NATIONAL LAW UNIVERSITY ODISHA

INDIRECT DIRECT TAXATION PROJECT

CHANGES BROUGHT IN DEFINITION OF GOODS AND SERVICES BY

THE GST REGIME

Submitted by:
Amit Chawla (16ba016)
Antara Deshpande (16ba020)
Divyansh Nayar (16ba038)
Kamal Sattawan (16ba047)
Kunaal Sharma (16ba054)
 TABLE OF CONTENT
SYNOPSIS................................................................................................................................. 1
RESEARCH OBJECTIVE .................................................................................................... 1
SCOPE AND LIMITATION ................................................................................................. 1
RESEARCH QUESTION...................................................................................................... 1
Introduction ................................................................................................................................ 2
DEFINITION OF GOODS UNDER CENTRAL EXCISE TAX.............................................. 3
Judicial Pronouncement on the term goods given under Central Excise Act ............................ 6
1. CCE vs. solid & correct Engineering Works and Ors ....................................................... 6
2. C.I.T vs. Turbo ................................................................................................................... 6
3. C.I.T VS Nicolas Primal .................................................................................................... 6
Definition of service tax in Finance Act 2012 ........................................................................... 7
Judicial Pronouncement on the term “SERVICE”given under FINANCE ACT ...................... 9
4. InfoTech software dealer association Vs. Union of India.................................................. 9
Definition of goods under GST................................................................................................ 10
Definition of service under GST .............................................................................................. 15
Changes bought by the GST in the definition of Goods and Services..................................... 17
Issues in implementation of GST ............................................................................................. 18
Input Tax Credit. .................................................................................................................. 18
Anti-profiteering clause ....................................................................................................... 19
Conclusion ............................................................................................................................... 21
Bibliography ............................................................................................................................ 22
1. Books Referred ............................................................................................................ 22
2. Articles Referred .......................................................................................................... 22
 SYNOPSIS

RESEARCH OBJECTIVE

The research objective of this research paper to get insight into changes brought by GST regime
in definition of goods and services in India.

SCOPE AND LIMITATION

This research paper does not take into account primary sources. The definition of goods is
limited to Excise act only.

RESEARCH QUESTION

The research question which the author have tried to answer through this paper are as follow:-

1. What was definition of the goods in indirect tax regime before introduction of GST?
2. What was definition of the services in indirect tax regime before introduction of GST?
3. What is definition of the goods introduced by GST?
4. What is definition of the services introduced by GST?
5. What are the changes in the definition bought by the GST?

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 Introduction

The Goods and Service act came into force on 1 st July 2017. This tax regime is considered to
be one of the milestones achieved by the India. GST regime has introduced a mammoth
number of changes in indirect tax regime in India. The indirect taxation in India has undergone
a sea change. One of the major sea changes that were brought by the act is the change in
definition of service and good by the Goods and Service act. Major changes have been brought
by the Goods and Service act in the definition of goods and services. The authors have tried to
examine those changes in the present paper. 1

This research paper basically focuses on the definition of goods as given under Constitution of
the India. The first part of the paper basically discusses the definition of goods prior to the GST
regime. The authors have primarily focus on the definition of the goods under the Excise duty
in order to achieve the desirable result. Definition of goods varies from act to act in indirect
taxation regime however their basic idea remains same and is defined under the Constitution
of the India.Similarly the authors in the latter part of the Act have examined the definition of
the services as defined by the finance Act of 2012. Th authors have tried to analyze the essential
ingredients of the definition of service prior to enforcement of the Goods and Service act. The
authors have also highlighted various legal issues associated with the definition of the service
in this particular section. This legal issue are very important in order to understand whether
GST is successful in solving these issues or not.2

Similarly in the latter part of the project the authors have briefly examined the definition of the
goods that was introduced by the Goods and Service regime. The authors have highlighted the
key changes that were brought by the Act. The authors have further examined the definition of
service as introduced by the Goods and Service Act regime. In the last part of paper the authors
have attempted to evaluate whether or not new GST regime is successful in solving legal issues
that remained unsolved in the indirect taxation regime. The authors have concluded this
research paper by the analysing the key change that was introduces by the GST regime. The
authors have highlighted that though GST is a innovative step still it is not sufficient to solve

1 REPORTS ON INDIA'S TAX REFORMS by Vijay L. Kelkar (Academic Foundation, 2nd ed. 2003)
2 STUDENT’S HANDBOOK ON INDIRECT TAXES by Madhukar N Hiregange (Notion Press, 2nd ed. 2003)

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the problem that was left unaddressed by the previous indirect taxation regime. The authors
have highlighted key issues regarding definition of service in the presnt paper.

