Service has been defined under Article 366(26A) of the Constitution of India as “Services” means anything other than goods.
The term “anything” holds importance here. The term has been defined by Hon’ble Apex Court in the matter of Tej Kiran Jain and Others vs N. Sanjiva Reddy and Others on 8 May, 1970 Equivalent citations: 1970 AIR 1573, 1971 SCR (1) 612 as follows:
The word ‘anything’ is of the widest import and is equivalent to ‘everything’.
This definition was inserted vide 101st Constitution Amendment Act. The reason why services have been so defined in the Constitution was discussed in the Report of Select Committee on the Constitution 122nd Amendment Bill.
The report of Select Committee on the 122nd Constitution Amendment bill provides the view of the Government as follows-
2.88 In this regard the Ministry of Finance, Department of Revenue has stated that term ‘services’ has been so defined in order to give it wide amplitude so that all supplies that are not goods can potentially be covered within the ambit of services and no activity remains outside the taxable net. This would also minimize disputes.
The Final Recommendation of the Select Committee for the definition of Service was in line with the view of the Government and accepted the view of the Government-
2.100 Endorsing the view of the Department, the Committee feels that ‘services’ has been so defined in order to give it wide amplitude so that all supplies that are not goods can potentially be covered within the ambit of services and no activity remains outside the taxable net. This would also minimize disputes.
Thus, it seems that rather than going for the conventional definition of “service” the intention of the lawmakers was to have a definition of service which is negatively worded to include everything other than goods.
As per 65B(44) of Finance Act, 1994, service was defined as follows-
(44) “service” means any activity carried out by a person for another for consideration, and includes a declared service, but shall not include—
(a) an activity which constitutes merely,—
(i) a transfer of title in goods or immovable property, by way of sale, gift or in any other manner; or
(ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; or
(iii) a transaction in money or actionable claim;
(b) a provision of service by an employee to the employer in the course of or in relation to his employment;
(c) fees taken in any Court or tribunal established under any law for the time being in force.
The charging Section of Finance Act, 1994 which provided for levy of tax on service was after 1st July 2012 was Section 66B which provided as follows-
There shall be levied a tax (hereinafter referred to as the service tax) at the rate of fourteen percent. on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed.
Finance Act, 1994 had two components for levy of Tax first that there should be service and second that the service should be provided or agreed to be provided.
In contrast to the above, Services have been defined under CGST Act, 2017 under Clause 2(102) of CGST Act, 2017 as follows-
(102) “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;
On a comparative study, it is seen that exclusion made from definition of services under the Finance act, 1994 have only been partly excluded from the definition of service under the CGST Act, 2017.
Further, there is a distinction under the CGST Act, 2017 between excluded from the scope of “Supply” and “Excluded from the “Scope of Service” as the CGST Act, 2017 first contemplates whether activity or transaction constitutes a “Supply” and once Constituting a “Supply”, thereafter it identifies whether it is a “Supply of Service” or “Supply of Goods” and that is equally important for levy as tax under Section 9 is only on “intra-State supplies of goods or services or both”.
A comparative chart between CGST Act, 2017 and Finance ACT, 1994 is as follows-
| S. No. | Finance Act 1994 | Brief comparative analysis of Finance Act, 1994 and CGST Act, 2017 | CGST Act, 2017 |
| 1. | (a) an activity which constitutes merely— (i) a transfer of title in goods by way of sale, gift or in any other manner. | Goods excluded from the scope of service by definition | Services have been defined to mean anything other than goods. |
| 2. | (a) an activity which constitutes merely— (i) a transfer of title in immovable property, by way of sale, gift or in any other manner | Not excluded from the scope of Service but Schedule III excludes sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building from the scope of Supply | It is imperative to be seen that immovable property has not been excluded from the scope of service but Schedule III excludes sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building from the scope of Supply. This clearly shows the intent of the legislature that transaction of immovable property as per the legislature falls under the ambit of service and what has excluded from the supply is sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. |
| 3. | (a) an activity which constitutes merely,— (iii) a transaction in money; | Excluded from the scope of Service | “services” have been defined to means anything other than money. |
| 4. | (a) an activity which constitutes merely,— (ii) such transfer, delivery or supply of any goods which is deemed to be a sale within the meaning of clause (29A) of article 366 of the Constitution; | Not excluded from the scope of service by way of an express exclusion but have been prescribed to be either supply of goods or supply of service by Schedule II. | Not excluded from the scope of service by way of an express exclusion but have been prescribed to be either supply of goods or supply of service by Schedule II. |
| 5. | (a) an activity which constitutes merely,— (iii) a transaction in actionable claim; | Excluded from the scope of service as included in the scope of goods | Service means anything other than goods and definition of goods includes actionable claim. |
| 6. | (b) a provision of service by an employee to the employer in the course of or in relation to his employment; | Excluded by Schedule III from the scope of Supply but not from the scope of Service | It is imperative to be seen that service by employee to the employer has not been excluded from the scope of service but has been excluded by way of Schedule III from the scope of supply of service which clearly shows the intent of the legislature that service by employee to employer as per the legislature falls within the ambit of service. |
| 7. | (c) fees taken in any Court or tribunal established under any law for the time being in force. | Excluded by Schedule III from the scope of Supply but not from the scope of Service | It is imperative to be seen that service any Court or tribunal established under any law for the time being in force has not been excluded from the scope of service but has been excluded by way of Schedule III from the scope of supply of service which clearly shows the intent of the legislature that service by any Court or tribunal established under any law for the time being in force as per the legislature falls within the ambit of service. |
Even though an activity might be “Supply” as per Section 7(1) but if it is neither classified as “goods” nor as “service”, then it cannot be held to be leviable to tax under Section 9 of CGST Act. That’s how Section 7(2) of CGST Act, 2017 works when even though the activity or transaction constitutes a “Supply” under Section 7(1) of CGST Act, 2017 but the mere fact that it is held to be neither supply of goods nor supply of service, that activity although constituting supply is taken out of the ambit of CGST Act, 2017.
