Understanding the Concept of Supply under GST
In this Article, we would like to give you the basis understanding about the term “Supply” under the GST Law. As we know that tax is to be levied at taxable event. The taxable event under previous indirect tax laws is ‘manufacture’ for levy of excise duty, ‘Sale’ for levy of VAT/Sale tax etc. Under the GST Law various taxable event such as manufacture or sale shall stand subsumed in one taxable event known as “Supply”. In other words, now under GST “Supply is the taxable event”. As per GST Law liability to pay CGST/SGST on goods/services depend upon at the time of supply for goods/services.
“Also see: Time of Supply of Goods / Services under GST Law
Supply has been defining under section 7 of GST Act.
As per Section 7 (1): –
| A. | Supply Includes – |
| a. | 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, |
| b. | Importation of Services for a consideration. |
| c. | Supply of Goods/Services specified under Schedule I, made or agree to be made without a consideration. |
After once activity is classified as “supply” according to above definition, for determine whether the said activity is to be treated as supply of goods or supply of services we have to referred to schedule II.
Schedule I of GST Law specified the following types of transaction that to be treated as supply even if made without consideration.
| 1. | Permanent Transfer or disposal of business assets where input tax credit has been availed on such assets. |
| 2. | Supply of goods or service between related persons or distinct persons as specified in section 25 for example inter-state self-supplies such as stock transfers will be taxable since supply is made to a distinct persons as a taxable person has to take state wise registration. However, Intra-state self-supplies are not taxable. Gift made by employer to employee upto value of fifty thousand in a financial year shall not be treated as supply of goods or services or both. |
| 3. | Supply of goods by a principal to his agents where agents undertakes to supply such goods on behalf of the principal |
| 4. | Supply of goods by an agent to his principal where the agents undertakes to receive such goods on behalf of the principal. |
| 5. | Importation of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business. |
Schedule II specified the matters mentioned therein is to be treated as supply of Goods or Services.
“Also see: Schedule II – Matters to be treated as Supply of Goods or Services
As per Section 7 (2): –
Notwithstanding anything contained in sub-section (1) activities or transaction specified in Schedule III or such activities or transaction undertaken by the Central Government, a State Government or any local authority shall be treated neither as a supply of goods nor a supply of services.
| Schedule III – Transactions which shall be treated neither as a supply of goods nor a supply of services. | |
| 1. | Services by an employee to the employer in the course of or in relation to his employment. |
| 2. | Services by any court or Tribunal established under any law for the time being in force. |
| 3(a). | the functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities; |
| 3(b) | the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or |
| 3(c) | the duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or a State Government or local authority and who is not deemed as an employee before the commencement of this clause. |
| 4 | Services of funeral, burial, crematorium or mortuary including transportation of the deceased |
| 5 | Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. |
| 6 | Actionable claims, other than lottery, betting and gambling. |
| 7 | Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India. |
| 8(a). | Supply of warehoused goods to any person before clearance for home consumption; |
| 8(b) | Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption] |
As per Section 7 (3): –
Subject to Section 7(1) and Section 7(2), the Central or State Government may specify by notification that transaction to be treated as: –
- A supply of goods and not as supply of services or
- A Supply of services and not as supply of goods or
As per Section 8 : –
The tax liability on a composite or a mixed supply shall be determined in the following manner: –
- a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply;
- a mixed supply comprising two or more supplies shall be treated as supply of that particular supply which attracts the highest rate of tax.
For any query you can write at taxhouseindia@gmail.com Before making any decisions do consult with your professional or tax advisor.
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