Meaning and Scope of the Words Goods and Service under GST


Meaning and Scope of the Words Goods and Service under GST. The GST will subsume two major indirect taxes namely sales tax/value added tax imposed on sale of goods and service tax levied on provision of various services. Hence under the proposed GST the two terms of prime importance are ‘goods’ and ‘service’ . This Article seeks to explain the meaning of these two terms in the light of several decided cases. Now scroll down below n check more details about “Meaning and Scope of the Words Goods and Service under GST”


Meaning and Scope of the Words Goods and Service under GST

Meaning of Goods

Section 2(88) of the Act define “service” to mean anything other than the “goods”. Really speaking, this definition does not define anything and, therefore, one needs to look to various shades, color and dimension of the word “Goods”. Section 2(48) of the GST Act defines “goods” thus:

“Goods” means “every kind of movable property other than actionable claim and money but includes securities, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under the contract of supply.”

Explanation: For the purpose of this Clause, the term “moveable property” shall not include any intangible property.

Article 366(12) of the Constitution of India gives an inclusive definition of ‘goods’ which says that ‘Goods’ includes all materials, commodities and articles;

Here once again the definition uses the expressions : “ ‘Goods’ means”. It, therefore, means that the definition is not inclusive but exhaustive. In other words, the goods could be of various types of movable property and could not encompass any other item or things within its fold except what is specifically mentioned in the definition itself.

In order to decide as to whether a particular transaction shall be exigible to GST, it should either be “goods” or “service”. First of all, one needs to understand the meaning, scope and intent the word “goods”.

The Supreme Court in the case of CST, MP. v. MPEB MANU/ SC/0156/1968: AIR 1970 SC 732, was required to consider whether “electricity” would be goods and after careful analysis, the Court held that “electricity” would be goods. The Court observed at page 736, paragraph 9 that;–

“………The term “movable property” when considered with reference to “goods” as defined for the purposes of sales tax cannot be taken in a narrow sense and merely because electric entry is not tangible or cannot be moved or touched like, for instance, a piece of wood or a book, it cannot cease to be movable property when it has all the attributes of such property……….”


Section 2(7) of the Sale of Goods Act defines the “goods” as follows :–

“Goods” means every kind of moveable property other than actionable claims and money; and includes stock and shares, growing crops, grass and things attached to or forming part of the land which are agreed to be served before sale or under the contract of sale.”

Meaning of Service

After having understood the meaning of “goods”, let us understand the meaning of the word “Service”. Under the Finance, 1994, section 65 deals with the definition of various “taxable service”. Under the existing law i.e. Finance Act, 1994, the levy of service tax is attracted when a taxable service is provided by a defined service provider to a defined service receiver. Unless a service can be regarded as being taxable and being provided by a defined service provider to a defined service receiver, it cannot be taxed. Section 65B(44) of Finance Act, 1994, defines ‘service’ as follows:-

“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) transfer of title in goods or immoveable property by way of sale, gift or in any other manner; or
  • (ii) a provision of service by an employee to the employer in the course of or in relation to this employment;
  • (iii) fees taken in any court of tribunal established under any law for the time being in force;”

The Supreme Court in the case of All India Federation of Tax Practitioners v. Union of India 2007(10) STT 166 has observed in relation “ service” as under:-

a) “goods” has to be understood in contradistinction to the word “service”.

b) Service Tax is a VAT which in turn is destination based consumption tax in the sense that it is on commercial activities and is not a charge on the business but on the consumer and it would, logically, be leviable only on services provided within the country. Service Tax is a value added tax.

c) Just as Excise Duty is a tax on value addition on goods, service tax is on value addition by rendition of services;

Existing section 66B of the Finance Act, 1994 provides that there shall be levied tax on services provided or agreed to be provided in a taxable territory by one person to another person. Thus, there has to be two different persons (i) receiver of service and (ii) provider of service. It is very often seen that many body corporates have separate divisions within the same legal entity. These divisions are separate profit centers and profit for each division is determined separately. One Division raises Debit Note on another division for the activities performed by that Division. In this case, the Division is not a separate entity, although it may have obtained separate tax registration for compliance of law. That does not make each division on separate juridical person and the services rendered by one division to another division cannot be considered as service under Section 65B(44). The CESTAT has consistently held so. In the case of Precot Mills Ltd v. CCE 2006 (5) STT 35 Bangalore, the Tribunal has observed that if one does service to one self, there is no question of leviability of Service Tax

Read also:

Section 114 of GST – Financial and 


We hope you like our article. Please share this article on social Media Platforms like Facebook, Google Plus, Twitter, Whatsapp


Please enter your comment!
Please enter your name here