Analysis of Entry Trading of Goods in Negative List

When transfer of title of goods is involved it is not taxable as it is included in the negative list. However the supporting services or ancillary services to the trading of goods would not come under the Negative list.

Illustrations:

1. The services provided by commission agent or a clearing and forwarding agent are not in the nature of trading of goods. These are auxiliary for trading of goods, and hence taxable.

2. Futures contracts would be covered under trading of goods as these are contracts which involve transfer of title in goods on a future date at a pre-determined price.

3. Commodity futures would also be covered under trading of goods, as actual delivery of goods does not normally take place and the purchaser under a futures contract normally offsets all obligations or closes out by selling an equal quantity of goods of the same description under another contract for delivery on the same date. There are, therefore, two contracts of sale/purchase involved which would fall in the category of trading of goods.

4. Service tax is not attracted when there is a  right to use the goods between  two persons is exchanged for  a consideration. This is specifically liable to VAT.

5. When a single (composite) contract with lump sum provide for sale  of goods along with installation, the dominant nature of the contract will be Sale of goods. However the entry of “Service portion of works contract” in declared services would cover such transactions of installations.