DEFINITION OF GOODS UNDER CENTRAL EXCISE TAX

Central Excise act has not defined the term “Goods”. However as per article 366(12) of the
Indian Constitution, goods include all commodities, article and material. As per the Indian Sale
of Goods Act, the term goods include every category of movable property. However it does
not cover money and actionable claim within its scope. The term “Goods” within its ambit also
covers share and stock, grass and things that form part of or are attached to the land which are
consented to be cut before sale and growing crops. In order levy Excise duty, the term goods
must fulfil two essential requirements which are as follow:-

1) They must be movable

2) They must be marketable.3

Goods must be movable – Goods for the purpose of this act must be movable. Hence, property
attached to earth or growing crops is not ‘goods ’for the purpose of the act and thus excise duty
cannot be levied on them.

Goods must be Marketable – Goods for the purpose of this act must be capable of being sold
or bought in the market. This is also known as ‘Marketability’ test. Market must be aware about
the good. Unless goods satisfy this test, Excise duty cannot be levied as these goods will not
be goods for the purpose of the act. In order to become ‘goods ‘for the purpose of the act an
article must be one that can be normally taken to market to be sold and bought.4

Actual sale is irrelevant. Marketability is a mandatory component that must be satisfied by a

good or article in order to be dutiable. Marketability is an important test for dutiability. In other
words it means ‘suitable for sale’ or ‘saleable’. It need not be marketed. The article must have
potential of being sold to consumers. Mere fact that an item is mentioned in Tariff is not
sufficient. This is because a certain article or good may falls within the Central Excise Tariff
schedule, however it might happen that particular good or article is non marketable 5

3 THE INDIRECT TAX REPORTS (Company Law Institute of India., Vol 291 2007).
4 REPORTS ON INDIA'S TAX REFORMS by Vijay L. Kelkar (Academic Foundation, 2nd ed. 2003)
5 STUDENT’S HANDBOOK ON INDIRECT TAXES by Madhukar N Hiregange (Notion Press, 2nd ed. 2003)

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Duty leviable on captive consumption – Excise duty can be levy on manufacture of goods
even if goods are utilized within the factory premises and not sold. However, the goods must
satisfy the test of marketability and further consumed within the factory. It is not necessary that
a sold good is 'marketable'. 'Marketability' basically means regular market for a product.
Occasional, distress or stray sales does not imply that the good or article is 'marketable'. 6

Examples of what are goods- Some examples will clarify the legal position regarding the tem
goods.

1) Steam, Gas etc. – steam and gas are goods as it is a tangible property. It satisfy
marketability test. In other word gas and steam are ‘goods’ as it can be measured,
marketed and weighted. .
2) Electricity –Generation or production of electrical energy is similar with its
consumption. Sale, consumption and supply of electricity can takes place without any
hiatus. Electricity though intangible is a movable property. It therefore fell within
definition of ‘goods’ 7
3) Design and drawing.– Design and drawing related to technology and machinery are
considered as ‘goods’, even if consideration is given for information technology or ,
technical advice which is intangible asset.
4) Machinery - Machinery will be considered as good if it is in marketable condition
during time of removal from manufacturing factory, though subsequently, it is to be
attached to earth.
5) Waste and Scrap not goods if not marketable – Wrap and scrap are not considered
marketable until or unless it is maintained in CETA. 8

Examples of What are not “Goods” - Some examples will clarify the legal position regarding
which product was not held as ‘goods’.

1) Goods having short life span are not considered to be ‘goods’, if they are not
marketable in that short span
2) Articles which are fixed to land are not goods as goods basically imply a movable
property. 9

6 STUDENT’S HANDBOOK ON INDIRECT TAXES by Madhukar N Hiregange (Notion Press, 2nd ed. 2003)
7 REPORTS ON INDIA'S TAX REFORMS by Vijay L. Kelkar (Academic Foundation, 2nd ed. 2003)
8 Ibid.
9 THE INDIRECT TAX REPORTS (Company Law Institute of India., Vol 291 2007).

