4 = sbiditnciiinaaineasvestiialll eee QAINTRODUCTION | PEE chectce,youshal Unrige earker indives! tax laws, there, were swo.seperste beable to understand the following: = Meaning of Goods and Services = Composite and Mixed Supply = Important related terms = Parameters of Supply (= Supply without consideration ¥ lulesI, and I under CGST activities, ie manufacture or sale of goods and the provision of services. In the GST regime, the entire value of these two is taxed in an integrated manner by laying down one comprehensive taxable event i. “supply” - supply of goods or services or both. It means, the term “supply” refers to a broad term which merges all taxable activities of the earlier laws into a single activity. For Example: If Mr. A has sold goods to B, then it is supply of goods. In this case, if A has manufactured the goods and then has sold to B, even then it is supply of goods. Similarly, if Mr. Mohan took services of engineer for construction of his house, then it is also supply of services to Mr. Mohan. Under GST, the scenario has been shifted from sales, service, manufacturing, etc. to one activity ie. supply. Therefore, it can be said that now, there are two modes of supply which may attract GST and these are goods and services. 4.2 SUPPLY: THE TAXABLE EVENTIN GST) 12 Taxable event in a law is an event, the occurrence or hap- pening of which triggers the imposition of tax. It means the incidence of tax arises only after the occurrence of the taxable event. Before GST: Under the earlier indirect tax laws, Central excise was levied on “manufacture of goods”, VAT/CST was levied on “Sale of Goods”, Service tax was charged on “Services provided or agreed to be provided", etc. Under GST: According to Article 366(12A)of the Constitution of India, Goods and Services Tax (GST)is “Any tax on Supply of goods or services or both except taxes on Supply of the Alcoholic liquor for human consumption.” Therefore, under GST, the taxable event is “Supply of Goods or provision of @NNVIXYLee ‘TAXMANN® 5 Pensa ‘supPLy UNDER GST : . 2 ; shifted from multiple tay, Services or both”, As already stated, under GST the scenano es aan cozablecactivily Le Soe ~ ¢vent namely manufacture, sales, provision of Se ca OF services OF both. These two fore” The GST is applicable if ods or c if there is Supply of goods or P! of Supply have been discussed in detail in next Para. 43. (@SFORMS oF suPPLY ice th. The concept of Under GST, supply includes all forms of supply of goods oF services Ot Pia an goods or: sen isthe key stone of the GST architecture because the supply of any ne, goods and services, 8 does not attract GST. There are two forms of supply under GST namely, 4.3.1 Goods The term ‘Goods’ has been defined under section 2(52) of CGST Act, 2017. As pe eae ‘Goods means every kind of movable property other than money and securities | st ine nds actionable claim, growing crops, grass and things attached to or forming part ‘of the land which are agreed to be severed before supply or under a contract of supply. Goods | ——; é Ttincludes [ It excludes. | Actionable Claims [Money & Securities | Growing Crops, Grass, ete. Actionable claim: The section 2(1) of CGST Act provides that the definition of actionable claims shall have the same meaning as assigned to it in section 3 of the Transfer of Property Act, 1882. As per section 3 of the Transfer of Property Act, 1882, “actionable claim means a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property, or to any beneficial interest in movable property not in the possession, either actual constructive, of the claimant, which the civil courts recognise as affording grounds for relief, whether ‘such debt or beneficial interest be existent, accruing, conditional or contingent.” It may be noted that there are certain activities listed in Schedule Ill which are treated neither Supply of goods nor as Supply of services (Refer Para. 4.11), Actionable claims (other than lott betting & gambling) have been included in this Schedule. Thus, only lottery, betting & gambling shall be treated as Supply under GST. All the other actionable claims shall net be supplies Money: As per section 2(75) of CGST Act, “Money means 1 : sarreney, cheque, promissory note billof exchange, tehor’p creda ey et tender or any ied money order, postalor electronic remittance or any other instrument regen mod Geaga Reserve tl of india when used as a consideration to settle an obligation or exohaner se ne Rese onde Of another denomination but shall not include any curreney thats held with Indian lege og! ‘Transaction in money: The transaction in money is outside the ambi sohereea YT dedio Trae ftaition of €o0ds/ services, When we deposit prinengt amet of GST as itis not included is withdrawn, then it is simply a transaction in money. Th ount in the bank or if such amou"” vice & thus are not chargeable to GST. However, if a se se transactions do not constitute 5 Activities, then this consideration is subject to GST. For ant® Consideration is charged for 20 notes of & 100 then itis transaction in money. But, 4. nD: if € 2000 note is exchanse iy becomes payable on € 50. ’ fin consideration & 1950 is given, the? ©88 PORMS OF SUPPLY Para 4.3 ‘Securities: The term “securities” shall have the same meaning as assigned! to tt in clause (h) of set- tion 2 of | the: Securities Contracts (Regulation) Act, 1956, As per this Act, the term securities include the following in India: ‘ ~ shares, scrips, stocks, bonds, debentures, debenture stock or other marketable securities of alike nature in or of any incorporated company or other body corporate ~ derivatives which includes cated and issued by the Central Government or a State or any other instrument issued by any collective investment scheme to the investors in such schemes ~ units or any other such instrument issued to the investors under any mutual fund scheme Dut does not include any unit linked insurance policy which is a hybrid instrument providing stments — security receipts issued under SARFAESI Act (Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002) ~ Securitized debt instruments (collateralized debt obligations ete.) such other instruments as may be declared by the Central Government to be securities; and ~ Rights or interest in securities Please note that Securities are neither goods nor Services. 4.3.2 Service The term ‘Service’ has been defined under section 2(102) of CGST Act, 2017. As per this section, ‘service means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged” Itmeans the Service refers to anything other than goods, money and securities but includes activities relating to use of money or conversion of money for which separate consideration is charged. Service ane [oe Tbexdludessiqque ian ‘Activities relating to use of money 1. Goods ‘or conversion of money for which 2. Money separate consideration is charged. em F spire NOTE: Under GST, the supply should be of goods or services. Supply of anything other than goods op services does not attract GST... a A t ‘As stated above, supply should involve goods and/or Services viz either as wholly goods or wholly services, ‘Now, a question arises, what will happen where @ supply involves both goods ina dervices? ‘The GST law | provides that such supplies would be classifiable either as, wholly gootis or wholly Services. This classification has been providerbin Schedule If the Act, which has been discussed later in this chapter. oNNVIXVL,tliU_ ‘TAXMANN® Para ag SUPPLY UNDER'GST % - ferent stated in previous Para, the term supply under or ere supply of goods as