Trading of goods - Service Tax Practice Manual / Ready Reckoner - Service Tax

Chapter 5 Trading of goods Effective date: 1.7.2012 Scope of Negative Service Section 66D(e) Trading of goods Trading of goods represents purchase of goods and sale of the same. In case of State of Punjab v. Bajaj Electricals Limited 1967 (12) TMI 28 - SUPREME Court the apex court held that trade in its primary use is exchanging of goods for goods or for money and in secondary meaning it is repeated activity in the nature of business carried on with a profit motive. Also in case of Gannon Dunkerley Company v State of Madras, 1954 (4) TMI 30 - MADRAS HIGH COURT it was held that if a person buys goods with a view to selling them at profit it is essentially a case of trade and that it the transactions are on a large scale it is called commerce and that continuous repetition of such transactions will constitutes a business . Also the definition of service under Sec 65B (44) excludes transfer of title in goods or immovable property, by way of sale, gift or any other manner. Meanings and Definitions: Section 65B (25) - goods means every kind of movable property other than actionable claim and money; and includes securities, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale; Section 65B(1) - actionable claim shall have the meaning assigned to it in section 3 of the Transfer of Property Act, 1882; Section 65B(33) - money means Indian legal tender, cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveller cheque, money order, postal or electronic remittance or any such similar instrument 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; Section 65B(43) - securities has the meaning assigned to it in clause (h) of section 2 of the Securities Contract (Regulation) Act, 1956; (42 of 1956.) Clarification by the Board (Taxation Guide Guidance Note 4 Exemptions dated 20.06.2012) 4.5.1 Would activities of a commission agent or a clearing and forwarding agent who sells goods on behalf of another for a commission be included in trading of goods? No. The services provided by commission agent or a clearing and forwarding agent are not in the nature of trading of goods. These are auxiliary for trading of goods. In terms of the provision of clause (1) of section 66F reference to a service does not include reference to a service used for providing such service. ) Moreover the title in the goods never passes on to such agents to come within the ambit of trading of goods. 4.5.2 Would future contracts in commodities be covered under trading of goods? Yes. Futures contracts would be covered under trading of goods as these are contracts which involve transfer of title in goods on a future date at a pre-determined price. 4.5.3 Would commodity futures be covered under trading of goods? Yes. In commodity futures actual delivery of goods does not normally take place and the purchaser under a futures contract normally offsets all obligations or closes out by selling an equal quantity of goods of the same description under another contract for delivery on the same date. There are, therefore, two contracts of sale/purchase involved which would fall in the category of trading of goods. 4.5.4 Would auxiliary services relating to future contracts or commodity futures be covered in the negative list entry relating to trading of goods? No. Such services provided by commodity exchanges clearing houses or agents would not be covered in the negative list entry relating to trading of goods.