The document outlines the definitions and conditions under which the supply of goods or services is subject to GST, emphasizing that supply must involve consideration and be in the course of business. It details various forms of supply, exceptions, and specific scenarios where GST does not apply, such as donations and art exhibitions. Additionally, it explains the classification of composite and mixed supplies, as well as non-supplies under GST regulations.
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Supply Under GST New
The document outlines the definitions and conditions under which the supply of goods or services is subject to GST, emphasizing that supply must involve consideration and be in the course of business. It details various forms of supply, exceptions, and specific scenarios where GST does not apply, such as donations and art exhibitions. Additionally, it explains the classification of composite and mixed supplies, as well as non-supplies under GST regulations.
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SUPPLY OF GOODS OR SERVICES FOR CONSIDERATION IN COURSE OR FURTHERANCE OF
BUSINESS Section 7(1)(a)
1. SUPPLY SHOULD BE OF GOODS OR SERVICES OR BOTH Supply includes all forms of supply of goods or services or both. Supply of anything other than goods or services like money, securities etc. does not attract GST. 2. SUPPLY INCLUDES SPECIFIED FORMS OF SUPPLY, SHOULD BE FOR CONSIDERATION AND SHOULD BE IN COURSE OR FURTHERANCE OF BUSINESS Supply includes 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 consideration in the course or furtherance of business. A. FORMS OF SUPPLY I. Sale and Transfer: Sale means a contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. Transfer means to convey or remove from one place, person, etc., to another; pass or hand over from one to another; II. Barter and Exchange: barter’ is to exchange goods or services for other goods or services instead of using money. While barter deals with a transaction which only includes an exchange of goods/services, exchange may cover a situation where the goods are paid for partly in goods and partly in money. III. Licence, lease, rental and disposal: ‘licence’ is a permission granted by competent authority to engage in a business or occupation or in an activity otherwise unlawful. ‘rental’ is an arrangement to rent something, or the amount of money that you pay to rent something and that of ‘lease’ is to make a legal agreement by which money is paid in order to use land, a building, a vehicle, or a piece of equipment for an agreed period of time. disposal as the s ale, pledge, giving away, use, consumption or any other disposition of a thing. B. CONSIDERATION: in relation to the supply of goods or services or both includes: Any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government, the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government. However, a deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply. Let us examine the existence of consideration in the following three scenarios: 1. Donations received by charitable institutions from individual donors, without quid pro quo - Donations received by the charitable organisations are treated as consideration only if there exists, quid pro quo [something for something]. When the name of the donor is displayed in recipient institution’s premises, in such a manner, which can be said to be an expression of gratitude and public recognition of donor’s act of philanthropy and is not aimed at giving publicity to the donor in such manner that it would be an advertising or promotion of his business, then it can be said that there is no supply of service for the payment in the form of donation. Thus, GST is not leviable where all the following three conditions are satisfied namely: Gift or donation is made to a charitable organization Payment has the character of gift or donation Purpose is philanthropic (i.e., it leads to no commercial gain) and not advertisement 2. Art works sent by artists to galleries for exhibition is not a supply as no consideration flows from the gallery to the artists - no consideration flows from the gallery to the artist when the art works are sent to the gallery for exhibition and therefore, the same is not a supply. It is only when a buyer selects a particular art work displayed at the gallery, that the actual supply takes place and applicable GST would be payable at the time of such supply 3. No supply of service by the insured to the insurance company in lieu of ‘No Claim Bonus’ offered by said insurance company to him - there is no supply provided by the insured to the insurance company in form of agreeing to the obligation to refrain from the act of lodging insurance claim during the previous year(s) and NCB cannot be considered as a consideration for any supply provided by the insured to the insurance company. IMPORTATION OF SERVICES FOR CONSIDERATION WHETHER OR NOT IN COURSE OR FURTHERANCE OF BUSINESS Section 7(1)(b) The importation of services for a consideration U whether or not in the course or furtherance of business. This is the only exception to the condition of supply being made in course or furtherance of business. ACTIVITIES WITHOUT CONSIDERATION - DEEMED SUPPLY (SCHEDULE I) (1) Any kind of disposal or transfer of business assets made by an entity on permanent basis even though without consideration qualifies as supply. This provision would apply only if input tax credit has been availed on such assets. (2) Supply of goods or services or both between ‘related persons’ or between ‘distinct persons’ as specified in section 25, will qualify as supply even if made without consideration provided it is made in the course or furtherance of business. Provided that gifts not exceeding 50000 in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both. (3) Supply of goods — (a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or (b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal. is considered as supply. (4) Import of services by a person from a related person or