Definitions – TaxDose.com

Definitions :

In this Act, unless the context otherwise requires-

(1) “actionable claim” shall have the same meaning as assigned to it in section 3 of the Transfer of Property Act, 1882;

One may refer to section 130 of Transfer of Property Act, 1882 regarding the manner of ‘transferring’ actionable claims. Transfer of actionable claim can be with consideration or without consideration as per the Transfer of Property Act, 1882.

Actionable claim represents a debt and the holder of the actionable claim enjoys the right to demand “action” against any person. Acknowledgement of liability by a creditor to honor a claim, when made, does not constitute actionable claim in the hands of such creditor.

Examples could be: A claim to any debt other than mortgage- factoring of debtors ; Any beneficial interest in movable property not in ones possession. Readers may get more from the European Unions VAT decision.

The following aspects need to be noted:

 Assignment of actionable claim without permanently supplanting the holder of the claim would not be supply.

 Under the GST regime, actionable claim relating to lottery, betting and gambling alone will be regarded as ‘goods’ since the definition of goods includes actionable claim.

(2) “address of delivery” means the address of the recipient of goods or services or both indicated on the tax invoice issued by a registered person for delivery of such goods or services or both;

“Address of delivery” is relevant to determine Place of Supply of goods (other than imports/ exports).

It is understood that the address of delivery would be a crucial pointer towards the location of goods at the time of delivery to the recipient. The place of supply of goods or services or both

(other than imports/ exports) would primarily be the location of the goods or services or both at the time of delivery to the recipient.(3) “address on record” means the address of the recipient as available in the records of the supplier;

‘Address on record’ is relevant to determine Place of Supply in case of supplies made by a registered person to an un-registered person in relation to services. In such cases, where the Place of Supply has not been specifically provided for under the law, the address on record available in the records of the supplier would be regarded the Place of Supply.

(4) “adjudicating authority” means any authority, appointed or authorised to pass any order or decision under this Act, but does not include the Central Board of Excise and Customs, the Revisional Authority, the Authority for Advance Ruling, the Appellate Authority for Advance Ruling, the Appellate Authority and the Appellate Tribunal;

The following authorities are not permitted to pass an order/ decision under the GST laws:

(a) The Central Board of Excise and Customs [ To be read as Central Board of Customs and Indirect Taxes)

(b) Revisional Authority

(d) Appellate Authority for Advance Ruling

(e) Appellate Authority

(f) Appellate Tribunal

Under the Act, the Revisional Authority, Appellate Authority and the Appellate Tribunal are empowered to pass/ issue order as they think fit, after affording the parties a reasonable opportunity of being heard. However, such powers are limited to cases where an order has been passed by an authority of a lower rank, before it becomes a subject matter of revision/ appeal.

(5) “agent” means a person, including a factor, broker, commission agent, arhatia, del credere agent, an auctioneer or any other mercantile agent, by whatever name called, who carries on the business of supply or receipt of goods or services or both on behalf of another;

This definition appears to illustrate the principle of agency defined in Section 182 of the Indian Contract Act, 1872. Agency is a relationship that can be formed validly even without consideration in terms of Section 185 of the Indian Contract Act, 1872. Agent can work p urely on commission basis. Even e-commerce companies like Flipkart, Amazon and Uber may be covered in some fact situations. But the relevance of being an agent is more pronounced while examining whether a transaction between a principal and agent is itself a supply under para 3, schedule I. Very often, the word agent or agency is used without necessarily implying that the transaction is one of agency as understood under Indian Contract Act such as, recruitment agency, travel agency etc. Care must be taken to identify whether the parties intended to constitute an agency as understood in law and nothing less.

(6) “aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess;

The phrase “aggregate turnover” is widely used under the GST laws. Aggregate Turnover is an all-encompassing term covering all the supplies effected by a person having the same PAN. It specifically excludes:

 Inward supplies effected by a person which are liable to tax under reverse charge mechanism; and

 Various taxes under the GST law, Compensation cess.

The different kinds of supplies covered are:

(a) Taxable supplies;

(b) Exempt Supplies:

 supplies that have a ‘NIL’ rate of tax;

 supplies that are wholly exempted from SGST, UTGST, CGST, IGST or Cess; and

 supplies that are not taxable under the Act (alcoholic liquor for humanconsumption and articles listed in section 9(2) and in schedule III);

The following aspects among others need to be noted:

 Aggregate turnover is relevant to a person to determine:

o Threshold limit to opt for composition scheme: Rs. 75 Lakhs in a financial year;

o Threshold limit to obtain registration under the Act: 20 Lakhs (or 10 Lakhs in case of supplies effected from Special Category States, as explained in our analysis on Section 22) in a financial year.

