Important Terms & Definitions

Chapter Coverage
Sec 2(1) Actionable Claims
Sec 2(10) Appointed Day
Sec 2(16) Board
Sec 2(17) Business
Sec 2(31) Consideration
Sec 2(49) Family
Sec 2(52) Goods
Sec 2(53) Government
Sec 2(72) Manufacture
Sec 2(75) Money
Sec 2(102) Service
Sec 2(107) Taxable Person

IMPORTANT TERMS & DEFENITIONS

Sec 2(17) Business
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 in the nature of 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 vocations;
(h) Activities of a race club including by way of totalisator or a license to book maker or activities of a
licensed book maker in such club.
(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.

Importance of Business: Basically, GST is a tax on commercial transactions. It means any Supply
made by individual in his personal capacity does not come under the ambit of GST unless it falls within
the definition of Business.

For example: Mr. Vipin has purchased Scooty “Activa 4G” from a dealer “Honda Auto” for personal use.
After a year, he sells it to a dealer M/s True Value. Now, when the Scooty was sold by “Honda Auto”, it
is a supply under GST. But, when Vipin sold the Scooty to M/s True /Value, then it is not a supply under
CGST Act because this supply is not made by Vipin in the course of or in furtherance of business.
In the course of Business or in the furtherance of business:
In the course of Business:
In order to carry on the business, various activities are carried out by the entity on a routine basis such
as sale or purchase of goods, provision of services, production of goods, making and receiving
payments, etc. These activities may be regarded as the activities undertaken in the course of business.

In the Furtherance of Business:

The dictionary meaning of furtherance means an act of helping something to become more successful
or advanced. If we draw inference from this meaning, then the phrase “Furtherance of business” means
any activity intended for the advancement of business.

Under GST, both the phrases are to be taken together to interpret its meaning in true sense.
Importance of term:
Only those supplies that are in the course or furtherance of business qualify as supply under GST. It
means selling of used personal car by individual to a dealer is not supply under GST as it is not in the
course or furtherance of Business. Therefore, any activity undertaken in the course or for furtherance of
business would only constitute a supply. There is one exception to this course or furtherance of
business rule i.e. import of services for a consideration.

Sec 2(31) Consideration

Consideration in relation to the supply of goods or services or both includes- a- Any payment made or to
be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the
supply of goods or services or both, whether by the recipient or by any other person but shall not
include any subsidy given by the Central government or a State government
b- The monetary value of any act or forbearance, in respect of, in response to, or for the inducement
of, the supply of goods or services or both, whether by the recipient or by any other person but
shall not included any subsidy given by the Central Government or a State Government.

The proviso to section 2(31) states that, “a deposit given in respect of the supply of goods or services or
both shall not be considered as payment made for such supply unless the supplier applies such deposit
as consideration for the said supply.”

The following are the important interpretations from the above definition:
1. Monetary Consideration: the term consideration includes monetary consideration. As per section 2(75)
, “ Money” includes not only cash ( Indian Currency as well as foreign currency ) but also
 cheques, promissory notes, bills of exchange, letter of credit, draft, pay order, traveler’s cheque,
money order, postal or electronic remittance or any other instrument recognized by RBI.
2. Non-Monetary Consideration: Under GST, Consideration also includes non-monetary consideration,
which simply implies compensation in kind. The following shall be included as non-monetary
consideration.
Supply of goods or Example: Shyam, a barber, agrees for hair-cut of a dentist & in return
services in return for the dentist extracts his damaged tooth
provision of service
Refraining or forbearing to Example: Mohan owns a renowned shop for good quality chicken. Anil
do an act for provision of wants to enter into the same business in the same locality. Mohan paid
service. `2,00,000 to Anil refraining him to open shop in the same area for two
years.
Tolerating an act or a Example: Dorbin owns three cars and is unable to park, all of them
situation in return for within his premises. he requested his neighbor to allow him to park one
provision of a service. of his cars in front of his main gate. In return the neighbor charged
`2,500 per month