well ag vices. This supply may be classified on various (@) On the basis of movement/flow (a) Inward supply (®) Outward supply (b) On the basis of Continuity (@) One time supply (6) Continuous supply (©) On the basis of taxability (a) Taxable supply (8) Non-taxable supply (©) Exempt supply (@) Zero-rated supply (@) On the basis of Geographical location (a) Intra-state supply (®) Inter-state supply (©) Supplies in territorial waters (©) On the basis of Goods supplied in conjunction (Explained in Para 4.5) (a) Composite supply (b) Mixed supply 4.4.1 Types of Supplies on the basis of movement/flow Every transaction necessarily involves two parties namely supplier and recipient. When we consid- er a supply of goods/services from the point of view of either of the party, it may be classified as inward supply or outward supply. (a) Inward supply : In relation to a person, ‘inward supply” means receipt of goods or services or both, whether by purchase, acquisition or any other means with or without consideration. (6) Outward supply: In relation to a taxable person, ‘outward supply” means supply of goods or services or both, whether by sale, transfer, barter, exchange, licence. rental lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business. ae d,, a registered dealer h: Example: Ravish Computers Lt ‘eistered dealer has sold desktop computer to ABC Ltd. at price of €26,000 plus GST. This single transaction of supply of computer conte sesiog ecascpol” forrecipient (ie for ABC Ltd) and “Outward Supply” forthe Supplier (ie forRevish computers td) 4.4.2 Types of Supplies on the basis of Continuity ‘The recurrence of a Supply is the basis for this classification: (a) One-time Supply: It simply refers to Supply of goods or Servi oe en eas ee et wh one a yyTYPES OF SUPPLIES Para 4.4 purchases a machine from M/s ABC, then it is one-time Supply. This category is required just to recognise the other type of Supply, which is continuous Supply. (&) Continuous Supply: The continuous supply may be as regards goods as well as for services. Continuous Supply of Goods: As per section 2(32) of CGST Act, 2017, “continuous supply of goods” means a supply of goods which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract, whether or not by means of a wire, cable, pipeline or other conduit, and for which the supplier invoices the recipient on a regular or periodic basis. Continuous Supply of Services: As per section 2(33) of CGST Act, 2017, “continuous supply of services” 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. Example: Kanika uses LPG stove and is a registered customer with Shivani Enterprises, a dealer of LPG Cylinders. She acquires two cylinders every month on regular basis. It is the example of one-time supply where every supply of cylinder is a separate transaction. On the other hand, Ms. Tania has taken PNG connection at her kitchen from Indraprastha Gas Limited. The billing is done monthly on the basis of meter reading. It is the case of continuous supply of goods. 4.4.3 Types of Supplies on the basis of taxa ‘The scope of supply has been given in section 7 of CGST Act, 2017. Even if an activity is a supply, itis not necessary that the same is subject to GST. On this basis, there can be following types of supplies: (a) Taxable Supply: As per section 2(108) of CGST Act, “Taxable Supply refers to a Supply of Goods and/or Services which is leviable to tax under CGST Act or under the IGST Act”, (b) Non-Taxable Supply: As per section 2(108) of CGST Act, ‘Non-Taxable Supply means a Sup- ply of Goods and/or Services which is not leviable to tax under CGST Act or under the IGST Act”. (c) Exempt Supply: As per section 2(47) of CGST Act, “Exempt Supply means a Supply of any Goods or Services or both which attracts Nil rate of tax or which may be wholly exempt from tax under Section 11, or under section 6 of IGST Act, and includes non-taxable Supply”. (d) Zero Rated Supply: It is Supply of any Goods and /or Services on which no tax is payable but input tax credit pertaining to that Supply is admissible. As per Section 16(1) of IGST Act, 2017, ‘zero rated supply” means any of the following supplies of goods or services or both, namely:— (a) export of goods or services or both; or (b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit. 4.4.44 On the basis of Geographical location: When we consider the movement of Supply geographically, it can be of three types namely Inter- State Supply, Intra-State Supply and ‘Supplies in the territorial waters. (1) Inter-State Supply: As per Section 7(1) of IGST Act, Subject to the provisions of section 10, supply of goods, where the location of the supplier and the place of supply are in (@, two different States; (b) two different Union territories; or (© a State and a Union territory, eNNVWXVL,CE ES ‘TAXMANN® Parad SUPPLY UNDER'GST “ or commerce, shall be treated as a supply of goods in the course of inter-State ee ofservices, wh, Similarly, as Per section 7(3), Subject tothe provisions of section a » Where the location of the supplier and the place of supply are 1" (@) two different States; (B) two different Union territories; ot (© a State and a Union territory, shall be treated as a supply of services in the course of inter- i rads (2) Intra-State Supply: As per Section 8(1) of IGST Act, Subject to the Proms OM cen, supply of goods where the location of the supplier and the place of supply of B00 are inthe same State or same Union territory shall be treated as intra-State supply: Provided that the following supply of goods hall notbe treated asintra-State supply, namely.— ‘conomic Zone developer or a Special Economic State trade or commerce, ( supply of goods to or by a Special E: Zone unit; (id) goods imported into the territory of India till they cross the customs frontiers of India, or (iid) supplies made to a tourist referred to in section 15. (3) Supplies in the territorial waters: As per Section 9 of IGST Act, Notwithstanding anything contained in this Act— (a) where the location of the supplier is in the territorial waters, the location of such sup- plier; or (b) where the place of supply is in the territorial waters, the place of supply, shall, for the purposes of this Act, be deemed to be in the coastal State or Union territory where the nearest point of the appropriate baseline is located, (AS TYPES OF SUPPLIES IN'CASE OF COMBINATION SUPPLIE: ‘The GST is payable on individual goods or Services or both at the notified rates, For example: The Tooth-paste and Tooth-brush are liable to GST @ 12% and 18% respectively. It means the ST on these items will be calculated accordingly, Sometimes, two or more goods or Services are supplied in combination at a Consolidated price. In this case, a question arises about the rate of GST to be levied as the goods/services in package may be subjected to different rates of tax, For example: ‘A desktop computer (GST@28%) and a wooden table (GST i ante or price of € 52.500. (GST@18%) are offered by supplier at 19610 ADOWS: wet (b) Supply of LCD with warranty and maintenance for 1 year again at a consolidated price. For the purpose of taxability, the CGST Act, classifies these “Combination Supplies” into two {PS (1) Composite Supply (2) Mixed Supply 4.5.1 Composite Supply:87 ‘TYPES OF SUPPLIES Paradd ‘The following are the basic features of a composite supply: @ It should be supply made by taxable person to a recipient. (& It should consist of two or more taxable supplies of Goods or/services or both. (©) The combination should be naturally bundled and supplied in conjunction with