 Inter-State supplies between units of a person with the same PAN will also form part of aggregate turnover.

 For an agent, the supplies made by him on behalf of all his principals would have to be considered while analysing the threshold limits.

 For a job-worker, the following supplies effected on completion of job work would not be included in his ‘aggregate turnover’:

o Goods returned to the principal

o Goods sent to another job worker on the instruction of the principal

o Goods directly supplied from the job worker’s premises (by the principal): It would be included in the ‘aggregate turnover’ of the principal.

(7) “agriculturist” means an individual or a Hindu Undivided Family who undertakes cultivation of land—

(a) by own labour, or

(b) by the labour of family, or

(c) by servants on wages payable in cash or kind or by hired labour under personal supervision or the personal supervision of any member of the family;

An individual or HUF undertaking cultivation of land, whether own or not, would be regarded as an agriculturist. The cultivation should be undertaken by own labour/ family labour/ servants on wages or hired labour.

It may be noted that the scope of the definition is restricted to an Individual or a Hindu Undivided Family. Any other “person” as defined in section 2(84), carrying on the activity of agriculture will not be considered as an Agriculturist and hence will not be exempted from registration provisions as provided in section 23 (1)(b), of the Act.

Agriculturist providing taxable supplies need to confirm that the aggregate turnover is not exceeded when taking a decision not to register.

(8) “Appellate Authority” means an authority appointed or authorised to hear appeals as referred to in section 107;

It refers to an authority before whom a person aggrieved by a decision/ order under the CGST/ SGST/ UTGST Act may appeal. An order passed by the Appellate Authority would be final and binding on all the parties. If a person is further aggrieved by the order passed by the Appellate Authority, he may prefer an appeal before the Appellate Tribunal or Courts.

(9) “Appellate Tribunal” means the Goods and Services Tax Appellate Tribunal constituted under section 109;

It refers to an authority before whom a person aggrieved by a decision/ order under the CGST/ SGST/ UTGST Act passed by the Appellate Authority/ Revision Authority may appeal. An order passed by the Appellate Tribunal would be final and binding on all the parties. If a person is further aggrieved by the order passed by the Appellate Tribunal, he may prefer an appeal before the High Court.

(10) “appointed day” means the date on which the provisions of this Act shall come into force;

Most of the provisions of the CGST Act are implemented with effect from 1st July 2017 with powers vested to notify different dates for effective date of commencement of different provisions of the Act.

Registration provisions were before appointed date enable easy transition.

(11) “assessment” means determination of tax liability under this Act and includes selfassessment, re ssessment, provisional assessment, summary assessment and best judgment assessment;

The types of assessment covered under the Act are:

(a) Self-assessment (Section 59)

(b) Provisional assessment (Section 60)

The CGST Act also provides for determination of tax liability by:

(a) Scrutiny of returns filed by registered persons (Section 61)

(b) Assessment of non-filers of returns (Section 62)

It may, however, be noted that there is no provision permitting a Proper Officer to re -assess the tax liability of taxable person. As such, reference to such re-assessment in the definition may have to be suitably read down.

(12) “associated enterprises” shall have the same meaning as assigned to it in section 92A of the Income-tax Act, 1961;
‘Associated enterprise’ is referred to only in the context of time of supply of services where the supplier is an associated enterprise (located outside India) of the recipient ( reverse charge attracted under sec 9(3)).

 In such cases, the time of supply will be the date of entry in the books of account of the recipient of supply or the date of payment, whichever is earlier.

 This in turn means that provisional entries made at the time of closure of books of account for a year (on accrual basis) may trigger GST liability in the hands of the recipient, under section 7(1)(b).

It may be noted that in addition to associated enterprise, the Act also defines ‘related person’, the reference to which is made in the context of deemed supply (Schedule I) and valuation. (13) “audit” means the examination of records, returns and other documents maintained or furnished by the registered person under this Act or the rules made thereunder or under any other law for the time being in force to verify the correctness of turnover declared, taxes paid, refund claimed and input tax credit availed, and to assess his compliance with the provisions of this Act or the rules made thereunder;

The definition of ‘audit’ under the Act is a wide term covering the examination of records, returns and documents maintained/ furnished under this Act or Rules and under any other law in force. Any document, record maintained by a registered person under any law can thus be called upon and audited. It becomes critical for the person to maintain true documents/ records to ensure correctness and smooth conduct of audit.

