Annexure 16: Indian Accounting Standard in the perspective of GST - Model All India GST Audit Manual 2023 [CBIC] - GST

Annexure 16: Indian Accounting Standard in the perspective of GST Indian Accounting Standards (Ind ASs) are Standards prescribed under Section 211(3C) of the Companies Act, 1956 . This Standard prescribes the basis for presentation of general purpose financial statements to ensure comparability both with the entity s financial statements of previous periods and with the financial statements of other entities. It sets out overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content. There are various fields where the manner of the accounting and provisions under GST may vary. GST in India is a paradigm shift with complete business change, which impacts finance, accounting and reporting functions. The following illustrative examples are for primary understanding before conducting audit and there could be many more cases of differences in the turnovers between the financial statements and the GST Law when the auditor will audit in practical field. 1. AS 1 / IND AS 1: DISCLOSURE OF ACCOUNTING POLICIES AS 1 deal with the disclosure of significant accounting policies followed in the preparation and presentation of financial statements. It states that an enterprise needs to disclose significant accounting policies followed by it to prepare and present its financial statements. The following are a few examples of the areas in which different accounting policies may be adopted by different enterprises. a) Methods of depreciation, depletion and amortisation b) Treatment of expenditure during construction c) Conversion or translation of foreign currency items d) Valuation of inventories e) Treatment of goodwill f) Valuation of investments g) Treatment of retirement benefits h) Recognition of profit on long-term contracts i) Valuation of fixed assets j) Treatment of contingent liabilities. e.g.1: Supplies on behalf of the principal are not reflected in the financial statements of the agent and only commission is shown as the revenue of the agent. Under the GST Law, such turnover would be treated as part of the agent s turnover also [Ref: Sch I under sec 7]. e.g.2: Disposal of business assets without any consideration Suppose assets of a company are damaged due to flood. The company claimed insurance and also received the claim amount. The company disposed of such damaged assets. If no consideration is received on such disposal of business asset then also it will be considered as sale of assets in GST if input tax credit has been availed on such business assets [Ref: Entry no. 1 of Sch I under sec 7]. e.g.3: Other income from penal interest The interest may be for various reasons like bank interest against deposit, penal interest received for payment received beyond interest free credit period, etc. So, when examining such other income, the audit officer should check whether such interest is taxable or exempted. In the present case interest received from bank against deposit is exempted but interest received from the recipient of goods and/or services for late payment is taxable if the supplied goods and/or services were taxable [Ref: sec 15(2)(d) ]. e.g.4: Sometimes auditee may prepare his final statement by showing certain income in different head of expenses. The following are a few examples of expenses in which supply may be involved- a) Printing Stationery, b) Repairing of office and godown, c) Repairing of furniture Fixture, For example, the auditee incurred expenses for purchase of office stationery and at the same time also received some sale proceeds against sale of old office stationeries. This sale proceeds may be accounted as other income or may be treated as credit entry in the printing stationery head. So, the audit officer should check such expenses account to identify whether any supply is also clubbed in such expenses account or not. e.g.5: Accrual accounting: The auditee may disclose revenue as per Accounting Standard 7 (AS 7), where the principles of accrual system of revenue are acknowledged. But, the auditee for GST purpose may disclose supply value from such works contract on certified bill basis. In this situation there may be difference in turnover as per books and as disclosed in GST return. While dealing with these cases the audit officer should know the exact provisions of time of supply and time limit to issue tax invoice to ensure whether there is any under reporting of supply value or not [Ref: Sec 13 , Sec 31 and Rule 47 ]. e.g.6: As per Ind AS, excise duty is included in value of supply but, GST is not included [ Sec 15(2)(a) of CGST /SGST Act]. For the first three months of 2017-18 revenue would be presented at Gross for Excise Less Excise Duty paid, and for the subsequent period it would be shown only the net. 2. AS 2 / IND AS 2: VALUATION OF INVENTORY As per AS-2 the costs of purchase of inventories comprise the purchase price, import duties and other taxes (other than those subsequently recoverable by the entity from the taxing authorities), and transport, handling and other costs directly attributable to the acquisition of finished goods, materials and services. Trade discounts, rebates and similar items are deducted in determining the costs of purchase. In the CGST/SGST Act several provisions are there for the availment of input tax credit and refund of input tax credit in specified situations. Thus, to the extent credit is available or refund is available, it would not form part of the cost of inventory. But, in following situations input tax is not available for