each other in the ordinary course of business. [ ‘® The Supplied in conjunction means that they should be occurring in the same point in time and space. (@ Out of two naturally bundled supplies, one should be a principal supply: @ 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 a principal supply. Principal Supply means supply which forms the predominant element of the composite supply and other parts of the supply are only ancillary or supportive to that predominant part. Examples on Composite Supply: Brample 42 E aE PRES ‘Supply: Prakash buys LCD and also gets warranty and a maintenance contract with the LCD. Comment: This supply is a composite supply. The supply of LCD is the principal supply and warranty/ maintenance services are ancillary. [Bample 42 CET EE ‘Supply: Samrat Hotel in Shimla, provides 4 days-3 nights package at 8,000 wherein the facility of breakfast and dinner is provided along with the room accommodation. Comment: It is composite supply since the supply of breakfast and dinner with the accommodation in the hotel are naturally bundled. es ST TS TTT z ‘Supply: The Xiaomi Communication Co. Ltd. has recently launched a mobile phone with the brand name ‘Redmi Note 4", The company supplies the accessories, earphone and charger along with the handset. Comment: The supply of earphone and charger with the mobile phone handset are naturally bundled. This supply qualifies as ‘composite Supply.” The Supply of mobile phone is the principal supply. 4.5.2 Mixed Supply: As per Section 2(74), ‘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.” The essence of the definition is that there should be supply of two or more individual goods or services or any combination thereof, in conjunction with each other. In fact, in case of mixed supplies, the goods/services which are supplied to the recipient at one price can be supplied individually. In other words, the individual supplies are independent of each other and are not naturally bundled. in nutshell, a supply of more than one goods and/or services as a bundle will be reckoned as mixed supply if the following conditions are fulfilled: (9 Such goods/or services are supplied for a single price, (ii) They are not naturally bundled together and (iii) It does not qualify as composite supply. oNNVIXVE,eae ‘TAXMANN® CO Para 4.6 SUPPLY UNDER GST Examples on Mixed Supply: ae ae cakes, dry fruits, aerated drinks a Sornly: A gift pack comprising of canned foods, ‘uit juices supplied for a single price. ‘old independently. Comment: Its an example of mixed supply as all these goods can be 8 [Bampieas nso Supply: Rent deed executed for renting of the different floors of a buil for commercial purpose to the same person. Comment: It will be treated as mixed supply as the two floors could ‘Supply: A supply of a package Comprising of shirt, trouser, tie and tian ‘Comment: I is a mixed supply. The reason being each of these items can be supplied separately and is not dependent on any other. Note: The provisions relating to determination of tax liability on mixed supplies have been discussed in Para 5.11 of Chapter 5. eweets, chocolates Faoomnens ws holla’ ort ¢ ] ding, one for residence and another have been rented independently. elt for a single price. ‘Works Contract and Restaurant Services 1. As per section 2(119) of CGST Act, 2017, “Works contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out, improvement, modification, repair, maintenance, renovation, alteration or commissioning of any immovable property wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such contract.” 2. Works contract and restaurant services are the classic example of composite supplies. However, the GST law identifies both as supply of services [as per Schedule I] Composite and Mixed Supply (Comprising two or more supplies of goods or services or any combination thereof) TT Natuvally Binaied van Raa Comprising two or more supplies, one Comprising two or more individual of which is a Principal Supply supplies, made for a single price, which is not Composite Supply Comiposite Supply” y Ta Say There are certain terms which are necessary to be understood in order to analyse the provision® e pr of section 7, These include the following 1, Business 2, In the course of business or in the furtherance of Business 3. Consideration 4, Taxable Person59 IMPORTANT TERMS: Para 4.6 4.6.1 Business: As per section 2(17) of CGST Act, 2017, the term business includes: (a) Any trade, commerce, manufacture, profession, vocation, adventure, wager orany other similar activity, whether or not itis for a pecuniary benefit; (0) Any activity or transaction in connection with or incidental or ancillary to sub-clause (a): (¢) Any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction; (a) Supply or acquisition of goods including capital goods and services in connection with com- mencement or closure of business; (c) Provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members; (f) Admission, for a consideration, of persons to any premises; (g) Services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession or vocation; th) Services provided by a race club by way of totalisator ora licence to book maker in such club; and i) Any activity or transaction undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, Importance of Business: Basically, GST is a tax on commercial transactions. It means any Supply made by individual in his personal capacity does not come under the ambit of GST unless it falls within the definition of Business. For example: Mr. Vipin has purchased Scooty “Activa 4G’ from a dealer “Honda Auto” for personal use. After a year, he sells it to a dealer M/s True Value. Now, when the Scooty was sold by “Honda Auto’, itis a supply under GST. But, when Vipin sold the Scooty to M/s True Value, then it is not a supply under CGST Act because this supply is not made by Vipin in the course of or in furtherance of business. 4.6.2 In the course of Business or in the furtherance of business: These terms are not defined under GST laws. On the basis of general interpretation, the two terms may be explained in the following manner. In the course of Business: In order to carry on the business, various activities are carried out by the entity on a routine basis such as sale or purchase of goods, provision of services, production of goods, making and receiving payments, etc. These activities may be regarded as the activities undertaken in the course of business. In the Furtherance of Business: The dictionary meaning of furtherance means an act ofhelping something tobecome more successful or advanced. If we draw inference from this meaning, then the phrase “Furtherance of business” means any activity intended for the advancement of business, Under GST, both the phrases are to be taken together to, Sperone its meaning in true. ae Importance of term: Only those ‘supplies that are in the Course or furtherance of business qualify a8 supply under GST. It means selling of used personial:car by individual t6 a dealer is not supply under GST-as it is not in the course or furtherance of Business, Therefore, any activity undertaken in, the course or-for furtherance of business would only constitute a supply. There is one exception to this course or fartherayiée of ‘businéss rule fe: import of Services for a consider sls eter Para 48 6.3 for detail). oNNVIXVL,"TAXMANN® it i) Beads SUPPLY UNDER OST 4.6.3 Consideration: son tothe supply of €00d OF Serve AAs per section 2(31) of COST Act, 2017, ‘Consideration in relation 10 @ or both includes— (a) Any payment made