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3) Excisability of machinery and plants assembled at site – Machinery or plant or
assembled and fixed at site are not 'goods' for the purpose of Excise Act, if it is not
movable and marketable.
4) Goods installed and erected in the factory premises and fixed to earth cease to be goods
and it cannot be termed as excisable goods.

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 Judicial Pronouncement on the term goods given under Central Excise Act

1. CCE VS. SOLID & CORRECT ENGINEERING WORKS AND ORS

The honourable Supreme Court in the case of CCE vs. solid & correct Engineering Works and
Ors stated that an attachment where the essential intent of making the attachment permanent is
missing cannot be said a permanent fixing, attached or embedded in the sense that would
constitute the machine a part of the land permanently. The Court also opined that according to
the assessee, the machine was attached to lands by bolts and nuts not because the intention of
assessee was to permanently attach the machine to the earth, but because a base was essential
to equip wobble free functioning to the machine. Hence, the Supreme Court finally held that
the plants and machinery in question are movable property therefore they are not immune from
the levy of excise duty. Hence, Excise duty was levied on goods.10

2. C.I.T VS. TURBO

The fact of this case was similar to that of above mention case. Courts in this gain reiterated
the same principle. It stated that an attachment where the essential intent of making the
attachment permanent is missing cannot be said a permanent fixing, attached or embedded in
the sense that would constitute the machine a part of the land permanently. The Court also
opined that according to the assessee, the waste treatment plant was attached to lands by bolts
and nuts not because the intention of assessee was to permanently attach the plant to the earth,
but because a base was essential to equip wobble free functioning to the waste treatment plant. 11

3. C.I.T VS NICOLAS PRIMAL

This is an important judgement regarding goods under Central Excise act. The court in this
case held that even there is only one buyer the good would be said to marketable. The court
further opined that even a product has very life it will be considered as marketable. 12

10 CCE vs. solid & correct Engineering Works and Ors, 2010 (252) ELT 481 (SC).
11 C.I.T VS. TURBO 2012 (277) E.L. T. 299 (S.C.)
12 C.I.T VS Nicolas Primal ,2008 (215) CTR 355 (Bom).

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 Definition of service tax in Finance Act 2012

Section 65b (44) of the 2012 finance act define service as any activity done for consideration
by one person to other persons and includes a declared service.

Analysis of the definition: - The definition of service can be broken into four parts which are
namely:-
1) Any activity
2) For consideration
3) Carried out by a person for another
4) And includes a declared service13
What is an Activity

Activity can be defined as any work done, a deed done, an act done, an execution of the act,
execution of an act, provision of a facility and operation carried out etc. etc. Activity could be
passive or active. It within its scope also contains forbearance to an act.

What is a consideration?

Consideration as defined under Indian contract Act is applicable here. Consideration can be
defined as everything received in exchange for a provision of service which contains monetary
payment and non monetary as well as deferred consideration. 14

What is the significance of the phrase “carried out by one person to another”?

This phrase is very important as it provides that the services given by one person to self does
not fall within purview of the service tax. However there are certain exceptions which are as
follow:-.

1) Services provided by a person residing in a taxable territory to the establishment of the

same person incorporated in a non taxable territory.

13 C.A. Amit Mundhra 'Definition of ‘Service’ As Proposed in Finance Act 2012' (TaxGuru, no-
date) <https://taxguru.in/service-tax/definition-service-proposed-finance-act-2012.html>accessed 30 August
2017
14 SERVICE TAX OF INDIA: INDIAN LAW SERIES (.Indian Law Series, 2nd ed. 2008 )

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 2) A body of persons or unincorporated association and its member are also treated as
different person.15

What are declared Services?

Section 66 E states that there are certain service that are deemed to be a service for the purpose
of the service act. Some of the declared services are:-

1) Renting of immovable property

2) Construction of civil structure
3) Work Contract
4) Catering Service
5) Software
6) Sim goods. 16

What are excluded services?

Excluded services are those services which may fall under the definition of the service however
it is excluded by the Act. Some of the excluded services are:-

1) Transfer of title in immovable good or property for consideration.