from his establishments located outside India, without consideration, in the course or furtherance of business shall be treated as “supply”. ACTIVITIES/TRANSACTIONS BETWEEN A PERSON, OTHER THAN AN INDIVIDUAL, AND ITS MEMBERS/ CONSTITUENTS FOR CONSIDERATION [SECTION 7(1)(aa)] The activities or transactions (involving supply of goods or services) between a person, other than an individual, (i.e. association, club, etc.) and its members or constituents, for cash, deferred payment or other valuable consideration are covered within the ambit of ‘supply’ as per section 7(1)(aa) . Further, explanation to clause (aa) to section 7(1) clarifies that for the purpose of this clause, such person (association, club, etc.) and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions between them shall be deemed to take place from one such person to another. The explanation starts with a non-obstante clause and shall therefore, shall have an overriding effect over anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority. The aforesaid explanation prevents the application of doctrine of mutuality by such person(s) ACTIVITIES/TRANSACTIONS TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES Section 7(1A) Section 7(1A) classifies certain activities/ transactions constituting supply, either as supply of goods or supply of services. Schedule II to the CGST Act contains the list of activities or transactions which have been classified either as supply of goods or supply of service. These are as follows:- Supply of Goods 1. Transfer – a. Any transfer of title in goods. b. Any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed. 2. Transfer of Business Assets – a. Goods forming part of business assets are transferred or disposed off by or under directions of person carrying on the business so as no longer to form part of those assets. b. Goods forming part of assets of any business carried on by a person who ceases to be a taxable person, shall be deemed to be supplied by him, in the course or furtherance of his business, immediately before he ceases to be a taxable person. Supply of Services 1. Transfer - Any transfer of right in goods/ undivided share in goods without transfer of title thereof. 2. Land and Building - Any lease, tenancy, easement, licence to occupy land 3. Treatment or Process - Any treatment or process which is applied to another person’s goods 4. Transfer of Business Assets - Goods held/used for business are put to private use or are made available to any person for use for any purpose other than business, by/ under directions of person carrying on the business. 5. Following composite supplies:- a. Works contract b. 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. 6. Others- a. Renting of immovable property b. Construction of complex, building, civil structure, etc. c. Temporary transfer or permitting use or enjoyment d. Development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of IT software e. Agreeing to obligation to refrain from an act, or to tolerate an act or situation, or to do an act. f. Transfer of right to use any goods for any purpose (whether or not for specified period) for cash, deferred payment or other valuable consideration. NON-SUPPLIES UNDER GST Section 7(2) Section 7(2)(a) provides activities or transactions specified in Schedule III 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. However, services provided outside the ambit of employment for a consideration would qualify as supply. 2. Services by any court or Tribunal established under any law for the time being in force. 3. A) Functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities. B) Duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity. (C) 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 paragraph 5(b) of Schedule II, sale of building. (i.e. in case, where entire consideration for sale of building received after issuance of completion certificate or after its first occupation, whichever is earlier) 6. Actionable claims, other than lottery, betting and gambling. Section 7(2)(b), Government is empowered to notify the activities/ transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities as the activities/transactions which shall be treated neither as supply of goods nor as supply of services. Till now, following activities/ transactions have been notified under said clause: (i) Services by way of any activity in relation to a function entrusted to a Panchayat under article 243G of the Constitution or to a Municipality under article 243W of the Constitution are treated neither as a supply of goods nor as a supply of service (ii) Services by way of grant of alcoholic liquor licence by the State Governments are treated neither as a supply of goods nor as a supply of service CBIC has clarified that following activities / transactions are non-supplies: (i) Inter-State movement of various modes of conveyance between distinct persons including- Trains, Buses, Trucks, Tankers, Trailers, Vessels, Containers, Aircrafts, (a) carrying goods or passengers or both; or (b) for repairs and maintenance, (ii) Inter-State movement of rigs, tools and spares, and all goods on wheels [like cranes] Section 8 Tax liability on composite and mixed supplies (A) A COMPOSITE SUPPLY Composite supply means a supply made by a taxable person to a recipient and: • comprises two or more taxable supplies of goods or services or both, or any combination thereof. • which are naturally bundled and supplied in conjunction with each other, in the ordinary course of business • one of which is a principal supply Accordingly, the entire value of composite supply shall be classified under the category of main supply and shall be taxed at the GST rate applicable to the main supply. (B) A MIXED SUPPLY 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 [Section 2(74)]. The individual supplies are independent of each other and are not naturally bundled. A mixed supply comprising of two or more supplies shall be treated as supply of that particular supply that attracts highest rate of tax.