However it may be important to note that this is neither an investigation nor a revenue leakage exercise and may lead to claim of benefits as well as short payment of taxes being identified.

(14) “authorised bank” shall mean a bank or a branch of a bank authorised by the Government to collect the tax or any other amount payable under this Act;

The date of credit to the account of the Government (i.e., the Central Government in respect of CGST, IGST, UTGST and CESS or the relevant State Government in respect of SGST) in the authorized bank will be considered as the date of deposit in electronic cash ledger.

(15) “authorised representative” means the representative as referred to in section 116; An authorized representative is a person authorized on one’s behalf to appear before an Officer of the Act, Appellate Authority or Appellate Tribunal in connection to proceedings under the Act. Any of the following persons can act as authorized representatives:

(a) His relative/ regular employee;

(b) Practicing advocate who is not debarred;

(d) Retired Officer of the Commercial Tax Department of any State/ Union Territory not below the post of Group-B Gazetted Officer of 2 years’ service;

(e) GST practitioner

The following persons cannot act as authorized representatives:

(a) Who is dismissed/ removed from Government service;

(b) Who is convicted of an offence under any law dealing with imposition of taxes;

(d) Who is adjudged as an insolvent.

(16) “Board” means the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963 (17) “business” includes––

(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;

(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);

(c) any activity or transaction sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction;

(d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business;

(e) provision by a club, association, society, or any such body (for a subscription or any ther consideration) of the facilities or benefits to its members;

(f) admission, for a consideration, of persons to any premises;

(g) 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;

(h) services provided by a race club by way of totalisator or a licence to book maker in such club; and

(i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities;

Excise / Service tax laws do not define the term ‘business’. However, it is defined under the CST Act / State VAT laws. The definition in the GST law is a modified version of the definition under CST / VAT laws, in as much as the scope is substantially expanded to include among others wager, profession and vocation. This definition is very wide and covers all the transactions that were subjected to various taxes that are being subsumed in the GST Laws.

This definition assumes significance as the proposed levy is on supplies undertaken in the course or furtherance of business. The definition may be understood in two parts, namely:

(a) General activity – trade, commerce, etc., including incidental activities whether or not there is volume, frequency, continuity or regularity of such transactions. Principle of ejusdem generis provides that similar activity would be determined by the previous enumerated ones.

The following persons cannot act as authorized representatives:

(a) Who is dismissed/ removed from Government service;

(b) Who is convicted of an offence under any law dealing with imposition of taxes;

(d) Who is adjudged as an insolvent.

(16) “Board” means the Central Board of Excise and Customs constituted under the Central Boards of Revenue Act, 1963

(17) “business” includes––

(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;

(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);

(c) any activity or transaction sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction;

(d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business;

(e) 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;

(f) admission, for a consideration, of persons to any premises;

(g) 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;

(h) services provided by a race club by way of totalisator or a licence to book maker in such club; and

(i) any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities;

Excise / Service tax laws do not define the term ‘business’. However, it is defined under the CST Act / State VAT laws. The definition in the GST law is a modified version of the definitionnder CST / VAT laws, in as much as the scope is substantially expanded to include among others wager, profession and vocation. This definition is very wide and covers all the transactions that were subjected to various taxes that are being subsumed in the GST Laws.

This definition assumes significance as the proposed levy is on supplies undertaken in the course or furtherance of business. The definition may be understood in two parts, namely:

a) General activity – trade, commerce, etc., including incidental activities whether or not there is volume, frequency, continuity or regularity of such transactions. Principle of ejusdem generis provides that similar activity would be determined by the previous enumerated ones.

(b) Specific activity – acquisition of goods including capital goods, supply by association/lub, admission of persons to a premises and services by a race club.he following aspects need to be noted:

 ‘Wager’ is also included in the definition of business to impose GST on betting transactions;

 Educational services would be covered under profession or business however the sale of uniforms, mess facilities could be covered.;

 Charitable or religious activities are not specifically covered however fund raising activities like letting out of hoardings, sale of books could be considered as business ;

 Clause (g) may require understanding of employment as differentiated from profession. For instance, if a CA in practice provides services as Independent Director, the service provided by him may be treated as ‘business’ and not ‘employment’.

 Clause (i) is also very important as ‘any’ activity or transaction by Government is included in the definition of business this will have far-reaching implications as the responsibility to pay tax in respect of services by Government is covered under reverse charge mechanism. Due to the expansive words used here, there is no room to differentiate payments made to any Government department on the ground that it is not ‘business’ activity.