2) Any transaction in money or actionable claim
3) Deemed sale transaction
4) Service for consideration outside employment
5) Service of M.P., M.L.A and employees of Panchayats
6) Any fee charge by court or tribunal. 17

15 C.A. Amit Mundhra 'Definition of ‘Service’ As Proposed in Finance Act 2012' (TaxGuru, no-
date) <https://taxguru.in/service-tax/definition-service-proposed-finance-act-2012.html>accessed 30 August
2017
16 STUDENT’S HANDBOOK ON INDIRECT TAXES by Madhukar N Hiregange (Notion Press, 2nd ed. 2003)

17 C.A. Amit Mundhra 'Definition of ‘Service’ As Proposed in Finance Act 2012' (TaxGuru, no-
date) <https://taxguru.in/service-tax/definition-service-proposed-finance-act-2012.html>accessed 30 August
2017

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 Judicial Pronouncement on the term “SERVICE”given under FINANCE ACT

4. INFOTECH SOFTWARE DEALER ASSOCIATION VS. UNION OF INDIA.

Info tech dealers were involved with re selling of the software’s. They basically deal with three
category of software. Those three categories of software are as follow:-

1) Shrink wrap software

2) Multiple user software
3) Inherent download

Amended definition of section 65 stated that state has power to levy tax on goods and not the
parliament. Tax authorities in present case taxed these softwares as services. Appellant argues
that these softwares are goods as the effective control is transfer along with the software hence
software’s cannot be taxes as service. Supreme Court in this particular case differed from the
reasoning of the appellants and stated that software is a good and there is no doubt about it
however each transaction associated with sale of the software is to be seen individually. When
the owner develops software this is the time when he enjoy copyright. However during the sale
of software only the permission to use that software is vested in sale and the owner stills holds
the copyright .Since there is no effective control transfer in the present case, software should
be treated as service. No hard and fast rule can be laid down to determine whether software is
a good or service.18

18 InfoTech software dealer association vs. Union of India,(2008) TIOL509 (MAD). .

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 Definition of goods under GST

The section on “definitions” sets forth and defines the key terms used in the statute. One might
find the definitions either in the section of the statute one is analyzing, or generally, in one of
the first few sections of the act viz. Section 2 of the Model GST Law. Sometimes these
particular terms are codified as definitions of a chapter or part of the relevant statute, meaning
that they are intended to apply to the entire chapter or part (if not otherwise specified) viz
Section 113 of the Model GST Law. These definitions are important as they suggest a specific
meaning to a term that might differ from its common usage.19

Another feature of GST is that it is a destination based tax on consumption of goods and
services, proposed to be levied at all stages beginning from manufacture and ending on final
consumption. The credit of taxes paid at previous stages will be available as set-off at the
present stage. In other words, only value addition will be taxed and burden of tax is on the final
consumer. Now since we have arrived at the GST era the tax will be levied on the supply of
Goods and/or Services. Thus, giving us an important reason to know about the meaning of the
two terms, goods and services. In this article the authors have tried to intricate and interpret
these two terms.20

Section- 2(52)-for Goods and 2(102)-for Services Under GST Act

When we talk about a taxable event under GST, it is supply of “Goods” and “Services”.
Therefore, it is very important to understand the meaning of these terms.

Before the GST regime the distinction between the two was very important because taxes on
services were different from the taxes on goods. The taxes charged on Goods were Excise Duty,
VAT, CST and on services was Service Tax. At present it is often argued that since both the
taxes are subsumed why is there a need for distinction between the two of them? The distinction
becomes necessary for the following reasons:

1. Place of provision

19 GOODS AND SERVICES TAX (GST) in India by B. Viswanathan (New Century Publications, 1ST edition 2016).
20 Deepak Jauhari, 'Meaning of Goods and Services In GST' (TaxGuru, no-date) <https://taxguru.in/goods-and-
service-tax/meaning-goods-services-gst.html> accessed 30 August 2017

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2. Point of taxation21

There are different rate of taxes for supply of goods and services.

Definition of Goods – Section 2(52) of GST Act

Goods’’ means every kind of movable property other than money and securities but includes
actionable claims ,growing crops, grass and things attached to or forming part of the land which
are agreed to be severed before supply or under a contract of supply.

