Definition of Supply under GST
Definition of ‘supply’ Under section 2(92) read with section 3 ‘supply’ includes all forms of supply of goods and/or services such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. Schedule I specified the supply.
Analysis: Supply is the term replaced for the term sale; no scope has been left for any confusion and the definition includes every term which shall be coined as sale. Even the supply which is made or agreed to be made without a consideration will also amount to sale.
Any transfer of title to goods is a supply of goods, transfer of right to use goods [section 4(8) of APVAT Act, 2005], Hire purchase transactions, transfer of business assets are also brought under the ambit of term ‘supply’ as per Schedule II.
(a)all forms of supply of goods and/or services 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,
(b)importation of service, whether or not for a consideration and whether or not
in the course or furtherance of business, and
(c) a supply specified in Schedule I, made or agreed to be made without a
2.Schedule II, in respect of matters mentioned therein, shall apply for determining what is, or is to be treated as a supply of goods or a supply of services.
Activities which are not Supply
Activities and transactions specified in Schedule III –
- Services by an employee to the employer in the course of or in relation to his employment;
- Services of funeral, burial, crematorium or mortuary including transportation of the deceased.
- Actionable claims, other than lottery, betting and gambling
- Sale of land / Sale of building after occupation or completion will not attract GST. Thus, sale of building before completion or before occupancy will attract GST
Such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council.
Deemed Supply of Goods & Services
Following matters will be treated as deemed supply of goods and services and will attract GST :
1.In case of Transfer of title in goods, OR, Right in goods, OR of undivided share in goods without the transfer of title, OR, transfer under an agreement which stipulates that property will pass at a future date upon payment of full consideration
2.In case of Land & Building, – Any lease, tenancy, easement, license to occupy land or building ( both for commercial or residential purpose, fully or partly)
3.Treatment or Process , which is being applied to another person’s goods is a supply
4.Transfer of Business Assets – Where goods forming part of the assets of a business are transferred or disposed of, and are no longer forming part of business OR Where goods held for business are put to use for any private use, in such a way, as not for business OR Where any person ceases to be a taxable person, any goods earlier forming part of business, unless (a) the business is transferred as a going concern to another person, or (b) the business is carried on by a personal representative who is deemed to be a taxable person With or Without for a Consideration
5.Supply of Services – Following shall be treated as deemed “supply of Services” :
- renting of immovable property;
- construction of a complex, building, civil structure or a part thereof, including a complex or building intended for a sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate;
- Temporary transfer or permitting the use or enjoyment of any intellectual property right;
6.Composite Supply – Following shall be treated as deemed “supply of Services” :
- works contract as defined in section 2 (119) of CGST Act
- Supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink ( other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration.
7.Supply of goods – supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.
Inward Supply or Purchases– “Inward Supply” in relation to a person, shall mean receipt of goods and/or services whether by purchase, acquisition or any other means and whether or not for any consideration
Outward Supply or Sales – “Outward Supply” in relation to a person, shall mean supply of goods and/or services, whether by sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made by such person in the course or furtherance of business
Continuous Supply – Means a supply of services which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract, for a period exceeding three months with periodic payment obligations and includes supply of such services as the Government may, subject to such conditions, by notification, specify.
‘Fringe benefits’ to employees & directors under GST
Supply of Goods or Services between related persons will be supply even if made without consideration – Para 2 of Schedule I of CGST Act . Also, employer & employee are related persons as per 15 of CGST Act.
Further, para 4(b) of Schedule II of CGST Act, states that goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, whether or not for a consideration, the usage or making available of such goods is a supply of services.
This will cover “ Fringe Benefits” given to employees or directors by a company and should be subject to GST. This is a back-door entry for FBT, which was earlier in Income Tax Act, and was very litigative.
Mixed Supply under GST
Mixed Supply – means two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply.
Example – A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drink and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately.
Taxability – The tax liability on a mixed supply comprising two or more supplies shall be treated as supply of that particular supply which attracts the highest rate of tax .
Composite Supply & Principal Supply under GST
Composite Supply is a supply made by a taxable person to a recipient comprising two or more supplies of goods or services, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of trade, one of which is a principal supply
Example – Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is the principal supply.
Principal Supply Means: The supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary and does not constitute, for the recipient an aim in itself, but a means for better enjoyment of the principal supply.
Zero Rated Supply under GST
Zero Rated Supply Means export of goods or services or both; or supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit (eligible for ITC).
Important Points to Note
1.Supply of goods or services or both is “ taxable event “ in GST as that event triggers liability to pay GST
2.Supply of goods and services for consideration is always taxable
3.Supply by taxable person to related person is subject to GST even if there is no consideration that is no amount charged and will cover the followings :
This will cover transactions between group companies ( like deputation of persons, supply of goods on loan basis, common facilities shared by group companies), transactions between branches
4.Free Gifts to related persons will be subject to GST
5.Benefits provided to employee by the employers like transport, meals, telephone. However, gifts upto Rs. 50K to employees will not be subject to GST, but input credit will have to be reversed.
6.Supply by principal to agent is subject to GST, GST is payable on supplies to C & F agents. However, commission agent has to pay GST only on his commission.
7.Import of services from related persons or from business establishment outside India is subject to GST even if there is no consideration. Branch / Head office in India receiving free services from Head Office / Outside India will be subject to GST.
8.Lottery, betting and gambling is subject to GST
9.Lottery tickets are goods and GST will be payable. GST will also be payable on services relating to betting and gambling
10.Some services provided by government are taxable and mostly will be subject to reverse charge.
We have launched Single Platform on GST Compliances In India, assisting in 4 areas – 1) Migration, 2) GST Compliance, 3) Training and 4) Transition & Implementation. Click this link for any assistance.