credit: (i). Input / input services /capital goods are used for other than business purposes. (ii). Tax paid on inward supplies by the composition tax payers. (iii). Restricted credits u/s 17(5) of the CGST /SGST Act; (iv). Depreciation claimed on tax element; (v). Input/input services/capital goods used for exempted supply. (vi).Any other ineligible input tax credit. Thus, a systematic evaluative process is required to determine what credit is claimed and what is part of the cost of inventory as per the applicable accounting standard. e.g.1: Goods and or services are procured where basic value is Rs. 1,00,000/- and tax paid @ 18% is of Rs. 18,000/-. Now, if ITC is available for set off against this inward supply, the cost would be recorded to the tune of Rs. 1,00,000/- only in the books whereas if availability of ITC is restricted u/s 17(5), the entire bill value of Rs. 1,18,000/- will be recorded as cost in the books as per AS 2. e.g.2: A proprietor of a business having purchased face-masks distributes some to his office staffs and keeps a few for his home consumption. In that case, as per the AS2, the cost of such goods for business use as well as for personal use cost needs to be segregated keeping in mind that ITC is not available for goods used for personal use. Accordingly, the cost of goods is to be calculated and recorded in the books. 3. AS 3 / IND AS 7: CASH FLOW STATEMENTS The AS 3 deals with the provision of information about the historical changes in cash and cash equivalents of an enterprise by means of a Cash Flow Statement which classifies cash flows during the period from operating, investing and financing activities. The Cash Flow Statement reports the cash flows during the period for the following activities: (i). Operating activity: Principal revenue producing activities and other activities that are not investing or financing activities. (ii). Investing activity: Acquisition and disposal of long-term assets and other investments not included in cash equivalents. (iii). Financing activity: Activities that result in changes in the size and composition of the owners capital (including preference share capital in the case of a company) and borrowing. However, out of the operating activities as stated above, the principal revenue producing activities and other activities that are not investing or financing activities, i.e. sale of goods or services or both will have GST implication except in a case where purely money is dealt with. This is because money is not goods as per the CGST/SGST Act(s). Again, relating to investing activities, permanent transfer or disposal of business assets where input tax credit has been availed on such assets have been termed as an activity to be treated as supply even if made without consideration. Furthermore, where financing activities are concerned, services by way of (a) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services) and (b) inter se sale or purchase of foreign currency amongst banks or authorised dealers of foreign exchange or amongst banks and such dealers are exempted from GST. As per the GST Laws, interest means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) but does not include any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilised. So, acquisition of capital, taking a loan, payment/receipt of interest or dividend will not attract GST, but any service charge or /processing fee incurred at the time of a loan will attract GST. e.g.1: A business firm receives Rs. 10,00,000/- as dividend from its investments in share capital. This will be reflected in the cash flow statement as per AS 3 but will not have any GST implication. e.g.2: A business firm borrows Rs. 10 crore from the bank for its business expansion. It pays Rs. 10 lakh as processing charge and starts repaying the loan with principal and interest components. Both the inflow of fund (as loan) and outflow (as EMI and processing charge) will be reflected in the cash flow statement as per AS 3 out of which, the firm has to pay GST only on the service charge part. 4. AS 4 / IND AS 10: CONTINGENCIES AND EVENTS OCCURRING AFTER THE BALANCE SHEET DATE A contingency is a condition or situation, the ultimate outcome of which, gain or loss, will be known or determined only on the occurrence or nonoccurrence, of one or more uncertain future events. A contingent asset is a potential asset that is associated with a potential gain. The asset and gain are contingent because they are dependent upon some future event occurring or not occurring. For example, Company X has filed a lawsuit claiming for Rs. 1 crore from another Company Y. Even if it is probable that Company A will win the lawsuit it cannot be held as certain till a favourable judgement is declared. Thus, the probable gain of Rs. 1 crore is a contingent asset and a contingent gain. As such, it will not be recorded in Company A s general ledger accounts until the lawsuit is settled. As per AS 4, a contingency gain is reported only when realised/earned. If a specific event causing such gain occurs and the gain is realised, then only the gain is disclosed. In terms of GST, in this case, the contingent gain of Rs. 1 crore will be against services provided by Company X to Company Y as agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act and will be subject to GST only after actual occurrence of the event. Similarly, contingent Liability is that kind of a liability which is non-existent as on date, but it may become an actual liability in the future. For example, a customer has filed a suit against the company for compensation. This can become an actual liability in the future if the firm loses the case. However, as on date, it is not a liability as the outcome is not known today. Now, let s assume that the company s legal department thinks that the claimant has a strong case, and the business estimates a Rs. 2 lakh loss if the firm loses the case. Since this liability is estimated, the firm will disclose this liability in its books as a footnote below balance sheet. Product warranties given by the company can also be considered a contingent liability, since there is no certainty about the exact number of units that will be returned by customers for repair or replacement. 