or to be made, whether in money ot 10, or for the induicement of, the supply of goods or ser or by any other person but shall not include any subsidy given 4 State Government. ise, it ect of, in respons, otherwise, in resp e 1 oer both, whether by the recipien by the Central Government oy in respect of, in response 10, or for the induce. ‘her by the recipient or by any other person ernment or a State Government, () The monetary value of any act or forbearance, ment of, the supply of goods or services or both, whet but shall not include any subsidy given by the Central Gov ie The proviso to section 2(31) states that, “a deposit given in respect of the supply of - ae 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.” The following are the important interpretations from the above definition:— (1) Monetary Consider: The term consideration includes monetary consideration. As per section 2(75), “Money” includes not only cash (Indian Currency as well as foreign currency) but also cheques, promissory notes, bills of exchange, letter of credit, draft, pay order, traveller's cheque, money order, postal or electronic remittance or any other instrument recognized by RBL. (2) Non-Monetary Consideration: Under GST, Consideration also includes non-monetary con- sideration, which simply implies compensation in kind. The following shalll be included as non-monetary consideration. (a) Supply of goods or service in | Example: Shyam, a barber, agrees for hair-cut of a dentist & return for provision of service | in return the dentist extracts his damaged tooth. (b) Refraining orforbearingtodo | Example: Mohan owns a renowned shop for good quality anact for provision of service | chicken. Anil wants to enter into the same business in the same locality. Mohan paid € 2,00,000 to Anil refraining him to open shop in the same area for two years, (6) Toleratinganactorasituation | Example: Dorbin owns three cars and is unable to park all in return for provision of a of them within his premises, He requested his nelghtous 1 Bervice allow him to park one of his cars in front of his main gate. In return the neighbour charged & 2,500 per month, (G) Who will pay Consideration: The consideration is paid by recipient i not always flow from the recipient of the supply; t can sles coats eee i need For Example: Sonu has joined coaching classes for MBBS is ent i Preparation. The Provider of sup- ply is the Institute, the recipient is Sonu but payment is made b ’. “ constitute supply. 'y Son's father. It will aso (4) Determination of Value: The Value of Supply is deter tion 15 of the CGST Act, 2017. In addition, Vahiation principles a see CGST Rules, 2017. (Please refer Chapter 9 ofthe book for detaily Sen Chapter IV o (5) Government Subsidy: The consideration does not include Government or a State Government, (Refer Para. 9 fon, detail) (©) Deposit: The deposit may be of two types: refuridable an (a) Refundable Deposit; It is not subject to Supply of Goods and/or Service is not cor mined in the mann ified in Sec- a er specified in subsidy given by the Central6 PROVISIONS IN RELATION WITH SUPPLY Para 4.7 The reason being it has to be refunded after the completion of provision of service or the transaction, (6) Non-refundable deposit: If the deposit is non-refundable, or the supplier applies such deposit as consideration for the said supply, then GST is applicable. (7) Donation: The donation or charity does not attract GST unless this donation imposes an obli- gation on the recipient (ie. the donee) to provide something in return. For example: A donation of & 1,00,000 is given by a doctor to the trust of a temple. This will not attract any GST. But, if on account of such donation, the trust is bound to display or advertise the doctor's cli then it is a consideration and GST will become applicable. Importance of Consideration: In order to fall within the ambit of GST, one of the essential conditions for the supply of goods and/ or services is that it is made for a consideration. There are exception to this rule given in Schedule I of the CGST Act as deemed supply. 4.6.4 Taxable Person: As per section 2(107), a taxable person is a person who is registered or liable to be registered under section 22 or section 24. The following are the important inferences: 1. A registered person is a taxable person. 2. The person who is liable to be registered is also a taxable person. It means an unregistered person, who is liable to be registered, is a taxable person. 3. A person who has taken voluntary registration is also a taxable person although he is not liable to be registered. Importance of Term: A supply to attract GST should be made by a taxable person. However, it may be made to a non- taxable person. But a supply between two non-taxable persons does not constitute taxable supplies under GST. NWiTH SUPPLY NTO) ‘The provisions relating to components and scope of supply are given in section 7 of CGST Act, 2017. The following diagram shows an overview of the provisions. Provisions in relation to supply Scope'of Supply (Seetion’7) 9!) ‘Section 7(1): Inclusions in Supply 1 Treated as Supply, even if without consid” eration Section 7@), Neither Supply of Goods not|» I Classification of Supply into Goods/ services Services ‘Section 7@): Central Government may notify Il Neither Supply of Goods nor Supply of Services wat oNNVWXVLTAXMANN® Para 4.8 [SUPPLY UNDER GST fromciad y a adhe As per section 7(1) supply includes:- (@) Allforms of supply of goods or services or both such as sale, lease or disposal made ot agreed to be made for a consideration ance of business; varter, exchange, licence, rental transfer, barte® ty the course or furth by a person rtherance of business; | () Import of servi notin the couse Or rat ices for a consideration whether or vie aithout a consideration and (©) The activities specified in Schedule I, made o agreed to be ma ferred to in Schedule I (d) The activities to be treated as supply of goods or supply of services a8 T° enre Analysis of Provisions of Section 7(1) 4.8.1 Modes of Supply The supply of goods and services are under the purview of GST. The scope of Supply [as given in section 7(1)] has been given in an inclusive manner. The list given in the sub-section is not exhaustive, This is substantiated by the use of words “such as” and ‘supply includes” in the definition. The following modes of supply have been mentioned in section 7(1)(@) (a) [Sale Itis simply sale of goods (®)_| Transfer Its like inter-state stock transfer. (©) | Barter Transaction involving exchange of goods or services. In this case, same activity constitutes supply as well as consideration. For Example: A grocery shop owner exchanges grains for fruit from fruit seller. (@) [Exchange | Itis broader than barter, as it also covers a situation where goods are partly paid for in goods and partly in money. For Example: Old mobile phone is exchange for a new one & some additional cash has been paid. (© | License, Lease, |The licenses, leases and rentals of goods with or without transfer of right to use are Rental et | covered unde the supply of service in GST because there is no transfer of tilein such supplies. Such transactions are specifically treated tule IL of CGST Act, ly as supply of service as per Like disposal of waste )__| Dispos 4.8.2 Parameters of supply The section 7(1)(a) clearly specifies the followin; i a a cacton suppl a i Parameters which can be adopted to characterize (@) lt should be supply of goods or services only. (Refer Para 42 for details) (&) The supply should be made for a consideration (Refer Para 443 for details) (c) The supply should be made in the course or fi ; Odell) " furtherance of business (Refer Para 442 fot (@ lt should be made by a taxable person (Refer Para 444 for detail) (@) It should be a taxable supply. (Refer Para 445 for details) Exception to the above Parameters ‘There are few exceptions to some of aforesaid parameters of taxable suppl ly. These are as follows:63 ‘SCOPE OF SUPPLY Para 4.8 (@) ‘Consideration’ Parameter: There are few cases specified in Schedule I of CGST Act, 2017, where the supply is considered even if the same is without consideration. (Refer Para 4.9) () ‘Course or furtherance of business’ Parameter: In the case of import of service for a consideration, the same is treated as supply whether or Not it is in the course or furtherance of business. (© ‘All’ Parameters: There are few exceptional cases where the transaction is not treated as supply despite of existence of all the parameters. A list of activities is given in Schedule III (may be called as negative list of services). These transactions/activities shall be neither treated as supply of goods nor a supply of services. It means these are kept outside the scope of GST. (Refer Para 4.11) 4.8.3 Importation of Service for consideration [Section 7(1)(b)] In order to bring a supply under the ambit of GST the ‘in course or furtherance of business” parameter is one of the necessary condition. The only exception to this condition is given in section 7(1)(b) of CGST Act. As per this section, the Import of services for a consideration, whether or not in the course or furtherance of business, shalll be treated as supply. It means even the import of services for personal use with consideration would also be covered under the definition of supply. For example: Mr. Mukesh Ambani, an industrialist, has received the architect service for his private house “Antilia” from Chicago based architects firm “Perkins & will”. This import of service is supply under section 7(1)(b) through it is not in course or furtherance of business. It is important to note that the recipient of Service (ie. the importer of Service) is liable to pay GST under Reverse Charge mechanism. (Refer Para. 13.10.1 for further details.) 428. Supply without consideration [Section 7(1)(c)] ‘The section 7(1)(c) includes some activities as supply which are made or agreed to be made even if the same is without consideration. These are specifically mentioned in Schedule I appended to the CGST Act, 2017. It has been discussed separately under Para 4.9. 4.8.5 Activities to be treated as supply of goods or supply of services [Section 7(1)(d)] ‘The section 7(1)(d) of the CGST Act, 2017 refers to Schedule Il for determining whether a particular transaction is a supply of goods or supply of services, The activities specified in Schedule II have always been marginal cases with respect to levy of multiple indirect taxes. This Schedule tries to lays down all the controversies to rest by holding what would be held as service and what would be goods. Therefore, this helps in mitigating the ambiguities which existed in the earlier laws. The supply by a restaurant is one of the classic examples wherein food and services, both are supplied & these are naturally bundled in ordinary course of business. It means both goods and services are inter-linked, inter-mixed and dependent on each other. The Schedule Il (Entry 6(b)] to the CGST Act specifically provides that such composite supply shall be treated as supply of service. It means, GST is leviable on entire value of invoice as value of service. The Schedule II has been discussed in detail in Para 4.10. oNNVIVXVL,TAXMANN® ee ——————————————— Para 4a « SUPPLY UNDER GST BOSCOPEOF: UPPLYISECTION7(2)1 AS Per section 7(2), "Nonwithstanding anything contained in section 71), (9) Activities or transactions specified in Schedule Ill;or (0) Such activities or transactions undertaken by the Central Governmen or any local authority in which they are engaged as public authorities, the Government on the recommendations of the Council, shall be trea Of goods nor a supply of services Analysis of Section 7(2): 1, a State Governmen, as may be notified by ted neither as a supply The section 7(2(a) refers to Schedule Il that specifies the activities which shall be a eated as supply of goods nor a supply of services. It means these specified activities are 29 ne ies and are outside the scope of GST. The schedule II has been explained in Para 4.11 in detail Overriding effect: The section 7(2) starts with “notwithstanding anything contained in sub-section (1).......” It implies that this section has an overriding effect on section 7(1) It means in case of any dispute, section 7(2) will prevail over Section 7(1), 4.10 GOVERNMENT'S POWER OF CLASSIFICATION [SECTION 7(3)] As per section 7(3), “Subject to the provisions of section 7(1) and 7(2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as— (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods." This sub-section gives a right to the Government to Therefore, under this section, the government is e of goods and certain supply as supply of services, council. classify and make amendments to Schedule IL mpowered to classify certain supply as supply But this shall be on the recommendations of the 4.11 SCHEDULE I [ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT (CONSIDERATION F022 to yicgue 16 *hoop to aque 26 beset o¢ ot asinivitsa abd In every tax statute, the consideration plays paramount role for levy of taxes. However, under GST, the concept of consideration has been done away in certain cases As per Schedule following four cases, the supplies made even without consideration will be treated as supply under section 7 of the CGST Act: 1. Permanent Transfer/Disposal of Business Assets 2. Supply between related person or distinct persons 3. Supply of goods by a Principal to his Agent 4, Importation of services 4.11.1 Permanent Transfer or Disposal of the Business Assets: Any kind f disposal or transfer of business assets made by an enti ee Sat even though it is without consideration. However, it ig mn. eet aneNt basis qualifies aS import ae would apply only if input tax eredit has been availed on such asrerg ot © ROt® that this provisionoy ACTIVITIES TO BE TREATED AS SUPPLY. Para 4At ‘XYZ Limited had purchased computer for business purposes & ITC on the same has been availed. After ‘one year, these computers are permanently transferred to a charitable school without consideration. This permanent transfer is subject to GST although it is made without consideration, [Bampleast GOOG. Y guilore Won Hilly 1a Svs Te Re Priyansh is a cloth retailer located in Chandni Chowk, Delhi. At the time of purchase of cloth (Business asset) he claims input tax credit. He has given clothes from his business stock to his friend free of cost. Since it is transfer of business asset and ITC had been claimed, it will tantamount to supply and will attract GST. 4.11.2 Supply between Related Person or Distinct Persons: The Supply of goods or services or both between related persons or between distinct persons as specified in section 25 will qualify as supply provided it is made in the course or furtherance of business. It means such transactions will be treated as supplies, even if made without consideration. Let us discuss the concepts of related person and distinct persons. Related Persons As per explanation to section 15, the persons shall be deemed to be “related parties” if: (@ Such persons are officers or directors of one another's businesses; (ii) Such