

Taxable person means a person who is registered or liable to be registered under section 22 or section 24.

Taxable person is a person who is registered or liable to be registered under CGST law. Persons who are liable for registration are governed by section 22 and section 24 of the Act. Every supplier shall be liable to be registered.

Taxable Supply [Section 2(108)]

Taxable supply means a supply of goods or services or both which is leviable to tax under this Act. Taxable supplies are liable to tax. Supplies other than non-taxable supplies and exempt supplies are liable to tax

Taxable Territory [Section 2(109)]

Taxable territory means the territory to which the provisions of this Act apply.

Taxable territory means the territory to which GST law would apply. As per Section (1), CGST Act applies to whole of India except the State of Jammu and Kashmir (J &K). Territory which is not taxable is called non-taxable territory.

Telecommunication Service [Section 2(110)]

Telecommunication service means service of any description (including electronic mail, voice mail, data services, audio text services, video text services, radio paging and cellular mobile telephone services) which is made available to users by means of any transmission or reception of signs, signals, writing, images and sounds or intelligence of any nature, by wire, radio, visual or other electromagnetic means.

Telecommunication service is made available to users by transmission or reception means. Such means would include signs, signals, writing, images and sounds or intelligence of any nature, by wire, radio, visual or other electro- magnetic means

Service of any description may include :

• Electronic mail
• Voice mail
• Data services
• Audio text services
• Video text services
• Radio paging, and
• Cellular mobile services

Turnover in State [Section 2(112)]

Turnover in State or “turnover in Union territory” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis) and exempt supplies made within a State or Union territory by a taxable person, exports of goods or services or both and inter-State supplies of goods or services or both made from the State or Union territory by the said taxable person but excludes central tax, State tax, Union territory tax, integrated tax and cess;

‘Turnover in a State’ or ‘turnover in Union territory’ means the aggregate value of-

(a)    all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis),

(b)    exempt supplies made within a State or Union territory,

(c)     exports of goods and/or services, and

(d)    inter-State supplies of goods or services or both made from the State or Union territory

    by a taxable person

Turnover excludes taxes, if any charged under the CGST Act, SGST Act, the IGST Act, UTGST and Cess, as the case may be.

It may be noted that aggregate turnover does not include the value of inward supplies on which tax is payable by a person on reverse charge basis, value of non-taxable supplies and the value of inward supplies.

Usual Place of Residence [Section 2(113)]

'Usual place of residence' means:

• in case of an individual, the place where he ordinarily resides.
• in other cases, the place where the person, as defined in sub- section (84) is incorporated or otherwise legally constituted.

Union Territory [Section 2(114)]

Union territory means the territory of-

(a) the Andaman and Nicobar Islands;

(b) Lakshadweep;

(c) Dadra and Nagar Haveli;

(d) Daman and Diu

(e) Chandigarh; and

(f) other territory.

Explanation––For the purposes of this Act, each of the territories specified in sub-clauses (a) to (f) shall be considered to be a separate Union territory.

Valid Return [Section 2(117)]

Valid return means a return furnished under sub-section (1) of section 39 on which self-assessed tax has been paid in full.

Valid return is a return filed under section 39 of CGST Act. Self assessment tax must have been paid in full on such return.

Under section 39(1), every registered person, other than an Input Service Distributor or a non-resident taxable person or a person paying tax under the provisions of section 10, section 51 or section 52 shall, for every calendar month or part thereof, furnish, in such form and manner as may be prescribed, a return, electronically, of inward and outward supplies of goods or services or both, input tax credit availed, tax payable, tax paid and such other particulars as may be prescribed, on or before the twentieth day of the month succeeding such calendar month or part thereof.

Voucher [Section 2(118)]

Voucher means an instrument where there is an obligation to accept it as consideration or part consideration for a supply of goods or services or both and where the goods or services or both to be supplied or the identities of their potential

suppliers are either indicated on the instrument itself or in related documentation, including the terms and conditions of use of such instrument.

Sometimes vouchers are supplied for a consideration which entitles the recipients of those vouchers

• to buy goods of certain value as mentioned on the vouchers or
• to buy certain specific items as are mentioned on the vouchers.
• Voucher is accepted as a consideration or part consideration for supply of goods or services or both.
• Voucher is accepted as an obligation for towards consideration
• Vouchers are issued subject to certain terms and conditions.

Works Contract [Section 2(119)]

Works contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract.

Works contract has been defined only with reference to immovable property.  In case immovable property is not involved then, the transaction of supply can not be categorized as works contract.

In case of supply of goods and services in relation to supply of goods which are movable, the transaction of such nature would either be classified as composite supply or mixed supply for the taxability of which separate provisions have been made in CGST law.

There should be a contract to provide / undertake works contract. The activities to be undertaken under a works contract may be one or more of the following :

• Building
• Construction
• Fabrication
• Completion
• Erection
• Installation
• Fitting out
• Improvement
• Modification
• Repair
• Maintenance
• Renovation,
• Alteration, or
• Commissioning

Such activities shall be in relation to any immovable property. Works contract including transfer of property in goods, (whether as goods or in some other form) involved in the execution of a works contract shall be treated as supply of service.