3. Who will pay Consideration: The consideration paid by recipient of the supply. But it need not
always flow from the recipient of the supply; it can also be made by a third person.
For Example: Sonu has joined coaching classes for MBBS preparation. The provider of supply is the
Institute, the recipient is Sonu but payment is made by Sonu’s father. It will also constitute supply.
4. Determination of Value: The Value of Supply is determined in the manner specified in Section 15 of
the CGST Act, 2017. In addition, Valuation principles are given in Chapter IV of the CGST Rules,
2017.
5. Government Subsidy: The consideration does not include any subsidy given by the Central
Government or a State Government.
6. Deposit: The deposit may be of two types: refundable and non-refundable.
a- Refundable Deposit: It is not subject to GST. It means such deposit in respect of the Supply of
Goods and/or Service is not considered as payment made for such supply. The reason being it
has to be refunded after the completion of provision of service or the transaction.
b- Non-refundable deposit: If the deposit is non-refundable, or the supplier applies such deposit as
consideration for the said supply, then GST is applicable.
7. Donation: The donation or charity does not attract GST unless this donation imposes an obligation
on the recipient (i.e. the donee) to provide something in return. For example: a donation of
`1,00,000 is given by a doctor to the trust of a temple. This will not attract any GST. But, if on
account of such donation, the trust is bound to display or advertise the doctor’s clinic, then it is a
consideration and GST will become applicable

Importance of Consideration:
In order to fall within the ambit of GST, one of the essential conditions for the supply of goods
and/services is that it is made for a consideration. There are exception to this rule given in Schedule I of
the CGST Act as deemed supply.

Sec 2(107) Taxable Person

A taxable person is a person who is registered or liable to be registered under section 22 or section 24.
The following are the important inferences:

1. A registered person is a taxable person.

2. The person who is liable to be registered is also a taxable person. It means an unregistered person,
who is liable to be registered, is a taxable person.
3. A person who has taken voluntary registration is also a taxable person although he is not liable to be
registered.

Importance of Term:
A supply to attract GST should be made by a taxable person. However, it may be made to a non-taxable
person. But a supply between two non-taxable persons does not constitute taxable supplies under GST.
Sec 2(52) 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;
Sec 2(102) Services
“services” means anything other than goods, money and securities but includes activities relating to the
use of money or its conversion by cash or by any other mode, from one form, currency or denomination,
to another form, currency or denomination for which a separate consideration is charged.

Explanation: For the removal of doubts, it is hereby clarified that the expression “services” includes
facilitating or arranging transactions in securities
Sec 2(75) Money
“money” means Indian legal tender or any foreign currency, cheque, promissory note, bill of exchange,
letter of credit, draft, pay order, traveller cheque, money order, postal or electronic remittance or any such
similar instru ment recognised by the Reserve Bank of India when used as consideration to settle an
obligation or exchange with Indian legal tender of another denomination but shall not include any
currency
that is held for its numismatic value;
Sec 2(1) Actionable claim
“actionable claim” shall have the meaning assigned to it in section 3 of the Transfer of Property Act, 1882
Sec 2(16) Board
Means the CENTRAL BOARD OF INDIRECT TAXES & CUSTOMS constituted under the Central Board
of Revenue Act, 1963.
Sec 2(10) Appointed Day
Means the date on which the provisions of this Act shall come into force.
Sec 2(49) Family
“family” means,
i- the spouse and children of the person, and
ii- the parents, grand-parents, brothers and sisters of the person if they are wholly or mainly
dependent on the said person
Sec 2(53) Government
Means Central Government.
 Sec 2(72) Manufacture
Means processing of raw material or inputs in any manner that results in emergence of a new product
having a distinct name, character and u se and the term “manufacturer” shall be construed accordingly
Sec 2(114): Union territory
means the territory of:
a- Andaman and Nicobar Islands
b- Lakshadweep
c- Dadra and Nagar Haveli & Daman and Diu d- Ladakh
e- Chandigarh

Note: All of above UTs do not have their legislature but in the following cases UTs are having their own
legislature:
a- Delhi,
b- Jammu and Kashmir and c- Puducherry