persons are legally recognised partners in business; (iii) Such persons are employer and employce; (év) Any person directly or indirectly owns, controls or holds 25% or more of the outstanding voting stock or shares of both of them; (¥) One of them directly or indirectly controls the other; (vi) Both of them are directly or indirectly controlled by a third person; (vii) Together they directly or indirectly control a third person; or they are members of the same family; Distinct person AAs per section 25(4), a person who has obtained or is required to obtain more than one registration, ‘whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of this Act. Establishments of Distinct persons [As per section 25(5), where a person who has obtained or is required to obtain registration in a State or Union territory in respect of an establishment, has an establishment in another State or Union {erritory, then such establishments shall be treated as establishments of distinct persons for the purposes of this Act. Analysis of Provision: ‘The supply of goods or services.or both between related persons or between: distinct persons would be taxable even though it is without consideration, provided it is made in the course of furtherance of Business. The following points may be rioted in this regard: 1. Supply between Employer and Employee By virtue of the definition of related person given in explanation to section 15, the employer and employee are related persons. However, the services provided by the employee to the employer in the course of or in relation to his employment are not treated as supply of ser- oNNVINXYLTAXMANN® Re gegen mae 4 Para « “it ‘SUPPLY UNDER GST! st ly by the empl Vices. [Schedule Ill of CGST discussed in Para 4.11} It is SE bie the employer ay to the employee in terms of contractual agreement ent the employee, will not be subject to GST. % About Gifts by Employer to Employee (000 in value in a finane, The second entry in schedule provide that gifts not exceeding © eh of good or seviowat year by an empioyer to an employee shall not be treated as SUPP'Y or both. The limit of % 50,000 is per financial year. An employee has joined the company an L4th Nov. 2017. OF cheque as gift to that empl dt iployee. Since it does not excee 17.In the year 2017-18, the fresh limit of € 50,000 will be available with the erm 2018 the company has given? 40,009 S500, euch supply would not be taxable in 2016, ailabl ployee. 3. Stock Transfers or Branch Transfers : As already stated, under section 28, a person who has obtained more than one segstration shall be treated as district person in respect of each such registration. There may be transac. tion between different locations of same legal entity ike stock transfers or branch transfers, In view of entry 2 of Schedule I, such transfers will quality as supply under GST. Example 4.10 “Ritu Wears’ has a factory in Delhi & retail showroom in Mumbai. The factory & retail showroom are registered in Delhi & Maharashtra under GST law. The company has transferred 50 designers ‘Sarees’ Z| 100 executive ‘Lehanga’ from the factory to showroom. Although no consideration is charged, transfer of goods from factory to showroom constitutes supply. 4.11.3 Supply of goods between Principal and Agent The Supply of goods by a principal to his agent, without consideration, where the agent undertakes to supply such goods on behalf of the principal is considered as supply. Similarly, supply of goods by an agent to his principal, without consideration, where the agent undertakes to receive such goods on behalf of the principal is considered as supply. Analysis ‘The following are the important inferences: (a) This entry covers supply of goods only. (b) The supply of goods between principal and agent without consideration is covered here. (©) The clearance of goods to a consignment agent/clearin, tutes supply. Mes aoiAiiis & WGN Te Am jes Sou wea n his behalf. This qualifies as a supply. i agent and forwarding agent consti- ‘Mr. Ranjan has supplied the goods to his agent, in order to sell them o1 although the agent has not paid any consideration as yet. 4.11.4 Importation of services (from related person located outside India) ‘Theimport of services by a taxable person froma related person or from outside India, without consideration, in the course or furthy supply’. his establishments located 'erance of business shall be treated a567 ‘Q00DS OR SUPPLY OF SERVICES Para 4.12 ‘When an Indian company receives consultancy services from its head office located outside India free of cost (being its own branch), it will quality as supply as Head office and Branch office are related person. It is important to note that the import of Service is normally chargeable to GST under RCM. Section 7(1)(d) of the Act refers to Schedule II for determining whether a particular transaction is a supply of goods or supply of services. The Schedule Il appended to the CGST Act enlists the matters/transactions to be treated as Supply of either goods or services. The list of supplies is the taxable supplies but they have been prescribed separately under Schedule II just to remove any ambiguity on the taxability of such transactions and also to ensure uniformity of taxation on such supplies throughout the country. These are as follows: ‘Transaction ‘Nature of Supply 1, [Transfer Title in goods Supply of Goods Right in goods/undivided share in goods without transfer of title in goods ‘Supply of Services Title in goods under an agreement which stipulates that property shall pass at a | Supply of Goods future date. 2. | Land and Building : # ay Lease, tenancy, easement, licence to occupy land. Supply of Services Lease or letting out of building including a commercial, industrial or residential | Supply of Services complex for business or commerce, wholly or partly. |Biitieatment of Process : ‘Applied to another person’s goods ‘Supply of Services (For example: the job work performed by a job worker) 4,_| Transfer of Business Assets 4 Goods forming part of business assets are transferred or disposed of by/under | Supply of Goods directions of person carrying on the business so as no longer to form part of those assets, whether or not for consideration Goods held/used for business are put to private use or are made available to any | Supply of Services person for use for any purpose other than business, by/tnder directions of person carrying on the business, whether or not for consideration. ‘Goods forming part of assets of any business carried on by a person, who ceases | Supply of Goods 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, Exceptto ‘@ Business is transferred as a going concern to another person. ‘ Business is carried on by a personal representative who is deemed torbe a taxable perso ‘Renting of immovable property ‘Supply of Services @NNVINXVL‘TAXMANN® SUPPLY UNDER GST er Supply of Services including @ Construction of a complex, building, civil structure or a part thereof, where complex or building intended for sale to.a buyer; wholly or Party ete arte, the entire consideration has been received after issuance of comp! aren whichever where required, by the competent authority or after its first occupation, is earlier, ight | Supply of Servi Temporary transfer or permitting use orenjaymentof any intellectual property right es tation, upgradation, | Supply of Services Development, design, programming, customization, adat enhancement, implementation of IT software Agreeing to obligation to refrain from an act, or to tolerate to do an act. Supply of S Transfer of right to use any goods for any purpose Supply of Services 6._| Composite Supplies oe ‘an act or situation, or | Supply of Services Works contract services Supply of Services Supply by way of or as part of any service or in any other manner whatsoever, | Supply of Services of goods, being food or any other article for human consumption or any drink. 