Section 7 of CGST Act, 2017 defines the expression supply to include all forms of supply of goods or services or both 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, and includes activities specified in Schedule II to the CGST Act, 2017. Further, the term person is defined in section 2(84) of the CGST Act, 2017 to include an association of persons or a body of individuals, whether incorporated or not, in India or outside India. Therefore, the question arises regarding the taxability on the services being provided by JV to members or vice-versa or inter-se between members.

To clarify the taxability w.r.t. supplies being provided by or to Joint Venture or members, Central Government has issued Circular No. 35/9/2018-GST dated 05.03.2018 vide F. No. B-1/20/2016-TRU. It is to be noted that combined reading of Section 7 and Section 2(84) of CGST Act, 2017 would be interpreted to conclude that supply of services by an unincorporated association or body of persons (AOP) to a member thereof for cash, deferred payment or other valuable consideration shall be treated as supply of services.

Also, the clarification issued in Service Tax vide Circular No. 179/5/2014 ST issued from F.No. 179/5/2014-ST dated 24 September 2014 holds good in GST as well. The taxability in this regard can be better understood with the help of the example as follows:

Illustration 1:

Illustration 3:

There are 4 members in the JV contributing INR 100 each as a part of their share.

Case 1: If the operating member purchases machinery for Rs 400 for the JV to be used in oil production, the GST will not be applicable as the money paid for purchase of machinery is merely in the nature of capital contribution and is therefore a transaction in money.

Therefore, the taxability will vary case to case and will ultimately depend upon the terms of the agreement.