Actionable Claims are included in the CGST Act, 2017 as part of the ‘Goods’ described in Section 2(52). Because the GST Act does not define an actionable claim individually, the term for an actionable claim is taken from section 3 of the Transfer of Property Act.
An Actionable Claim is known as a ‘Chose in Action’ or a ‘Thing in Action’ in English law. This refers to a claim or a debt for which action can be taken. In other words, there is a claim (in this case, a debt) that can be enforced by the court.
Rights Under Actionable Claim
As a result, the individual who has actionable claims can seek the help of the court to recover the debt. The term ‘Chose in Action’ or ‘Object in Action’ is distinct from the term ‘Chose in Possession,’ which refers to a thing in a person’s physical possession. The holder of an Actionable Claim has the following rights under the Act:
- He has the right to the properties he owns.
- Without possession of the property, you have the right to sue.
Defining Actionable Claims
What are Actionable Claims under GST? Examples of Actionable Claims, Non-Actionable Claims, and Transfer of Actionable Claims are all covered in this article.
Actionable Claims are defined in Section 2(1) of the CGST Act, 2017 as those that have the same meaning as those defined in Section 3 of the Transfer of Property Act, 1882. According to the Transfer of Property Act, an actionable claim signals the following.
A claim to any obligation other than a debt secured by an immovable property mortgage or a moveable property hypothecation or pledge, or a claim to any beneficial interest in movable property not in the claimant’s possession, either actual or constructive.
Furthermore, the civil courts accept such actionable claims as providing grounds for redress. Whether the obligation or beneficial interest is existing, accumulating, conditional, or contingent, this is the case.
In a nutshell, the definition of actionable claims consists of two parts: Any claim to an unsecured debt or any interest in movable property that is not in the claimant’s possession.
Actionable claims only apply to items, not services. According to Section 2 of the CGST Act, goods are defined as any movable property other than money and securities, including actionable claims, growing crops, grass, and things attached to land that are agreed to be separated before supply (52).
Instances of Actionable & Non-Actionable Claims
According to section 3 of the Transfer of Property Act’s definition of Actionable Claims, the following could be examples of Actionable Claims:
- Right to sue for rent arrears.
- Money due under a contract for a price or an advance
- Right to obtain contract benefits
- Except in the case of maritime insurance, insurance claims
- Lottery ticket
- Dividends on stocks, debentures, and negotiable securities like bills of exchange
- A stake in a partnership’s real estate
- A right granted under the terms of a licence
- Shares with rights or a buy option
- Guarantee from a bank
The following are not considered actionable claims under the GST. These include: a debt decree; copyright; the right to sue in the case of a breach of contract; coupons and vouchers; and the right to seek damages in the event of a breach of contract.
Transfers in Regard to GST
It’s worth noting that Actionable Claims can be transferred. Sections 130 to 137 of the Transfer of Property Act cover the provisions relating to the transfer of Actionable Claims.
Actionable Claims can only be transferred by a written instrument, according to these provisions. The transferor or his authorised representative must sign such an instrument. It must also be complete, and it only takes effect when the instrument is executed. All of the transferor’s rights and remedies pass to the transferee upon execution.
The Actionable Claim can be sold, exchanged, gifted, mortgaged, or otherwise transferred. An endorsement at the back of the document can be used to assign an actionable claim. The actionable claim is sufficient, and no other or extra document is necessary, according to such an endorsement.
The assignment of the Actionable Claim becomes effective on the date of the assignment. Following the transfer, the transferee is responsible for all of the transferor’s assets and obligations at the time of the transfer.
The transferee must furnish the debtor with notification of transfer for his own purposes. When a debtor receives such a notice, he or she becomes obligated to pay the transferee for the debt. Finally, the debtor must be given written notice that includes the name and address of the transferee.
Finally, because actionable claims are included in the GST definition of goods, they will be subject to GST. However, there are some reservations about whether Actionable Claims should be classified as goods, and there may be complications as a result.