The above is summarized as under:

Good include:

1. Every kind of movable property.

2. Actionable claims.

3. Growing crops, grass and things attached to or forming part of the land which are agreed to
be severed before supply or under a contract of supply.

Goods exclude:

1. Money.

2. Securities.

The first part of the definition is wide enough to include in its ambit every kind of movable
property, except money and securities. The term movable property is not defined under Model
GST Law. But, as per Section 3(36), General Clauses Act, 1897, “Movable property” means
property of every description, except immovable property. In the case of H. Anraj Etc vs
Government of Tamilnadu AIR 63, 1985 SCR Supl. (3) 342], it was laid down by the
Honourable Supreme Court said that the expression “movable property” means property of
every description, excluding immovable property. The second part includes within itself other
kind of movable property i.e. actionable claim. At the international forum actionable claims

21 CSDevender Jaglan, 'Decoding Definitions of Goods and Services under Revised Model GST
Law' (TaxGuru, no-date) <https://taxguru.in/goods-and-service-tax/decoding-definitions-goods-services-
revised-model-gst-law.html> accessed 30 August 2017

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have been given a different treatment so far taxability is concerned. Some classify it as deemed
goods and some as services and therefore, tax accordingly.

The First Model GST Law which was released in June 2016 and it excluded actionable claim
from the category of goods. But the Revised Model GST Law which was released in November
2016 included goods, to make them taxable. 22

Whether actionable claims liable to GST?

As per section 2(52) of the CGST/SGST Act actionable claims come under the definition of
goods. Schedule III read with Section 7 of the CGST/SGST Act lists down the number
activities or transactions which will be treated neither as supply of goods nor supply of services.
The third Schedule lists actionable claims other than lottery, betting and gambling as one of
such activities. Therefore, only lottery, betting and gambling shall be treated as supplies of
goods under the GST regime. All the other actionable claims shall not be supplies and
therefore not taxable.Also, ‘Actionable Claim’ is defined under Section 2(1) of the Model GST
Law. It is stated that “actionable claim” shall have the meaning as it is assigned to it in section
3 of the Transfer of Property Act, 1882. 23

Section 3 of the Transfer of Property Act, 1882 defines actionable claim as a claim to any debt,
other than a debt secured by mortgage of immovable property or by hypothecation or pledge
of movable property, or to any beneficial interest in movable property not in the possession,
either actual or constructive, of the claimant, which the civil courts recognise as affording
grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional
or contingent.”24

Whether transaction in securities be taxable in GST?

Securities have been particularly excluded from the definition of goods as well as services
under GST. Therefore, the transaction in securities is not taxable.

22GOODS AND SERVICES TAX (GST) in India by B. Viswanathan (New Century Publications, 1ST edition 2016).
23 CSDevender Jaglan, 'Decoding Definitions of Goods and Services under Revised Model GST
Law' (TaxGuru, no-date) <https://taxguru.in/goods-and-service-tax/decoding-definitions-goods-services-
revised-model-gst-law.html> accessed 30 August 2017
24 Deepak Jauhari, 'Meaning of Goods and Services In GST' (TaxGuru, no-date) <https://taxguru.in/goods-and-
service-tax/meaning-goods-services-gst.html> accessed 30 August 2017

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Meaning of some of the Terms used with reference to Goods
“Money” as defined in Section 2(75) means an Indian legal tender or any foreign currency,
cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveller cheque,
money order, postal or electronic remittance or any other instrument recognized by the Reserve
Bank of India when used as consideration to settle an obligation or exchange with Indian legal
tender of another denomination but shall not include any currency that is held for its
numismatic value. “Securities” as defined in Section 2(90) shall have meaning assigned to it
in section 2(h) of the Securities Contracts (Regulation) Act, 1956 (42 of 1956). Goods must be
moveable to be classified as Goods under GST Act, it shall also satisfy the Test of
Movability.25

The term “Movability” of property is defined as per the section 3(36) of the General Clause
Act, 1897 to mean “Property of every description, except immovable property”.