(18) “business vertical” means a distinguishable component of an enterprise that is engaged inhe supply of individual goods or services or a group of related goods or services which is subject to risks and returns that are different from those of the other business verticals. Explanation––For the purposes of this clause, factors that should be considered in determining whether goods or services are related include––

a) the nature of the goods or services;

b) the nature of the production processes;

c) the type or class of customers for the goods or services;

(d) the methods used to distribute the goods or supply of services; and

(e) the nature of regulatory environment (wherever applicable), including banking, insurance, or public utilities;

A person having multiple business verticals in a State/ Union Territory is permitted to obtain separate registrations for each such business vertical. Therefore, the person will have an option to avail a single registration (covering all business verticals in a State or Union Territory) or separate registration for each business vertical in a State or Union Territory.

The following aspects need to be noted:

 The component must be a distinguishable component of the person, which is capable of being transferred or to function without affecting any other business of that person. A component cannot become a ‘business vertical’ merely based on geographical
differentiation;

 The supplies made by one business vertical unit should be:

(a) individual goods or services or a group of related goods or services; and

(b) subject to risks and returns different from those of the other business verticals;

 The risk and returns of supplies forming part of a business vertical should be same;

 Interestingly, graphical separation by itself cannot be a criterion to segregate the business into distinct business verticals;

 Supplies between business verticals are deemed to be taxable supplies;

 Lastly, the option to avail composition scheme is PAN-based and hence, a person has to opt for composition scheme for all the business verticals across India. He cannot opt for the scheme only in a particular business vertical;

(19) “capital goods” means goods, the value of which is capitalised in the books of account of the person claiming the input tax credit and which are used or intended to be used in the course or furtherance of business;

An attempt has been made to align the meaning of capital goods to the generally accepted standards of accounting of what is considered as revenue and what as capital Goods will be regarded as capital goods if the following conditions are satisfied:

(a) The value of such goods is capitalised in the books of account of the person claiming input tax credit;

(b) Such goods are used or intended to be used in the course or furtherance of business. The following aspects need to be noted:

(a) Assuming that the value of capital goods was not capitalised in the books of account, the person purchasing the capital goods would still be eligible to claim input tax credit on such capital goods since the definition of ‘input tax’ applies to goods as a whole (including capital goods).

(b) Capital goods lying at the job-workers premises would also be considered as ‘capital goods’ in the hands of the purchaser as long as the said capital goods are capitalized in his books of account.

It maybe noted that only value of goods is to be capitalized and not services. In c ase of turnkey works contract (necessarily an immovable property) it would be deemed to be a service.
However in a composite supply of plant and machinery the services or commissioning or erection etc. would be included and capitalized. In case of mixed supply part could be capitalized and the balance would be revenue.

(20) “casual taxable person” means a person who occasionally undertakes transactions involving supply of goods or services or both in the course or furtherance of business, whether as principal, agent or in any other capacity, in a State or a Union territory where he has no fixed place of business;
A person would be regarded as a casual taxable person if he undertakes supply of goods or services or both:

(a) Occasionally, and not on a regular basis;

(b) Either as principal or agent or in any other capacity;

A trader, businessman, service provider, etc. undertaking occasional transactions like supplies made in trade fairs would be treated as a ‘casual taxable person’ and will have to obtain registration in that capacity and pay tax. E.g., A jeweller carrying on a business in Mumbai, who conducts an exhibition-cum-sale in Delhi where he has no fixed place of business, would be treated as a ‘casual taxable person’ in Delhi.

Although in most cases a registered taxable person in one State may be a casual taxable person in any other State, there is no necessity that this must always be the case. A nonresident who holds a PAN number undertaking occasional business-like activities may also be a casual taxable person.

The following aspects need to be noted:

 The threshold limits for registration would not apply and he would be required to obtain registration irrespective of his turnover;

 He is required to apply for registration at least 5 days prior to commencement of business;

 The registration would be valid for 90 days or such period as specified in the application, whichever is shorter;

 An advance deposit of the estimated tax liability is required to be made along with the application for registration.

(21) “Central tax” means the central goods and services tax levied under section 9; Tax levied under this Act is referred to as “Central tax” as opposed to “CGST” as used in the model GST laws. It refers to the tax charged under this Act on intra-State supply of goods or services or both (other than supply of alcoholic liquor for human consumption). The rate of tax is capped at 20% and thereafter, the rates for goods and services will be notified by the Central Government based on the recommendation of the Council.

