Deeming Provision in Schedule 2

[VENU K]

Sec 7 Scope of Supply

Sub Section (1A)

where certain activities or transactions, constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II

Schedule II

“Activities or Transactions” to be treated as Supply of Goods or Supply of Services

Paragraph 4) Transfer of business assets

(c) 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—

(i) the business is transferred as a going concern to another person; or

(ii) the business is carried on by a personal representative who is deemed to be a taxable person.

The question is Schedule II is only for identifying whether something which has been already been identified as a Supply as per the provisions of sub-section 1 of Section 7 ought to be treated either as a supply of goods or as a supply of Services. Basically it is only treated as a reference for identifying nature of supply or even we can say, a deeming provision to classify supply into supply of Goods or Services.

Then, in such case can there be a deeming provision such as paragraph 4 c in Schedule II. Further it is interesting to note that it does not identify such deemed supply into any category.

So can such a deeming provision logically operate ?

Or am I missing something ?

[Shilpi Jain]

Sch II is only a classification schedule and it cannot deem anything as a supply.

However, whether any transaction is a supply, first look at it from the def of supply to see if it is not.

Supply and business are very widely defined under GST and they have been amending these definitions to include transactions - like facilities provided by clubs to members, etc. 

[Shilpi Jain]

So it could be a rare case that any transaction escapes GST. 

Specific transaction needs to be analysed to conclude whether supply or not.

AI Summary

Deeming provision: Schedule II classifies supply as goods or services but does not itself create a supply. Schedule II classifies whether a transaction that already constitutes a supply is to be treated as supply of goods or services; it does not itself create a supply. Paragraph 4(c) deems goods forming part of business assets of a person ceasing to be a taxable person to be supplied immediately before cessation, unless the business is transferred as a going concern or carried on by a personal representative deemed taxable. The primary inquiry into whether an activity is a supply must be made under the statutory definition; Schedule II only determines the nature of an established supply.