Meaning of Grass and Things attached to earth

The crops, grass, wood etc. should be considered as immovable property as they grow on the
land and therefore they are attached to the earth. In many cases a contract is entered into for
sale of crops, grass, wood etc. by the owner with the buyer. Unless these items are severed
from the earth, they can’t be considered to be a movable property and therefore they can’t be
categorized as goods.26

Meaning of actionable claims

As per Section 2(1) of the GST Act, actionable claims shall have the meaning which is assigned
to them under section 3 of Transfer of Property Act, 1882.

As per section 3 of TPA,1882, actionable claims means a claim to any debt, other than a debt
secured by mortgage of immovable property or by hypothecation or pledge of movable
property, or by any beneficial interest in movable property, either actual or constructive, of
claimant, which the civil courts recognise as affording ground for relief, whether such debt or
beneficial interest be existent, accruing, conditional or contingent. 27

25GOODS AND SERVICES TAX (GST) in India by B. Viswanathan (New Century Publications, 1ST edition 2016).
26 Deepak Jauhari, 'Meaning of Goods and Services In GST' (TaxGuru, no-date) <https://taxguru.in/goods-and-
service-tax/meaning-goods-services-gst.html> accessed 30 August 2017
27 CSDevender Jaglan, 'Decoding Definitions of Goods and Services under Revised Model GST
Law' (TaxGuru, no-date) <https://taxguru.in/goods-and-service-tax/decoding-definitions-goods-services-
revised-model-gst-law.html> accessed 30 August 2017

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Case with respect to Actionable Claims

Lottery Ticket is actionable claims – Sunrise associates v. Govt of NCT of Delhi

The question which arose in the case was whether sales tax could be levied by State on the sale
of lottery tickets. A bench of two-Judges held that a lottery involved two things (i) the right to
participate in the lottery, and (ii) the right to win the prize. The learned Judges were of the
opinion that while" the second right was a chose in action and depended on a chance and
therefore could not be said to be 'goods' for the purposes of the levy of Sales Tax. However,
the first was a transfer of a beneficial interest in moveable goods and was a sale within the
meaning of Article 366(29-A)(d) of the Constitution and was therefore subject to sales tax. 28

28 Sunrise associates v. Govt of NCT of Delhi, (2006) 5 SCC 603.

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 Definition of service under GST

Secttion 2(92) of the Model GST Law defines the term “services’’ as ‘anything other than
goods’;

Explanation 1- Services include transactions in money but does not include money and
securities;

Explanation 2 – Services does not include transaction in money other than an activity 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.

Definition of ‘services’ is specific and outright to include all that is not goods. The word
‘anything’ which appears in the definition has broadened the scope of services to include
everything that is not goods. In order to check whether an activity or transaction falls within
the category of services, one has to first find out whether it is a good or not. Once it is not a
good than certainly it will fall within the category of services.29

Although Money and Securities are neither goods nor services, but their conversion is covered
under the category of services. The money involved in the conversion is not liable to taxation
but the charges taken for the above said conversion is liable for taxed. For example, Mr. A gets
his Rs. 100000 converted into USD then Rs. 100000 is not liable to tax but conversion charges
are liable for GST.30

Meaning of Transaction in Money:

Example-1: A demand draft (DD) issued by the bank on deposit of cash. This is a transaction
in money. But this cannot be subject to tax. But if any commission charged for making of such

29 Deepak Jauhari, 'Meaning of Goods and Services In GST' (TaxGuru, no-date) <https://taxguru.in/goods-and-
service-tax/meaning-goods-services-gst.html> accessed 30 August 2017
30 CSDevender Jaglan, 'Decoding Definitions of Goods and Services under Revised Model GST
Law' (TaxGuru, no-date) <https://taxguru.in/goods-and-service-tax/decoding-definitions-goods-services-
revised-model-gst-law.html> accessed 30 August 2017

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DD will be considered as “conversion charge” and such charges will be liable for taxation as
per explanation 2 above.

