You are a Chartered Accountant, Company Secretary or an Advocate into practice of income tax and charge a fee of Rs. 10,000/- for return filing from your clients. You file the return of your wife and get to know that you will have to pay GST of Rs. 1,800/- (considering GST rate of 18%). What would be your reaction? I am sure you would be up in arms against this cruel joke cut on you. But this is not a joke and going to be a reality, if we go by the provisions of Model GST law released by the Empowered Committee on 14th June for public comments. Everybody will appreciate the saying “ There is no free lunch in commercial world” but no one expects this extent. If the trade and industry continue to be silent spectators of the events getting unfolded by such a transparent Government, such kind of things, though not intended will be served to them. In the present article, an attempt has been made to analyse the provisions in this regard contained in Model GST law.


All of us know that GST is an attempt to bring multiplicity of indirect taxes to an end and bring them under one law named GST. There is no denying to this, but besides this activity, an attempt has been made to plug loopholes in the existing legislation. Presently Services are being taxed through Finance Act, 1994, which defines Service in Section 65B(42) as

SERVICE means any activity carried out by a person for another for CONSIDERATION ……………..

The taxable event in GST would be SUPPLY instead of rendition of Service, the Service has been defined in Section 2(88) as anything other than goods.

SUPPLY has been defined in Section 2(92) as “SUPPLY shall have meaning as assigned to it in Section 3.

Section 3 provides the meaning and scope of Supply as

  1. Supply includes

           (a) 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,

           (b) importation of service, whether or not for a consideration and whether or not in                     the course or furtherance of business, and

           (c) a supply specified in Schedule I, made or agreed to be made without a                                   consideration.



1. Permanent transfer/disposal of business assets.

2. Temporary application of business assets to a private or non-business use.

3. Services put to a private or non-business use.

4. Assets retained after deregistration.

5. Supply of goods and / or services by a taxable person to another taxable or non taxable person in the course or furtherance of business.

Provided that the supply of goods by a registered taxable person to a job-worker in

terms of section 43A shall not be treated as supply of goods.

Item 3. Of Schedule I provides for services put to a private or non business use. Filing of income tax return of your wife would mean that you have used the services to a private or non business use.

In distinction to item 3, Item 5 provides for cases of Services as well as goods and would mean to include the following kinds of instances

  • Supply of free samples
  • Supply of free gifts
  • Supply of free services to your professional friends and colleagues as it will not be called private. Etc.


Section 14 of the Model law provides for value of taxable supply and the relevant provisions in this regard are contained in Sub section 4 of Section 14 as under :

(4) The value of the supply of goods and/or services in the following situations which

cannot be valued under sub-section (1), shall be determined in such manner as may be prescribed in the rules.

(i) the consideration, whether paid or payable, is not money, wholly or partly;

(ii) the supplier and the recipient of the supply are related;

The rules in this regard are provided by GST Valuation (Determination of the value of Supply of Goods and Services) Rules, 2016 as under :-

2. Definitions

(1) In these rules, unless the context otherwise requires:

(a) “Act” means the IGST Act or the CGST Act or, as the case may be, the SGST Act;

(b) …………………………………………………

(c) “services of like kind and quality” means services which are identical or similar in nature, quality and reputation as the services being valued and supplied by the same person or by a different person; and

(d) “transaction value” means the value of goods and/or services within the meaning

of section 15 of the CGST Act.

4. Determination of value of supply by comparison

(1) Where the value of a supply cannot be determined under rule 3, the value shall be

determined on the basis of the transaction value of goods and/or services of like kind and quality supplied at or about the same time to other customers, adjusted in accordance with the provisions of sub-rule (2).


The emotional response of anyone and everyone to above situation would be that such kind of provision should not exist in the legislation. I also wish so but in case a legal argument is made in favour of Revenue in this regard, the argument can be made going by the logic provided in the case of Mohd. Ekram Khan & Sons V Commissioner of Trade Tax, UP, Lucknow (2004) 24 PHT 180 (SC)

Argument that had you not been there to provide service of filing of income tax return to your wife, she would have taken the services of another professional to file her income tax return and thus paid GST of Rs. 1800/- so there should be no change in revenue in case services has been provided by you or by some one else.

Conclusion :

There might be some merit in bringing the law on the lines as discussed above but considering that it will be near impossible to implement the same especially for services as there is no back track of services in most of the cases, they begin and end with one service provider. Whereas it looks feasible for goods as there is always a back track of goods, there is hardly any case in the total value chain in the goods where the original producer becomes the final supplier. It is strongly appealed that the provisions in this regard should be relooked into and changed suitably.