5. AS 5/ IND AS 8 : NET PROFIT OR LOSS FOR THE PERIOD, PRIOR PERIOD ITEMS AND CHANGES IN ACCOUNTING POLICIES AS 5 mainly deals with the following items: (i). Net Profit or Loss for the Period These can be categorized into Profit/Loss from ordinary activities and from extraordinary activities. (ii). Prior Period Items - While preparing the financial statements, there are certain items which actually correspond to prior accounting periods. The income or losses due to these items are a result of error or omission in the financial statements of the prior period. By nature, these items are not frequent. Now, Profit or loss from ordinary activities is such which arise in the normal course of business, i.e. they are a part of business and related activities. Examples: Profit/loss on sale of goods, services. Profit or loss from extraordinary activities is such which do not arise under the normal course of business. These activities do not occur regularly. Example: Profit on sale of fixed assets, Loss due to theft. As, profit out of normal business activities have GST implication, the point of concern can be whether the goods/services dealt with are exempted or taxable and whether the turnover for which such profit element has been disclosed is at par with the Turnover on which GST liabilities have been fulfilled or not. Similar is the case for profit out of extraordinary activities. Even if such activities are extraordinary, they will form a part of the Turnover for GST Audit and accordingly tax should be paid. However, it may be stated that permanent transfer/disposal of fixed assets will be treated as supply even if made without consideration where input tax credit has been availed on such assets. Again, availment of ITC will be blocked for goods lost, stolen, destroyed, written off. So, any profit/loss arising out of extraordinary events will indicate a counter- check of such transactions from the GST angle. Furthermore, there are certain estimates which are used while preparing the financial statements for any period. For example estimate on the useful life of machinery, estimate on the realisable value of an item in inventory. At times, these estimates are required to be revised due to any reason Accounting policies are the accounting principles and method of applying those principles while preparing the financial statements. A change in accounting policy should be undertaken only in two cases: (i) If the change is required by law or accounting standard; or (ii) If the change helps in better presentation of financial statements Any change in an accounting policy which has a substantial/material effect is also disclosed as per AS 5. e.g. 1, There was a theft of goods in the warehouse of ABC Pvt. Ltd. in the 2018-19 amounting to Rs. 40 lakh. The same has been detected in the year 2019-20 at the time of physical verification of inventory. The theft is not expected to take place on a frequent or regular basis and is not in a normal course of business of ABC Pvt. Ltd. Thus, the same qualifies to be an extraordinary item. Also, the theft took place in the financial year 2018-19 but was discovered in 2019-20. This suggests that although the loss related to prior period, it was not shown and the profit was overstated by such amount i.e. Rs. 40 lakh. While taking the effect of such loss in the current year, this is a prior period item. Thus, such loss will be disclosed in the current year s financial statements as per AS 5. Accordingly, appropriate ITC already enjoyed on such goods is to be reversed as per GST Laws. e.g. 2, the rate of depreciation of a particular asset is changed from 7% to 10% due to a statutory change. The business firm charges depreciation in his books which is inclusive of GST. Such tax portion depreciated is not entitled for ITC. Accordingly in the changed scenario where the depreciation amount will be enhanced as per AS 5, the amount of ITC reversal will also increase as per the GST Laws. 6. AS 6 10/ IND AS 16: PROPERTY, PLANT AND EQUIPMENT (PPE) DEPRECIATION ACCOUNTING AND ACCOUNTING FOR FIXED ASSETS As per AS 6 10, at the time of recognition, an item of property, plant and equipment (PPE) that qualifies for recognition as an asset should be measured at its cost. Elements of cost include Purchase cost i.e. purchase price including import duties after deducting applicable discounts/rebates + Directly attributable and necessary costs to bring the asset to the location and condition necessary for it to be operating + costs of dismantling and restoration. Some examples of directly attributable costs are (i) Costs of employee benefits arising directly from the construction or acquisition of the item of PPE; (ii) Costs of site preparation; (iii) Initial delivery and handling costs; (iv) Installation and assembly costs; (v) Professional fees; (vi) Costs of testing whether the asset is functioning properly , after deducting the net proceeds from selling any items