Supply Redefined in Revised Draft GST Act,2016
The definition of supply has been a matter of discussion for long . The most discussed aspect of this definition is that it starts with the expression “supply includes”.
The revised draft GST Act,2016 which has been issued by GST Council Secretariat in November 2016 has some interesting changes which shall be discussed in series or articles under the heading “supply”.
A school of thought often advocated that the definition of supply is loosely drafted as it fails to define supply itself . They will be again disappointed since in the revised definition of supply, the expression “supply includes” still finds the same position
Why an expression “supply includes” in Section 3 ?
Before, one has to understand the reason of such drafting , it is pertinent to refer the entire definition of supply itself as below :
3. Meaning and scope of supply
all forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business,
importation of services, for a consideration whether or not in the course or furtherance of business, and
a supply specified in Schedule I, made or agreed to be made without a consideration.
Schedule II, in respect of matters mentioned therein, shall apply for determining what is, or is to be treated as a supply of goods or a supply of services.
Notwithstanding anything contained in sub-section (1),
activities or transactions specified in schedule III; or
activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities as specified in Schedule IV, shall be treated neither as a supply of goods nor a supply of services.
Subject to sub-section (2) and sub-section (3), the Central or a State Government may, upon recommendation of the Council, specify, by notification, the transactions that are to be treated as—
a supply of goods and not as a supply of services; or
a supply of services and not as a supply of goods; or
neither a supply of goods nor a supply of services.
The tax liability on a composite or a mixed supply shall be determined in the following manner —
a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply;
a mixed supply comprising two or more supplies shall be treated as supply of that particular supply which attracts the highest rate of tax.
On perusal of the same, it could be seen that the concept of supply has 5 limbs . Whereas, each limb has specific type of transaction related thereto. Hence, the expression “include” acts as an anchor to all such specific limbs.
Whether any definition should start with “include” ?
The definition of supply under the proposed draft GST Act,2016 is not only interesting but also give rise to various arguable aspects. Hence, it is pertinent to refer the definition of “goods” in Section 18 of Supply of Goods and Services Act 1982 of UK , which defines goods at par
Section 18 -“goods” includes all personal chattels, other than things in action and money, and as regards Scotland all corporeal moveables; and in particular “goods” includes emblements, industrial growing crops, and things attached to or forming part of the land which are agreed to be severed before the transfer bailment or hire concerned or under the contract concerned .;
Whereas, Section 4 of Malaysia GST Act,2014 defines supply as
Meaning of “supply” – 4. (1) subject to subsections (2) and (3), “supply” means all forms of supply, including supply of imported services, done for a consideration and anything which is not a supply of goods but is done for a consideration is a supply of services
Hence, it could be seen that ” includes” or ” including” has formed an important part of the definition of goods and supply in other parts of the word as well..
How Court treats “include” in interpretation ?
The Courts of law has held in plethora of rulings that
“when the word ‘includes’ is used in an interpretation clause, it must be construed as comprehending not only such things as they signify according to their nature and import but also those things which the interpretation clause declares that they shall include. “
Is there a reason to have an expression ” Include” ?
Ofcourse , there is a big reason to have an expression “include” in as much as the definition of supply is very wide and various limbs have been created there under to make various transactions fall under the ambit of supply.
Further, each limb of the definition of supply is independent to each other . Therefore, there was a compulsion to draft the definition of supply in such a manner so that different conditions and schedules can be incorporated therein whereby each limb has independent existence and conditions as well.