Four point analysis

Taxable event Where?

event?
Supply Place of
supply

Input tax
credit

When? Value?
Time of Supply Transaction
Value

1
Meaning of
Supply under
GST
Taxable event in GST is SUPPLY of goods or services
or both.
Under earlier indirect tax laws, there were separate
activities i.e. manufacture of goods, sale of goods,
provision of services, etc.
In the GST regime, the term “supply” refers to a
broad term which merges all taxable activities of
the earlier laws into a single activity.
The term “supply” is defined in CGST Act, 2017 and
the same meaning is applicable under IGST Act
and UTGST Act/ SGST Act.
In order to constitute a supply, the following
parameters are required to be kept in mind under
CGST/SGST Act-
Supply is of goods or services or both
There should be consideration. Schedule I is an
exception to this rule.
Supply is made by the supplier in the course or
furtherance of business. However, there is an
exception to this rule.
Supply is made by a taxable person
Supply includes deemed supply as mentioned in
Schedule II
 Section 7(1) of the CGST Act,5 2017 – Meaning/ Scope of
supply
Category 1 Category 2 Category 3 Category 4
Schedule I Schedule II/
Deemed
Supplies
All forms of supply Import of Activities specified in Schedule I The activities
of - To be treated as supplies even
-goods and/ or
service, to be treated
- for a though these are made without a as supply of
services,
- Made or agreed consideratio consideration goods or
to be made for a
consideration
n supply of
- in the course or - whether or services as
furtherance of not referred to in
business
in the course Schedule II.
such as: or
- sale, furtherance
- transfer, of business
- barter,
- exchange,
- license,
- rental,
- lease or
- disposal

© Indirect Taxes Committee, ICAI

Category-1

All forms of supply of

-goods and/ or services,
-made or agreed to be made for a
consideration
-in the course or furtherance of business

such as: sale, transfer, barter, exchange,

license, rental, lease or disposal
Category-2
Import of service,
- for a consideration
- whether or not in the course or furtherance of
business

Recipient is liable to pay GST under reverse

charge mechanism.
Category-3
Supply without Consideration ( Schedule I)

Schedule I prescribes activities to be treated as supply even if made

without consideration. Following activities to be considered as supply
even when made without consideration

1. Permanent transfer or disposal of business assets where input tax

credit has been availed on such assets

8
2. Supply of goods and/or services between
related persons or between distinct persons,
when made in the course or furtherance of
business
Meaning of related persons-
1. Such persons are officers or directors of one another’s business
2. Such persons are legally recognised partners in businesses
3. Members of the same family means
a) spouse and children of the person and
b) parents, grand-parents, brothers and sisters of the person if
they are wholly or mainly dependent on the said person
4. Any person directly or indirectly owns, controls or holds 25% or
more of the outstanding voting shares
5. One of them directly or indirectly controls the other
6. Both of them are directly or indirectly controlled by a third
person
7. Together they directly or indirectly control a third person;
8. Such persons are employer and employee, etc.
Supply between employer and employee:

1. Services provided by an employee to his employer in

the course of his employment is not treated as supply
of goods or supply of services. ( as specifically
mentioned in Schedule III)
2. When remuneration is paid under employment
contract by the employer, GST is not applicable.
3. If employer supplies goods/ services to its employees
without consideration (which is not covered under
employment contract), GST is applicable. However,
Supply by way of gift of up to Rs. 50,000 in value in a
financial year by an employer to his employee is not
treated as supply of goods or services. If more than Rs.
50,000 then GST is applicable.
 Meaning of distinct persons-
A person who has obtained or is required to obtain
more than one registration, whether in one state or UT
or more than one state or UT shall, in respect of each
such registration, be treated as distinct persons for the
purposes of this act.
 3. Supply of goods by a principal to his agent or by an
agent to his principal, where agent undertakes to
supply/receive such goods on behalf of the principal
It does not cover supply of services between principal
and agent.
Whether the transaction is covered under Schedule I or
not, it depends on in whose name the invoice to the
customer is being issued. If the invoice is issued in the name
of principal, then exchange of goods between Principal
and Agent will not be treated as supply under Schedule-I.
If the invoice is issued in the name of Agent, then the
exchange of goods between Principal and agent will be
termed as supply.
 4. Import of services by a person from a related person
or any of his other establishments outside India in the
course or furtherance of business without consideration.
Important points-
1. Service is imported by a person*.
2. Imported from a related person or any of his other
establishments.
3. Such service is imported in the course or furtherance
of business.

