Services - GST Ready Reckoner - GST

As per section 2(102) of CGST Act, 2017 - 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 expression services includes facilitating or arranging transactions in securities; Inserted vide CGST (Amendment) Act, 2018 w.e.f 01-02-2019 In other words - The Securities and Money are excluded from the definition of goods as well as that of services but Services includes facilitating or arranging transactions in securities or separate consideration is charged for conversion of money from one form to another form denomination. As per An Education Guide - Guidance Note 2 - What is Service? 'Service' has been defined in clause (44) of the new section 65B and means - any activity for consideration carried out by a person for another and includes a declared service. The said definition further provides that 'Service' does not include - any activity that constitutes only a transfer in title of (i) goods or (ii) immovable property by way of sale, gift or in any other manner (iii) a transfer, delivery or supply of goods which is deemed to be a sale of goods within the meaning of clause (29A) of article 366 of the Constitution a transaction only in (iv) money or (v) actionable claim a service provided by an employee to an employer in the course of the employment. fees payable to a court or a tribunal set up under a law for the time being in force. There are four explanations appended to the definition of 'service' which are dealt with in later part of this Guidance Note. Each of the ingredients bulleted above have been explained in the points below. 2.10 Explanations to the definition of 'service' Explanation 1 clarifies that 'service' does not cover functions or duties performed by Members of Parliament, State Legislatures, Panchayat, Municipalities or any other local authority, any person who holds any post in pursuance of the provisions of the Constitution or any person as a Chairperson or a Member or a Director in a body established by the Central or State Governments or local authority and who is not deemed as an employee. Explanation 2 clarifies that transaction in money does not include any activity in relation to money by way of its use or 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.' (please refer to point no 2.8.5 for further guidance on this) Explanation 3 creates two exceptions, by way of a deeming provision, to the general rule that only services provided by a person to another are taxable. As per these deeming provisions establishment of a person located in taxable territory and establishment of such person located in non-taxable territory are deemed to be establishments of distinct persons. Further an unincorporated association or body of persons and members thereof are also deemed as separate persons. For implications please see point no 2.4.2 of this Guide. Explanation 4 explains that a branch or an agency of a person through which the person carries out business is also an establishment of such person. Para 2.1.1 of An Education Guide - What does the word 'activity' signify? 'Activity' has not been defined in the Act. In terms of the common understanding of the word activity would include an act done, a work done, a deed done, an operation carried out, execution of an act, provision of a facility etc. It is a term with very wide connotation. Activity could be active or passive and would also include forbearance to act. Agreeing to an obligation to refrain from an act or to tolerate an act or a situation has been specifically listed as a declared service under section 66E of the Act. Para 2.2.1 The phrase 'consideration' has not been defined in the Act. What is, therefore, the meaning of 'consideration'? As per Explanation (a) to section 67 of the Act consideration includes any amount that is payable for the taxable services provided or to be provided. Since this definition is inclusive it will not be out of place to refer to the definition of 'consideration' as given in section 2(d) of the Indian Contract Act, 1872 as follows- When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or abstain from doing, something, such act or abstinence or promise is called a consideration for the promise In simple terms, 'consideration' means everything received or recoverable in return for a provision of service which includes monetary payment and any consideration of non- monetary nature or deferred consideration as well as recharges between establishments located in a non-taxable territory on one hand and taxable territory on the other hand. As per An Education Guide (para 4.1.7) - What is the meaning of support services which appears to be a phrase of wide ambit? Support services have been defined in section 65B of the Act as 'infrastructural, operational, administrative, logistic marketing or any other support of any kind comprising functions that entities carry out in ordinary course of operations themselves but may obtain as services by outsourcing from others for any reason whatsoever and shall include advertisement and promotion, construction or works contract, renting of movable or immovable property, security, testing and analysis. Thus services which are provided by government in terms of their sovereign right to business entities, and which are not substitutable in any manner by any private entity, are not support services e.g. grant of mining or licensing rights or audit of government entities established by a special law, which are required to be audited by CAG under section 18 of the Comptroller and Auditor-General's (Duties, Powers and Conditions of Service) Act, 1971 (such services are performed by CAG under the statue and cannot be performed by the business entity themselves and thus do not constitute support services.)