7._| Unincorporated Association /Body of persons Supply of goods by an unincorporated association or body of persons toa member | Supply of Goods thereof for cash, deferred payment or other valuable consideration, For better understanding, the important terms used in above table have been elaborated as under. Construction: The term ‘construction’ includes additions, alterations, replacements, or remodelling of any existing civil structure. Competent Authority: The expression ‘competent authority’ means the Government orany authority authorised to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely: (9 Anarchitect registered with the Council of Architecture constituted under the Architects Act, 1972; or (i A chartered engineer registered with the Institution of Engineers (India); or (ii) Alicensed surveyor of the respective local body of the city or planning authority. Works contract services [Section 2(119) of CGST Act] or town or village or development Works contract means a contract for building, construction, installation, fitting out, improvement, modification, repair, litenaneé,reaeene jo erty ‘commissioning of any immovable property wherein transfer of proper; grin some other form) is involved in the execution of stich conten 1 8°0U8 (whether as goods fabrication, completion, erection, ‘The Schedule III specifies the transactions or activities which sh, : goods nor a supply of services. These transactions or activities eo ve neither treated as supply of the GST regime. The following table depicts the Schedule In; termed "Negative list” undetPs ‘MISCELLANEOUS ILLUSTRATIONS ON SUPPLY UNDER GST ‘Neither supply of goods nor supply ofservicce 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. Explanation.— The term "Court’ includes District Court, High Court and Supreme Court, 3. | (@ Functions performed by the Members of Parliament, Members of State Legislature. Members of Panchayats, Members of Municipalities and Members of other local authorities; (2) Duties performed by any person who holds any post in pursuance of the provisions of the Con- stitution In that capacity; or (0) Duties performed by any person as a Chairperson or a Member ora Director ina 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. 5._| Sale of land and, subject to paragraph 5(b) of Schedule I, sale of building 6._ [Actionable claims, other than lottery, betting and gambling (SAAS ACTIVITIESTRANSACTIONSNOTIFIEDBYTHEGOVERNMENT(NEGATIVE LIST: Such activities /transactions undertaken by the Central Government, a State Government orany local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council shall be treated neither as a supply of goods nor a supply of services. Notification No. 14/2017-CT (R), dated 28.06.2017 has notified the services by way of any activity in relation to a function entrusted to a Panchayat under article 243G of the Constitution for the said purpose. MISCELLANEOUS ILLUSTRATIONS ON SUPPLY UNDER GST IMlustration 4.1: Determine whether the following supplies amount to composite supplies: fa) A hotel provides 3 days-2 night's package wherein the facitity of breakfast and dinner is provided along with the room accommodation. (b) A toothpaste company has offered the scheme of free toothbrush along with the toothpaste Answer: [As per section 20) of the CGST Act, under composite supply, two or more taxable supplies of goods or Services or both, or any combination thereof, are naturally bundled and supplied in conjunction with each ther, in the ordinary course of business, one of which is a principal supply. In the light ofthis provision, we may conclude the following: (@) Composite Supply: The supply of breakfast and inner with the accommodation inthe hotel are naturally bundled. Therefore, this supply qualifies as ‘composite supply’ “(by Mixed Supply: The supply of toothbrush along with the toothpaste is not naturally bundled. Therefore, it does not qualify as ‘composite supply’. In fact, it is a mixed supply. :TAXMANN® tIitIOtOTiT % ‘SUPPLY UNDER GST Mlustration 4.2: sch ofthe folowing supplies are naturay In the light of provisions of section 8 of CGST Act, 2017, siate which of t bundled? Xin favour of Mr. Mukes (A) Rent deed executed for renting of two different floors of a building aor is for business ice The first floor has been rented for residential purpose whereas the gr ‘separately als0- Both the floors have separate entry and passage and can be let out ich, tie and belt ina single bine (2) On the occasion of New Year, Jankidas & Sons, Connaught Place, Dethi sold wal Pack at a consolidated price. (3) A charger has been supplied by the vendor along with the mobile phone. (4) A gift pack comprising of chocolates and sweets. Answer: : (1) The two floors can be let out independently to different tenants. Therefore, this supply is not naturally bundled. Hence, itis mixed supply. (2) The each of the item in the packet can be supplied separately and is not dependent on each other. Hence, the supply is not naturally bundled and is mixed supply. (3) When the charger is supplied with the purchase of new mobile phone, it is in conjunction with each other as it is required by the user of mobile phone. So, this supply is considered to be naturally bundled, Therefore, it is Composite Supply. (4) The supply is not naturally bundled as the items in the gift pack can be supplied separately. Therefore, it is mixed supply, Mlustration 4.3: State whether the following supplies would be treated as supply of goods or supply of services as per Schedule Hof the CGST Act: () Title in goods under an agreement which stipulates that property shall pass at a future date (ii) Transfer of right in goods without transfer of ttle in goods (ii) Transfer of Title in goods immediately (iv) Renting of immovable property (v) The job work performed by a job worker Answer: Activity or Transaction Gena Be ’)_ | Title in goods under an agreement which stipulates that property shall ices s future date pert, Pass at a | Supply of Goods (| Transfer of right in goods without transfer of title in goods - (iid | Transfer of Title in goods immediately Seve a Sense i of (iv) | Renting of immovable property aa ly | See ()_| the job work performed by a job worker s polo rv s supply of Servic Illustration 4.4: State in which Schedule (Schedule If or IM), the following suppli ai colage™ they shall be classified: ‘8 supplies have been covered, Also determine in (a) Supply of Goods (b) Supply of Servicesnm MISCELLANEOUS ILLUSTRATIONS ON SUPPLY UNDER GST (6) Neither supply of goods nor supply of services: (1) Goods forming part of business assets are transferred by the business so as no longer to form part of those assets, without any consideration. (2) Services by an employee to the employer in the course of or in relation to his employment. (3), Services by any court or Tribunal established under any law for the time being in force (4) Temporary transfer of intellectual property right (8) Services of funeral, burial, crematorium or mortuary including transportation of the deceased (6) Lease rentals collected. (7) Sale of land Answer: The Schedule I appended to the CGST Act enlists the matters/transactions to be treated as Supply of either goods or services whereas Schedule III specifies the transactions or activities which shall be neither treated as supply of goods nor a supply of services. cana - | Schedule | Type of Supply oa 1. | Goods forming part of business assets are transferred by the rr ‘Supply of Goods business so as no longer to form part of those assets, without any consideration 2. _| Services by an employee to the employer in the course of or stg Neither Goods nor Services in relation to his employment & Services by any court or Tribunal established under any law m Neither Goods nor Services for the time being in force. 