(22) “cess” shall have the same meaning as assigned to it in the Goods and Services Tax (Compensation to States) Act;

It refers to the ‘cess’ levied on certain supplies (inter-State or intra-State) as notified, for the purposes ofproviding compensation to the States for loss of revenue arising on account of implementation of GST, for a period of five years (or extended period, as may be prescribed). (23) “chartered accountant” means a chartered accountant as defined in clause (b) of sub – section (1) of section 2 of the Chartered Accountants Act, 1949;

(24) “Commissioner” means the Commissioner of central tax and includes the Principal Commissioner of central tax appointed under section 3 and the Commissioner of integrated tax appointed under the Integrated Goods and Services Tax Act;

(25) “Commissioner in the Board” means the Commissioner referred to in section 168;

It refers to the Commissioner or Joint Secretary posted in the Central Board of Excise and Customs. Such a Commissioner or Joint Secretary is empowered to exercise the function of the Commissioner with the approval of the Board.

(26) “common portal” means the common goods and services tax electronic portal referred to in section 146;

The Common Goods and Service Tax Electronic Portal (“GST portal”) is a common electronic portal set up by the Goods and Service Tax Network (GSTN) that facilitates among othe rs registration, payment of tax, filing of returns, computation and settlement of IGST, electronic way-bill and other functions under the Act.

(27) “common working days” in respect of a State or Union territory shall mean such days in succession which are not declared as gazetted holidays by the Central Government or the concerned State or Union territory Government;

Common working days refer to such days in succession which are not a declared holiday for the Centre as well as State/ Union Territory.

The relevance of working days primarily arises in relation to registration provisions. Every person obtaining a registration under the Act is required to make an online application in the GST portal. The application for registration, along with the accompanying documents will be examined by the Proper Officer and if found in order, the registration will be granted within 3 working days. If the proper officer fails to take any action within 3 working days, the application is deemed approved.

Since the reference to ‘common workings days’ has been replaced by ‘working days’, it remains to be seen whether the applicant will be granted a deemed registration after 3 working days in case of inaction by the Proper Officer even if the third day was a holiday for a State.

(28) “company secretary” means a company secretary as defined in clause (c) of sub -section (1) of section 2 of the Company Secretaries Act, 1980;

(29) “competent authority” means such authority as may be notified by the Government; In terms of Explanation to entry 5(b) of the Schedule II to the Act, “Competent Authority” in relation to construction of a complex, building, civil structure covers:

(a) Authority authorised to issue completion certificate (local municipal authorities like BDA/
BBMP in Bangalore, PMC in Pune)
(b) Architect
(c) Chartered Engineer
(d) Licensed Surveyor
(30) “composite supply” means a supply made by a taxable person to a recipient consisting of
two or more taxable supplies of goods or services or both, or any combination thereof, which
are naturally bundled and supplied in conjunction with each other in the ordinary course of
business, one of which is a principal supply;

Illustration– Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply.

A supply will be regarded as a ‘composite supply’ if the following elements are present:

(a) The supply should consist of two or more taxable supplies;

(b) The supplies may be of goods or services or both;

(d) They should be supplied in conjunction ( event, time or contract) with each other in the ordinary course of business;

(e) One of the supplies should be a principal supply (Principal supply means the predominant supply of goods or services of a composite supply and to which any other supply is ancillary).

The following aspects need to be noted:
 The way the supplies are bundled must be examined. Mere conjoint supply of two or more goods or services does not constitute composite supply.
 The two (or more) supplies must appear natural when bundled and presented to the recipient.
 The ancillary supply becomes necessary only because of the acceptance of the predominant supply. Such predominance is neither guided by the predominant component in the total price of the supply nor guided by the predominant material involved. The test of predominance must be gathered from the ‘predominant object’ for which the recipient approached the supplier;

 The method of billing, assignment of separate prices etc. may not be relevant. In other words, whether separate prices are charged for each of the components of supply or a single consolidated price charged, the identity of each of the components of supply must be unmistakably distinct in the arrangement;

 The tax treatment of a composite supply would be as applicable to the principal supply.

Illustrations of composite supply are as follows:

(a) Accommodation with breakfast;

(b) Supply of laptop and carry case;

(d) Supply of repair services on computer along with requisite parts- Comprehensive AMC;

(e) Supply of health care services along with medicaments.

It may be noted that Buffet with alcohol for a couple on new year eve for a single price would not be composite supply as only taxable supplies are covered.;

Not all supplies which are given together is a composite supply merely because there are more than one taxable supplies simultaneously supplied. Unrelated, unconnected and independent taxable supplies that are supplied simultaneously for individual prices where each of them are intended to be the predominant object for which the recipient approached the supplier and may, to contrast with composite supply, be referred as non-composite supply. This is other than the mixed supply examined further.