Example-2: If a person goes to the bank for exchange of note of Rs. 2000 into 20 nos. of notes
of Rs. 100. Bank does not charge anything for change of denomination of Rs. 2000 note into
Rs. 100 notes. This cannot be considered to be a transaction in money because nothing is
charged by the bank for transaction in money or for its conversion and therefore it is not a
service.31

31 GOODS AND SERVICES TAX (GST) in India by B. Viswanathan (New Century Publications, 1ST edition 2016).

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 Changes bought by the GST in the definition of Goods and Services

Before the GST came into picture the goods were defined as all commodities, article and
material that are movable. However it does not cover money and actionable claim within its
scope. However after the enforcement of the GST there is change in definition of the goods
according to which goods means every kind of movable property other than money and
securities but includes actionable claims, growing crops, grass and things attached to or
forming part of the land which are agreed to be severed before supply or under a contract of
supply. Hence we can conclude money and actionable claim which were excluded by the
previous legislation is now included in the present GST regime.

The definition of service has also undergone a change in the present GST regime. Before the
GST came into pictures service was defined as any activity done for consideration by one
person to other persons and includes a declared service. However the GST defines service as
‘anything other than goods’. Definition of ‘services’ is specific and outright to include all that
is not goods. The word ‘anything’ which appears in the definition has broadened the scope of
services to include everything that is not goods. In order to check whether an activity or
transaction falls within the category of services, one has to first find out whether it is a good or
not. Once it is not a good than certainly it will fall within the category of services. However
author is of the view point that the issue raised by the info tech and BSNL case still remain
unsolved. They are not properly addressed by the current GST regime. As per the new
definition anything that is not good is service. However legislation failed to see the major
problem in above two questions was that the nature of transaction was such that the court was
not able to clearly distinguish whether it is good or service. So if similar situation arose again
what recourse should be taken is not defined by the act.

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 Issues in implementation of GST

The GST aims to tackle many of the issues plaguing the current system by combining central
and state indirect taxes. In their stead will stand two consolidated taxes: State Goods and
Services Tax (SGST) and Central Goods and Services Tax (CGST). Under the new system,
transactions will have both State GST and Central GST levied upon them, with ‘slabs’ of tax
rates being applied depending on the type of Good or Service. The rates levied on goods and
services will range from zero percent on items categorised as essential, to 28 percent on items
deemed to be luxuries. The new system is expected to bring down the average costs of goods
and services across the country by eliminating double taxation. Implementation issues,
however, could still cause extensive problems if they are not managed properly.

INPUT TAX CREDIT.

The main problem that could hamper the implementation of the GST centres on the
documentation requirements for Input Tax Credits and the stage at which said credit accrues.
The objective of any value added tax system (such as the GST) is the avoidance of double
taxation. This is done by providing credits along every step of the production chain, effectively
taxing only the extent of the value that has been added.

The issue that arises under the Indian GST, however, is the onerous documentation requirement
which can have a number of unintended consequences. Under Section 16 (11) of the Model
GST Law, an input tax credit can only be received when:

1. The buyer has received a tax invoice from the supplier.

2. The buyer has received the goods/services.

3. The taxes charged on the purchase have been deposited/paid by the supplier.

4. The supplier has filed the GST Returns.

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The issue with Section 16 (11) is that it puts the administrative burden associated with the tax
on the buyer rather than the supplier, which can be problematic for businesses. One potential
issue that could arise as a result of the administrative shift is the non- payment of taxes by the
supplier. In that case, the buyer will end up having to pay for not only her share of the tax, but
also for the supplier’s share of the tax under the proposed tax code. Further, problems could
arise, if for some reason there are inconsistencies found in the supplier’s documentation at
some later stage. Under this scenario, the buyer will be forced to pay back the tax
reimbursement to the government with interest. This problem is usually fixed by market forces,
however, as any non-compliant suppliers will soon find themselves losing customers as a result
of their negligence. The government has also put in place a mechanism to help with the issue,
by providing a publicly available compliance rating system which will allow consumers to
pinpoint defaulters as the system starts to take effect over the coming years.

