Actionable claims in GST

What are actionable claims in GST? And what are some examples of Actionable claims?

Introduction

The Goods and Services Tax (GST) regime has brought about significant changes in the way businesses operate and has simplified the tax structure by introducing a unified tax system. One of the important aspects of GST is the concept of an “Actionable Claim.” An actionable claim is a legal right to receive a payment for goods or services provided or for some other legal obligation. In this article, we will discuss actionable claims in GST, provide some actionable claim examples, non-actionable claims, and transfer actionable claims.

What are actionable claims in GST?

Under GST, an actionable claim is defined as a claim to any debt, other than a debt secured by a mortgage of immovable property or hypothecation of any asset. In simple terms, an actionable claim is a legal right to receive payment for goods or services provided or any other legal obligation. It is a claim that can be legally enforced.

Examples of actionable claims in GST

The following are some examples of actionable claims in Goods and Service Tax:

1. Unpaid invoices: One of the most common examples of an actionable claim is an unpaid invoice. When a business provides goods or services to another company, and the payment is due, the amount due is considered as an actionable claim. For instance, if a supplier provides goods worth Rs.10, 000 to a buyer, and the payment is due, the amount due is considered as an actionable claim.

2. Promissory notes: A promissory note is a legal document in which one party promises to pay a certain amount of money to another party at a specified time or on demand. Promissory notes are also considered as actionable claims. For example, if a business lends money to another business and the borrower signs a promissory note promising to repay the amount borrowed, the promissory note is considered as an actionable claim.

3. Rent receivable: Rent receivable is another example of an actionable claim. When a business leases out a property to another business, and the rent is due, the rent receivable is considered as an actionable claim. For instance, if a business leases out a property to another business for a monthly rent of Rs.20, 000, and the rent is due, the rent receivable is considered as an actionable claim.

What is the non-actionable claim?

Non-actionable claims are claims that are not considered actionable claims in GST. Non-actionable claims are of two types: claims secured by the mortgage of immovable property or hypothecation of any asset, and claims that are not related to debt.

Claims secured by the mortgage of immovable property or hypothecation of any asset are not considered as actionable claims in GST. These claims are secured by the mortgage of immovable property or hypothecation of any asset, and hence, they have not considered a legal right to receive payment. The other is the claims that are not related to debt.

Transfer of actionable claim

The transfer of actionable claims is exempt from GST, as it does not fall under the definition of supply. However, if the transfer of actionable claims results in the supply of goods or services, then GST will be applicable to the supply of goods or services.

For example, “A” sells goods worth Rs.10, 000 to “B”, and “B” agrees to pay the amount after 30 days. “A” decides to transfer the claim to “C”, who provides legal services to enforce the claim against “B”. In this case, the transfer of actionable claims will not attract GST as it does not result in the supply of goods or services. However, if “C” charges a fee for legal services, then GST will be applicable to the fee charged by “C”. It is important to note that the transfer of an actionable claim must be in writing and signed by the transferor or the transferor’s agent.

Conclusion

An actionable claim is an important concept under the Goods and services tax (GST). It refers to a legal right to receive payment for goods or services provided or any other legal obligation. Examples of actionable claims include unpaid invoices, promissory notes, and rent receivable. Non-actionable claims are claims that are not considered actionable claims in GST. The transfer of actionable claims that are exempt from GST is explained in this blog with an example.