Does advance booking of a standard product turn it into a service?

[Madhusudan Mishra]

Suppose, Mr Ambani gives an order of 1,00,000 dairy milk chocolates to Cadbury to be delivered in a month. Now let's discuss a few scenarios: At the time of placing the order and giving advance,

1. all 1,00,000 units are under manufacturing.

2. 50,000 are in the form of FG and the remaining 50,000 as WIP.

3. all 1,00,000 units are available and ready for delivery.

Under each scenario, what's Mr Ambani receiving? Goods or Services?

Imagine Marketing Ltd. get its brand Boat manufactured on a contract basis. Let's discuss a few scenarios:

1. Raw Material and Design is provided by Boat.

2. Design is provided by Boat.

3. Its just white-labelling.

Under each scenario, what's Imagine Marketing Ltd. receiving? Goods or Services?

Mr A lives on rent and wants his own house. Let's discuss a few scenarios:

1. Buy a piece of land and hires a contractor to build his house as per his own design.

2. Buy a ready made house which is currently under-construction.

3. Buy a ready made house which is fully constructed.

4. Buy a flat in an under-constructed project.

Under each scenario, what's Mr A receiving? Goods or Services?

Product 'A' which is in a WIP state is what? Not Product 'A'? A ice-cream which requires a cone to be served is not an ice-cream?

Purchasing or booking something in its WIP state is entirely different from having something manufactured or constructed. While there may be authority to classify goods as services and vice versa, you cannot declare something as a service simply because it is in its WIP state. Product 'A' remains Product 'A' from the moment it is intended to be manufactured as such.

Goods are not services, but they can be utilized as services. A car can be bought or rented, but it remains a car throughout its existence. You can't travel sitting on a chassis, you can't eat a chocolate that's still in progress, and you can't live in a house that's still under construction.

A flat becomes an immovable property from the moment it is intended to be built as such. Who awarded the contract to construct that flat? Would the flat not be built without a buyer? So, how can an under-construction flat be classified as a 'Construction Service'?

We're debating the valuation of land, but what about labelling an immovable property as a service? The 46th Constitutional Amendment was intended to tax the goods component of a works contract, and purchasing a flat is not a works contract.

Buying a shop is just as important as buying a home. You need to earn a living in order to live. But who cares—1%, 5%, 12%— intelligible differentia - just impose the tax!