ANTI-PROFITEERING CLAUSE

There is another implementation issue that could prove to be a hurdle for the GST, albeit on a
smaller scale than the documentation and technology factors. One of the touted benefits of the
GST system is the lowering of prices for many goods andservices across the economy. As
illustrated in an earlier example, businesses will be able to cut down on the effects of double
taxation which should then be passed on to the end user. Unfortunately, when VAT’s have been
implemented in other countries,businesses have kept prices the same and used the savings
incurred from a change in tax systems to bolster their own profit margins. In order to stop
undue profiteering from changes in tax systems, an anti-profiteering clause has been added to
the GST . The clause requires that businesses pass any benefits from the change in tax systems
to the end consumer. The clause does not, however, provide any mechanism for the monitoring
of anti-profiteering activity. The clause, and any subsequent investigation, will instead be
triggered by “credible complaints” according to Revenue Secretary Hasmukh Adhia. The
uncertainty associated with the anti-profiteering clause can affect both businesses and
consumers. The private sector fears that ambiguity in the clause will lead to “witch-hunts” as
tax authorities are given leeway to make subjective judgements as to whether a business is
profiteering, without any regulations or laws to back their rulings. At the same time, consumers
fear that ambiguous regulations or laws will lead to a lack of transparency and that decisions
regarding the applicability of the anti-profiteering clause will be made on an ad hoc basis
depending on political connections or even worse, outright corruption. The lack of clarity can,

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once again, have a detrimental effect on public perception regarding the GST. While public
perception might seem like a trivial matter, it can often spell the difference between success
and failure in the case of wide-scale implementation of policy reform, as the example of
Obamacare showed.

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 Conclusion

The legislature in CGST/SGST has made a clear distinction between the definition of goods
and services. Anything which is liable to be taxed under GST will be taxed either as goods or
services. If it falls within the category of goods it will be taxed as goods, otherwise, if it is not
good then, it will certainly fall within the category of the services. There have been many issues
in the past with regards to the definition of goods and services, which are debatable. For
example, whether software is a good or a service? Some of these issues have already been
determined by Schedule II specifying therein matter to be treated as goods or services. Some
will be resolved once the GST Law will become a reality.

The Goods and Services Tax is a much needed tax reform, and if implemented correctly, can
do wonders for India’s economy. Along with eliminating double taxation and lowering product
price, the GST can also assimilate the informal sector into the greater Indian economy and
provide a much needed boost for India’s flagging export market. Yet there are implementation
issues that could be problematic for India’s small businesses and, perhaps more importantly,
undermine public trust in the GST. The issues surrounding the GSTN can be managed if more
time is given for continued enrolment of taxpayers and thorough testing of the IT infrastructure.

Additionally, giving more time for the CAG to conduct a thorough audit would allow for any
functionality issues with the GSTN to be brought to light, preventing costly public trust issues.
Similarly, the problems with the anti-profiteering clause can be ironed out with more time and
the implementation of widespread education and price monitoring policies in the lead-up to the
GST. The formation of a committee to handle all complaints, creation of an audit unit
specifically geared towards anti-profiteering testing, and putting in place regulations outlining
what specifically constitutes “anti-profiteering” can help build corporate and public trust in the
GST. The documentation requirements and their subsequent effects on cash flow and small
businesses are more difficult to sort out. Perhaps more time needs to be spent by the
policymakers in the formulation of policies centred on the input tax credit and its
documentation requirements.

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 Bibliography

1. Books Referred

1. REPORTS ON INDIA'S TAX REFORMS by Vijay L. Kelkar (Academic Foundation, 2nd ed. 2003)
2. STUDENT’S HANDBOOK ON INDIRECT TAXES by Madhukar N Hiregange (Notion Press, 2nd ed.
2003)
3. THE INDIRECT TAX REPORTS (Company Law Institute of India., Vol 291 2007).
4. SERVICE TAX OF INDIA: INDIAN LAW SERIES (.Indian Law Series, 2nd ed. 2008 )
5. GOODS AND SERVICES TAX (GST) in India by B. Viswanathan (New Century Publications,
1ST edition 2016).

2. Articles Referred

1. C.A. Amit Mundhra 'Definition of ‘Service’ As Proposed in Finance Act

2012' (TaxGuru, no-date) <https://taxguru.in/service-tax/definition-service-proposed-
finance-act-2012.html>accessed 30 August 2017
2. Deepak Jauhari, 'Meaning of Goods and Services In GST' (TaxGuru, no-
date) <https://taxguru.in/goods-and-service-tax/meaning-goods-services-
gst.html> accessed 30 August 2017.
3. CSDevender Jaglan, 'Decoding Definitions of Goods and Services under Revised
Model GST Law' (TaxGuru, no-date) <https://taxguru.in/goods-and-service-
tax/decoding-definitions-goods-services-revised-model-gst-law.html> accessed 30
August 2017.

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