produced while bringing the asset to that location and condition (such as samples produced when testing equipment) Administration and other general overhead expenses are usually excluded from the cost of fixed assets because they do not relate to a specific fixed asset. However, in some circumstances, such expenses as are specifically attributable to the construction of a project or to the acquisition of a fixed asset or bringing it to its working condition, may be included as part of the cost of the construction project or as part of the cost of the fixed asset. In this case, three sections of the GST laws, viz. S. 16(1) , S. 16(3) and S. 17(5) need to be referred to. S. 16(1) of the CGST /SGST Act(s) mandates that to enjoy ITC on the asset (i.e. PPE in terms of the AS), the related goods or services or both need to be of the nature of being used or intended to be used in the course or furtherance of business. This is also to mention that business is also defined in the GST Laws. At the same time, S. 17(5) , lays down conditions where ITC is not available. So, although an asset may be booked and accordingly depreciated as per AS 6 10, the same may not qualify for ITC. e.g. Company X manufacturing processed food receives works contract service for constructing a warehouse. The same property will be recognized in the books as per AS 6 10, but ITC on the same will not be available as per Sec. 17(5) of the CGST /SGST Act(s). Now, as per AS 6 10, the cost of Fixed Assets is the amount of cash paid or the fair value of the other considerations given to acquire an asset at the time of its acquisition or construction. Where applicable, that amount recorded as per the books may be the amount attributable to that asset when initially acquired in accordance with the specific requirement of other Indian accounting standards. From the GST perspective, as per Section 16(3) where the registered person has claimed depreciation on the tax component of the cost of capital goods and plant and machinery under the provisions of the Income-tax Act, 1961 , the input tax credit on the said tax component shall not be allowed. In nutshell, Input tax credit shall not be allowed on the tax component of the cost of capital goods and plant and machinery if depreciation on such tax component has been claimed under the provisions of the Income Tax Act, 1961 . 7. AS 7/ IND AS 11: CONSTRUCTION CONTRACT AS 7 Construction Contract describes the accounting treatment of the revenue and of a construction contract. There are different types of construction contract like fixed price contract, cost-plus contract etc. Fixed price contract is very common where the contract between the contractee and contractor is agreed against a fixed price. In some cases, there may be a clause of escalation in the contract which is mutually agreed for various reasons like increase of the cost of raw materials, delay in completion etc. Divisible contract and indivisible contract: In divisible contract the elements of each contracts are clearly segregated. But in indivisible contract both the contractor and contractee agree lump-sum consideration for the entire contract. The word Turnkey is commonly used in the construction industry in case of indivisible contract. It represents an indivisible composite contract with single point Turnkey responsibility . According to this single point turnkey responsibility the Contractor undertakes all the things necessary for the project implementation from design to procurement of materials and construction of Works, from inception to completion, and makes ready for the use of the Owner. Here, only one entity takes the total responsibility for design, supply and execution of a project and provides a fully-equipped facility, ready for operation at the turn of the key . Revenue of a contract and costs of a contract are two important areas for the audit officers. Revenue of a contract includes agreed initial revenue as well as revenue from escalation. In cost plus remuneration or cost plus a margin type of agreement both the cost and the remuneration and percentage amount on such cost will form part of revenue. Even claim of incentive for completion of project before time or for various reasons will also form part of revenue. The treatment of such revenue may vary in GST. e.g.1: A contractor received mobilization advance of Rs.50 lakh on 30.08.2017. it will form part of GST revenue. The time of supply is the date of raising receipt voucher or 30.08.2017 whichever is earlier. If, this advance is adjusted with any RA bill within one year it will be treated as liability of the contractor though it is a revenue in GST. e.g.2: A contractor maintaining books as per AS 7 booked revenue for FY 2017-18 for Rs.1.5 Cr for which revenue accrued on 25.11.2017 but no invoice is generated (commonly known as unbilled revenue). Whether it will be part of GST Turnover for the FY 2017-18? Yes, it will be part of GST turnover. As per provisions of sec 13 read with sec 31 and rule 47 the time of supply of this service is this case is the date of payment or provisions of service whichever is earlier. Provision of service is made on 25.11.2017. As per provisions of rule 47 the contractor was supposed to raise invoice within 30 days of provisions of service. But, he failed. So, 25.11.2017 is the time of supply. e.g.3: A contractor received an incentive of Rs.55 Lakh due to completion of construction project before the agreed time. Whether it will be part Turnover in GST? Then which type of supply is this? Yes, it will form part of turnover in GST, since there is a