SCOPE OF BUSINESS UNDER GST LAW

[Dr. Sanjiv Agarwal]

Meaning of Business [Section 2(17)]

As per section 2(17) of the CGST Act, 2017 'business' includes –

1. any trade, commerce, manufacture, profession, vocation adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;
2. any activity or transaction in connection with or incidental or ancillary to (a) above;
3. any activity or transaction in the nature of (a) above, whether or not there is volume, frequency, continuity or regularity of such transaction;
4. supply or acquisition of goods including capital assets and services in connection with commencement or closure of business;
5. provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members as the case may be;
6. admission, for a consideration, of persons to any premises;
7. services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation;
8. services provided by a race club by way of totalisator or a licence to book maker in such club; and
9. any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities.

This definition is an inclusive definition wherein all types of transactions or activities including incidental or ancillary to trade, commerce, manufacture, profession, vocation, adventure or wager or other similar activities are covered. It is immaterial whether such transactions are for pecuniary benefit or not. These terms have not been defined. 'Agriculture' has not been specifically included in 'business'.

Example:

M X is import-export dealer, owning and maintaining a hospital for charitable purpose which is providing medical treatment to poor patients. In that case, transactions of  such hospital are also covered under the scope of 'business'.

In Income Tax, ‘business’ has been defined to include any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or  manufacture. According to Halsbury (4th edition, Vol. 27), the word ‘business’ extends the covenant to all cases where work, involving the recourse of numerous  persons to the premises, is done for payment, or even without payment where the result is in effect the same as if a charge were made. The making of profit is not essential to constitute a business; nor, on the other hand, does payment necessarily           constitute one.

The Supreme Court in State of Andhra Pradesh v. H. Abdul Bakhi and Bros. 1964 (4) TMI 75 - SUPREME COURT OF INDIA, held as under:          

“The expression “business” though extensively used a word of indefinite import, in taxing statutes it is used in the sense of an occupation, or profession which occupies the time, attention and labour of a person, normally with the object of making profit. To regard an activity as business there must be a course of dealings, either actually continued or contemplated to be continued with a profit motive, and not for sport or pleasure.”

Business includes:

1. day-to-day running of the business,
2. rationalization of business administration and modernization of machinery of business,
3. preservation of business and protection of its assets and property from expropriation, coercive process or assertion of hostile title,
4. payment of statutory dues and taxes imposed as pre-condition for commencement or carriage of business,
5. things incidental to carriage of business. [Birla Cotton Spng. & Wvg. Mills Ltd v. CFT, 1967 (3) TMI 104 - CALCUTTA HIGH COURT ,, affirmed, 1971 (8) TMI 9 - SUPREME Court ].

Relevance of scope of 'business'

The definition of the term ‘ business’ is important from the point that supplies of taxable goods and/or services made in the course or furtherance of business are taxable. Any supplies of goods and/or services which is not made in the course or furtherance of business will not be covered by the definition of Supply.

However, the importation of services whether or not in the course or furtherance of business, will be considered as a Supply.

It is important to note that for coverage under the term business, the intention to earn profit out of it will not be considered. Even if there is no intention to make profit out of it, still the transaction may be covered in the definition of 'business'. For example, supply of goods by an association to its members.

Agriculture under scope of 'business' ?

'Taxable person' means a person who is registered under GST law and as per section 23 of CGST Act, 2017     an agriculturist shall not be required to obtain registration to the extent of supply of produce out of cultivation of land.  As such, agriculturist is not required to be registered for his agricultural operations in relation to cultivation of land.