Analysis of Schedule II of CGST Act

SCHEDULE II

[SEE SECTION 7]

ACTIVITIES [OR TRANSACTIONS]1 TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES

1. Transfer

• • any transfer of the title in goods is a supply of goods;
  • any transfer of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of services; (Eg: Renting or Operating Lease of Goods)
  • any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed, is a supply of (Eg.: Financial Lease and Hire Purchase)

IMPORTANT:

• Operating Lease: Lease period is very short. Given for lease to one or more parties during its economic life. Depreciation shall be claimed by
• Financial Lease: Lease period is approx whole economic life of assets. Depreciation shall be claimed 100% from finance.
• Hire Purchase: Same concept as Financial Lease only difference is that in case of hire pur- chase no need of 100%

2. Land and Building

• any lease, tenancy, easement, licence to occupy land is a supply of services;
• any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of

3. Treatment or process

• Any treatment or process which is applied to another person’s goods is a supply of services. (Eg. Job Work, Testing)

4. Transfer of business assets

• where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, such transfer or disposal is a supply of goods by the person;

IMPORTANT: taken care of schedule I regarding transfer or disposal of business assets.

• where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, the usage or making available of such goods is a supply of services;

(Example: Shri Ram Art and crafts registered under GST has transferred a part of its building to Mr. shyam for use, The following supply shall be considered as supply of service.)

• where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person, unless—

• the business is transferred as a going concern to another person; or
• the business is carried on by a personal representative who is deemed to be a taxable

(Example: Mr. Abhishek registered under GST ceases to be a taxable person because he is going to close his business, in this case assets shall deemed to supplied by him in the course or furtherance of business)

5. Supply of services:

The following shall be treated as supply of services, namely:—

• renting of immovable property;
• construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is

Explanation.—For the purposes of this clause—

the expression “competent authority” means the Government or any authority authorized to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following,

• an architect registered with the Council of Architecture constituted under the Architects Act, 1972; or
• a chartered engineer registered with the Institution of Engineers (India); or
• a licensed surveyor of the respective local body of the city or town or village or development or planning authority;

IMPORTANT: Sale of Residential Complex after its occupation is exempt under GST.

The expression “construction” includes additions, alterations, replacements or remodelling of any existing civil structure;

• temporary transfer or permitting the use or enjoyment of any intellectual property right; (Eg. Trade Mark, Patent, Copy Right)
• development, design, programming, customisation, a d a p t a t i o n , upgradation, enhancement, implementation of information technology software (Note: Covers only implementation of software but not software itself in physical form) ;
• agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act (Eg. Notice period violation pay,

Penalty for violation of contract); and

• transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration (Eg. Renting).

6. Composite supply

The following composite supplies shall be treated as a supply of services, namely:—

• works contract as defined in clause (119) of section 2; and
• supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration(Eg. Restaurant Services).

Conclusion : This Schedule will guide us about the treatment of particular transaction as supply of Goods or Supply of Services.