supply of service. But, this is not any construction service. This is nothing but agreeing to the obligation to do an act which is a kind of service as per 5 (e) of Sch. II under sec 7 of the CGST/SGST Act. e.g.4: There may be a situation when the contractee may claim a penalty from the contractor for various reasons like delay in completion, inferior quality of works, construction machinery used not as per specification of the agreement etc. Whether this penalty will also be part of turnover in GST? If so, then what kind of service is it and who is the supplier of service? Yes, it will form part of turnover in GST, since there is a supply of service. But, this is not any construction service. This service is nothing but agreeing to the obligation to tolerate an act which is a kind of service as per 5 (e) of Sch. II under sec 7 of the CGST /SGST Act. The contractee is the supplier of such service to the contractor in this case. Work-in-progress As per AS 7 when a contractor incurs costs that relate to future activity in a contract. Such costs are recognized as an asset if it is probable that they will be recovered. In such cases the RTP as a contractor is eligible to claim ITC on such costs subject to fulfillment of conditions and restrictions of the Acts and Rules made there under. 8. AS 13/ IND AS 40: ACCOUNTING FOR INVESTMENTS A business entity may have investments for various diverse reasons such as, operations, where the assessment of the performance of the business may largely, or solely, depend on the results of such investment activity. Some investments are intangible e.g., shares while others exist in a physical form e.g., land buildings. By nature, an investment may be in the form of a debt, other than a short- or long-term loan or a trade debt, representing a monetary amount owing to the holder and usually bearing interest. Again, it may be in the form of results and net assets of an enterprise such as equity shares. As per this AS 13, the financial accounts are required to disclose the acquisition and disposal of all the investments. Accordingly, the P/L A/c is required to include the following items: Income from interest dividends; Profits and losses on disposal of current investments; Profits and losses on disposal of investments; Now, as money is not covered under goods as per the GST Act(s). Again, relating to investing activities, permanent transfer or disposal of business assets where input tax credit has been availed on such assets have been termed as an activity to be treated as supply even if made without consideration. Furthermore, where financing activities are concerned, services by way of (a) extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount (other than interest involved in credit card services) and (b) inter se sale or purchase of foreign currency amongst banks or authorized dealers of foreign exchange or amongst banks and such dealers are exempted from GST. As per the GST Laws, interest means interest payable in any manner in respect of any moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) but does not include any service fee or other charge in respect of the moneys borrowed or debt incurred or in respect of any credit facility which has not been utilized. So, acquisition of capital, taking a loan, payment/receipt of interest or dividend will not attract GST, but any service charge or /processing fee incurred at the time of a loan will attract GST. 9. AS 15/ IND AS 19: EMPLOYEE BENEFITS The objective of this Standard is to prescribe the accounting treatment and disclosure for employee benefits in the books of employers except employee share-based payments. Employee benefits are all forms of consideration given by an enterprise in exchange for service rendered by employees. This may be in the form of long/short term employee benefits, post-employment benefits, termination/retirement benefits etc. Now, as per entry no. 1 of Schedule III, Services by an employee to the employer in the course of or in relation to his employment, is an activity which is treated neither as a supply of goods nor as a supply of services. Thus the employee benefits provided to an employee and recorded as per AS 15, does not come under the purview of GST. e.g. 1, Mr. A receives an arrear payment of Rs. 70,000/- after retiring from Company X. Here, the expense will be recorded as post-employment benefit as per AS 15. From the GST perspective it may be said that, although at the time of recording of such expense, there exists no employer-employee relation between A X, the said expense will not attract any GST as it is an accrued expense for Company X in terms of employer-employee relation only. The guiding factor in this case will be the term employee . If the expenses are borne on a person who is not an employee as per the pay-roll, the same will be treated as a consideration paid against receipt of supply of services from that person. e.g. 2, Salary paid to a full-time Director of a company is a consideration paid to him out of employer-employee relationship. Hence such will not attract GST. But, remuneration paid to independent director and remuneration other than salary to employee director (such as, sitting fees) are not considerations out of employer-employee relationship. Hence, such will be treated as consideration paid against receipt of supply of services as per the GST Act(s) and will be taxable @ 18%. Furthermore, as per the provision to entry no. 2 of Schedule I, gifts of value upto Rs. 50,000/- in a financial year by an employer to an employee shall not be treated as supply of goods or services or both. Otherwise, such gift whose value exceeds Rs. 50,000/- will be treated as a supply even though made without a consideration. e.g. 3, Company X gives a mobile phone worth Rs. 25000/- to each member of its sales team as a gift in 2018-19. This will not be treated as a supply. But if the same Company X gives a high-end laptop worth Rs. 60,000/- to the head of the sales team, the same will be treated as a supply. 