Supply is beyond the course or furtherance of business

Supply is beyond the course or furtherance of business – AAR Karnataka

Since the advance ruling in case of M/s Rajashri Foods Private Limited has been announced by Authority of advance Ruling- Karnataka, we have been discussing that the transfer of business unit as a going concern shall be considered as supply of services which is exempt as per entry No. 2 of Notification No. 12/2017 dated 28.06.2017.

In the discussion we have forgot the most important dispute/argument this ruling has raised. As per Para 7.3.1 of the ruling, the authority held that Section 7 of the CGST Act 2017 is giving an inclusive definition of supply, which means that a transfer can still be treated as supply even if there is no consideration or it is made other than in the course or furtherance of business. Authority held that Transfer in course or furtherance of business is not an essential condition for considering it as a supply. This means that the supplies made on personal account which has no relation with the business shall also be treated as supply within the ambit of section 7 of the CGST Act 2017. Does this means that where a Chartered Accountant provides consultancy on personal account will also be treated as supply. Whether such supply is taxable or not is a separate question. The authority held that word “includes” has been used in section 7(1), the scope of supply goes beyond the meaning of the expression “in the course or furtherance of business”. Therefore in the case of the transfer of a going concern even if the act of transfer does not constitute an activity carried out in the course of regular business or for furtherance of business, the activity may still qualify to be termed as a supply.

If the law is interpreted in such manner, it is sure that GST is going to open up another pindora box of litigations and discussion over the question of law. The term supply itself shall be questioned at various instance, because going by this ruling- what is supply is not sufficiently defined and if the point of tax is itself questionable, then think about the disputes which are going to arise due to the biggest tax reform of the country.

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