Earlier, the word used was “taxable person”. It has been changed now to
“person”. This means that if a person (not registered under GST) but
engaged in business activities imports services from related peron or any of
his establishments outside India, then it would be liable to GST.
 15

Category-4 Schedule II: Deemed Supplies

1. It specifies what is to be treated as a supply of

goods and supply of services.
2. Supply includes transactions specified in
Schedule II.
 Supply
Nature of Transactions Treatment
S.No.

Supply of
1(a) Title in goods
Goods

1(b) Goods or of right in goods or of undivided share in goods without the Supply of
1. Transfer
transfer of title thereof Service

Supply of
1(c) Of title in goods at a future date upon payment of consideration
Goods

Supply of
2(a) Any lease, tenancy, licence to occupy land
Service
2. Land and
Building 2(b) Any lease or letting out of the building including commercial,
Supply of
industrial or residential complex for business or commerce, either wholly or
Service
partly.

5. Renting of
5(a) Renting of immovable property Supply of
immovable
Service
property,
5(b) 1. Services provided by builders or
Construction of developers or any other person
complex, for construction of a complex, Supply of services
building, civil building, civil structure, etc. It
structure also includes building/ complex
intended for sale to a buyer
wholly or partly.

Completion of construction
means earlier of the two events
1. issuance of completion
certificate by a competent
authority Or
2. Building’s first occupation,
whichever is earlier.

It does not include the buildings

where the entire consideration
has been received after
completion of construction of
building.
5(c)Temporary transfer/ permitting use of
enjoyment of any intellectual property Supply of Service
right

5(d) Development, design programming,

customisation, adaptation, upgradation, Supply of Service
enhancement, and implementation of
information technology software

5(e) Agreeing to refrain from an act or to

tolerate an act or situation or to do an
act Supply of Service

5(f) Transfer of the right to use any goods for

any purpose for cash, deffered payment
or other valuable consideration Supply of service
 Treatment or process applied to another
Supply of Service
3. Job-work person’s goods

4. Transfer of a) Goods forming part of the business Supply of goods

business assets assets are transferred or disposed
whether or not for a consideration

b) Goods held or used for the purpose

of the business are put to any
private use. Such activity would be Supply of services
treated as supply of services
whether consideration is involved or
not.

c) Treatment of business goods when a

person ceases to be a taxable Supply of goods
person

Exceptions: 1. Business is transferred as

going concern. 2. Business is carried
on by personal representative who is
deemed to be a taxable person.
7. Supply of goods by an
unincorporated association or
body of persons to a member for Supply of goods
consideration

6(a)Works Contract(Composite
Works contract means contract
Supply) for building, construction, Supply of Service
fabrication, completion,
erection of any immovable
property

6(b)Supply of goods, being

food or any other article for
human consumption or any Supply of Services
drink (other than alcoholic
liquor for human consumption)
Other points in definition of Supply
under Section 7

1. Schedule III (Negative list)

2. Such activities or transactions undertaken
by the Central government, state govt or
any local authority in which they are
engaged as public authorities, as may be
notified by the govt. shall be treated
neither as supply of goods nor supply of
services. Under section 7(3), govt has
poweer to notify the transactions that are
neither treated as supply of goods nor
supply of services.
Schedule III – Negative list
Services by an employee to the employer in the course of or in
relation to his employment.
Services by any court or Tribunal established under any law for the
time being in force.
Functions performed by the
(a)Members of Parliament, Members of State Legislature,
Members of Panchayats, Members of Municipalities and Members of
other local authorities;
(b) the duties performed by any person who holds any post in
pursuance of the provisions of the Constitution in that capacity; or
(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.
Services of funeral, burial, crematorium or mortuary
including transportation of the deceased.
Sale of land and sale of building ( Subject to
paragraph 5(b) of Schedule II), etc.
Supply of goods from non-taxable territory to
another non-taxable territory without such goods
entering into taxable territory
Supply of warehoused goods to any person before
clearance for domestic consumption.
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.
Activities / transactions notified by Govt. (Negative
List)
1. Services by way of any activity in relation to a

function entrusted to a Panchayat or to a

Municipality
2. Services by way of grant of alcoholic liquor

licence against consideration in the form of

license fee or application fee, etc.