10. AS 16/ IND AS 23: BORROWING COSTS This Standard is applied in accounting for borrowing costs. Borrowing costs are interest and other costs incurred by an enterprise in connection with the borrowing of funds. This includes: Interest and commitment charges on borrowings Discounts and premiums related to borrowings Ancillary costs incurred in connection with arrangement of borrowings Finance charges in respect of assets acquired under finance lease Exchange differences arising from foreign currency borrowings to the extent they are regarded as adjustment to interest costs. In this case, this is to mention that detailed discussions regarding GST implication on interests, other financial fees (processing fees etc) and that on foreign exchange have already been made in Paras 3 9 respectively. 11. AS 17/ IND AS 108: SEGMENT REPORTING The objective of this Standard is to establish principles for reporting financial information, about the different types of products and services an enterprise produces and the different geographical areas in which it operates. If a single financial report contains both consolidated financial statements and the separate financial statements of the parent, segment information needs to be presented only on the basis of the consolidated financial statements. Here, the concept of related person and distinct person comes in under the GST Laws. As per entry no. 2 of Schedule I, Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business is an activity to be treated as supply even if made without any consideration. In the explanation provided to Section 15(5) of the CGST /SGST Act(s), persons will be related if: such persons are officers or directors of one another s businesses; such persons are legally recognised partners in business; such persons are employer and employee; any person directly or indirectly owns, controls or holds 25% or more of the outstanding voting stock or shares of both of them; one of them directly or indirectly controls the other; both of them are directly or indirectly controlled by a third person; together they directly or indirectly control a third person; or they are members of the same family. Again, as per Section 25(4) of the CGST /SGST Act(s), a person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons . This means that two separate branches, or cost centres, or business segments (as per AS 17) of the same Company having two different GST registration numbers will be treated as related and distinct persons. In this case, if such segmented accounting happen to be of two different cost centres having one single GST registration, special care needs to be taken to ensure that the summation of the segmented accounts have been duly reported in the GST Returns under the single registration and accordingly tax liability has been discharged. 12. AS 20/ IND AS 33: EARNINGS PER SHARE AS 20 prescribes principles for the determination and presentation of earnings per share for comparison of performance among different enterprises for the same period and among different accounting periods for the same enterprise. In common parlance, earnings from shares means dividend. The term dividend has not been defined under the GST law. However, Section 2(35) of the Companies Act, 2013 defines the term dividend to include any interim dividend. It is an inclusive and not an exhaustive definition. In common parlance, dividend means the profits of a company, not retained in the business but distributed among the shareholders in proportion to the amount paid-up on the shares held by them. The Supreme Court in CIT vs. Girdhardas Co. (Private) Ltd. [1967 SCR (1) 777] observed that the expression dividend has two meanings- As applied to a company which is a going concern, it ordinarily means the portion of the profits of the company which is allocated to the holders of shares in the company. In case of a winding up, it means a division of the realised assets among the creditors and contributories according to their respective rights. Now, as per S. 2(52) of the CGST /SGST Acts, goods means every kind of movable property other than money and securities but includes actionable claim, 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. Thus, dividend Income may be treated as not being in the ambit of GST as such is a money income and money is excluded from goods. Also, Section 17(3) of the CGST /SGST Act provides that the value of exempt supply under Section 17(2) shall be as prescribed and shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. It is pertinent to note that Section 2(101) of the said Acts provides that securities shall have the same meaning as assigned to it in Section 2(h) of the Securities Contracts (Regulation) Act . The term dividend in itself is not included in the said definition. However, it becomes relevant to examine if the earning of dividend on account of holding shares (qualifying as security under the definition) is in any manner connected to the expression, transaction in security . The above examples and discussion on accounting standards are indicative only. Audit officer may go through other accounting standards also if required.