To be noted: GST is chargeable on grant of other

licenses, mining rights, natural resources such as
spectrum etc.
Q. Examine whether the following activities would be
treated as supply under Section 7, CGST Act, 2017?
1. Import of services without consideration for

personal purposes
Not a Supply.
2. Import of services for consideration in the course of

business
Supply
3. Import of services for consideration for personal

purposes
Supply (Category-2)
4. Import of services by person from related person

located outside India without consideration for

personal purposes
Not a Supply.
Q. Discuss whether these transactions are supply or not in
the following transactions:-
1. Mr. X transfers a plot of land to Y for Rs. 50 lakh.
Consideration is payable in instalments.
2. Transfer of derivatives by X for 5 lakh. X is a dealer in
securities.
3. Mr. X wants to send 1 lakh to Y of Mumbai. He purchases
a bank draft from SBI. SBI charges Rs. 150 as bank
commission.
4. X is not a registered person under GST. He is working as a
tax consultant. He sells his old tv to a TV dealer for Rs. 5000.
TV dealer is a registered person under GST.
5. X Ltd. is a consultancy firm. It takes legal advice from Z, a
solicitor based in London without consideration. X Ltd and Z
are not related.
6. B Ltd. is in the business of construction of
commercial buildings. One of the flats in the complex
is sold to D Ltd. for Rs. 14 crore. Completion certificate
is not yet received. Building is not occupied till the
time of sale to D Ltd.

7.Giving a commercial property on rent to a friend

without charging any rent

8. Giving a commercial property on rent to a relative

without charging any rent

9. X takes voluntary retirement from a public sector

company. He gets Rs 35,00,000 under voluntary
retirement scheme.
10. X Ltd. is an Indian company. It has branches in
Pune and Chennai. Pune branch provides
consultancy to Chennai branch against an invoice of
Rs. 15,00,000.

11. Mr. X has a factory in Delhi and a retail outlet in

Gurugram. Both the establishments are registered in
respective states. Finished goods are sent from
factory to retail outlet without consideration.

12. Mr. X, a dealer of refrigerator transfers one of the

refrigerators to his residence for personal use. The
dealer has availed ITC at the time of purchase of
stock.
13. X is a well known singer. Cine society of
Pune has awarded her a lifetime
achievement award consisting of Rs. 50 lakh
cheque.

14. Donation of Rs. 5,00,000 to a charitable

organisation

15. Donation of Rs. 5,00,000 to a charitable

organisation in return of display
advertisement of their brand name and
logo
16. X Ltd. is a marketing company. Its share are owned by X and his
family members. X Ltd. owns 50 computers in its office. One of the
computers is given by X to his friend for personal use. Ownership is
not transferred. No consideration is recovered from Y.

17. X is a scientist. Hw owns a patent right to manufacture art paper

by using grass. The patent right is transferred on temporary basis to Y
Ltd against payment of Rs. 50 lakh.

18. X ltd. is a manufacturing company. Sole distribution rights in the

state of Tamil Nadu is given to Y Ltd. Goods manufactured by X Ltd.
will be distributed in Tamil Nadu only by Y Ltd. In august, 2020, the
agreement is terminated. Under the termination agreement, X ltd.
will pay a consideration of Rs. 20 lakh in lieu of Y Ltd. promise not to
distribute similar goods of any other manufacturer in Tamil Nadu for
next 2 years.
19. X Ltd. owns a commercial flat. Renovation work of
this flat is given to Y for consideration of Rs. 25 lakh.
Renovation work will be done by Y as per design/
plan given by X LtD. Labour and materials for the
renovation work will be supplied by Y.

20. X is in the selling of electronic goods. He closes

down the business on March 31, 2020. Value of unsold
stock of electronic goods on that date is Rs. 15 lakh.

21. Sending goods out of India for exhibition purposes

for promoting exports
a. For consideration

b. Without consideration
22. SHruti Enterprises received legal consultancy from its head office
in Dubai. This service has been provided free of cost to its branch
office.

23. Business assets transferred to Charitable trust without

consideration

24. Mr. Rajesh’s son is a well-known architect in Singapore. At the

time of construction of his residential house and office factory, he
used the services of his son
a. For consideration
b. Without consideration
Import of services for consideration for residential house: Supply
Import of services for consideration for office factory: Supply
Import of services without consideration for residential house: Not a
supply
Import of services without consideration for office factory: Supply
25. Dharmendra has supplied 1000 units of
taxable supply to his agent Amitabh for the
purpose of sale without consideration.
Amitabh sells the goods to the customer for
consideration and the invoice is raised in the
name of Dharmendra. Analyse the two
transactions.
 Different Types of Supply
1. Taxable Supply
2. Zero-rated Supply
3. Exempt Supply
4. Non-taxable Supply
5. Continuous Supply vs One-time Supply
6. Inter-state vs inta-state supply
7. Deemed Supply (Schedule I transactions)
8. Composite vs Mixed Supply
9. Inward vs Outward Supply