4.__| Temporary transfer of intellectual property right rT ‘Supply of Services 5s Services of funeral, burial, crematorium or mortuary i Neither Goods nor Services including transportation of the deceased. 6. Lease rentals collected 0 ‘Supply of Services z Sale of land Lig Neither Goods nor Services Mlustration 4.5: Examine whether the following activities would amount to supply under section 7 of CGST Act? 1. Import of services without consideration for personal purposes 2. Import of services for a consideration in the course or furtherance of business 3. Import of services for consideration for personal purposes ‘4. Import of services by taxable person from related person located outside India without consideration: (a) For personal purposes. (b) In the course or furtherance of business Answer: ‘The provisions relating to import of services are covered in section 7(1)(b). An exceptional case of import of services from related person Is given In Schedule Inpport.of services, without consideration | NO...,,|.As per section 7(1)(b), Jmport of servicas-far, a for personal. purposes ie ¢onsideration whether or,not in the course or 2: |Importof servicesforaconsiderationinthe | Yes «| /urtherance of business, course or furtherance of business |< « 1. Nota supply as ‘Consideration’ is missing, 3. [Import of services for consideration for | Yes 2, Itquallfes for supply asitis forconsideration, personal purposes aNNVIXWLLLL q ‘SUPPLY UNDER GST “lifes a8 supply a8 consideration ‘“ Teport of services by taxable person from 3. ect Ha urpose is not relevant, ify ited on! te “ ar oe reltedpersonlocatedoutsidetndia without Fecconeain trom 4. Theimportation of servi : ne ie care covered under Schedule I ang er der Seb () In the course or furtherance of busi- | Yes pers aes apply provided itis in the cou ee otfurtherance of business. {a) It will not qualify as supply since the Jame has not been received in course or furtherance of business. It will qualify as supply as received in © A eourse of furtherance of business Mlustration 4.6: Examine whether the following activities would amount to supply under CGST Act, 2017: (a) Shiv steels is a renowned furniture house. As a part of their business policy, the firm donated 5 office tables 10 Charitable School. At the time of purchase, the ITC has been taken. (b) Pawan Manufacturers have a factory in Dethi and a depot in Mumbai. Both these establishments are reg istered in respective States. Finished goods are sent from factory in Delhi to the Mumbai depot without consideration so that the same can be sold. (c) Dharamdas Charitable Trust is engaged in getting the eye treatment of needy people done free of cost It donates clothes and toys to children living in slum area. (A) Bharat is a registered person under GST in Mumbai. His brother who is settled in London is a well-known lawyer. Raman has taken Legal advice from him free of cost with regard to his family dispute. Solution: ‘TAXMANN® (@ The given transaction is covered under Schedule I under the category, assets". Since the input tax credit has been availed, the donati supply. (b) There are two points relevant in this regard: “Permanent transfer of business ion of this business stock will qualify as + Firstly the two establishments are distinct persons as per section 25 of CGST Act. 2017 # Secondly, Schedule I stipulates that supply of goods oF services or bet ! ch 8 or between distinct persons is supply even without consider atio pawioes pelatcd pera y n provided it is made in the coursé or furtherance of business. In the given case, the business. , f goods have been sent in course/furtherance of ‘Therefore, supply of goods from Delhi factory of Pawan Manufacturers sideration, but in course/furtherance of business, is supply under ceva (© There are two elements in Section 7 of the CGST Act; ( The supply must be made for a consideration (i It should be in course or furtherance of business, Since, both these elements are missing, donation of clothes and toys to children living in slum area would not amount to supply under section 7 of the CGST Act. Such trans it is not transfer of business asset. Therefore, the activity shall sae Spo fall uder Schedule as supply. been taken for considerati (d) Since the service has not onsideration, ‘section 7(1)¢b) # not apply. The similar entry can be traced in Schedule T of cosy Me importation of Services” dott service as supply if itis provided in the course or furtherance of buses et t treats the importation o! received legal services from his brother free of cost in a wusiness, In the given case, Bharat his “of business. Therefore, it does not qualify as supply, 's to Mumbai Depot without com” ion 7 of the CGST Act.8 ‘TEST YOUR KNOWLEDGE Q.1 Under GST supply includes all forms of supply of goods and services. Define and explain the concept of goods and services. Q.2 Define “Scope of Supply" provided under section 7 of the CGST Act, 2017. Q.3 What are the activities which are treated as supply even if made without consideration? ‘ Q.4 Explain with example ‘Composite Supplies’ and ‘Mixed Supplies’ under GST. Q.5 What are the parameters which can be adopted to characterize a transaction as supply? Is there any exception? Q.6 Is there any negative list provided in CGST Act, 2017? If yes, explain it. Q.7 Explain with reason, whether the following shall be treated as supply or not: (a) Sunil, a dealer of refrigerator transfers one of the refrigerators to his residence for. personal use. The dealer has availed the benefit of ITC at the time of purchase of stock. (b) Acompany has two offices in the same state and separate registrations have been taken for both if the places. The company has transferred stock from one office to another. (©) The brother of Shri Ram is a renowned architect in London. At the time of construction of his residential house, Shri Ram used the services of his brother without any consideration. () The services used by Shri Ram in part (c) above, had been for construction of his factory but consideration has not been paid. (©) Suhani has supplied 2,000 units of a taxable supply to her agent ‘Harish’ for the purpose of sale. Harish will pay only after the actual sales made by him. [Ans.: All the transactions constitutes supply except in case (c)] Q.8 State whether the following supplies would be treated as supply of goods or supply of services as per Schedule II of the CGST Act: (Renting of immovable property (i) Transfer of right in goods without transfer of title in goods. (ii) Transfer of title in goods under an agreement which stipulates that property shall pass at a future date. (iv) Goods forming part of business assets are transferred or disposed of by/under directions of person carrying on the business, whether or not for consideration, (v) Job work performed by Job worker. (v) Business assets transferred to charitable trust without consideration. [Ans.: Supply of Goods (iti), (Iv) & (vi); ‘Supply of Services (i), (ii) & (v)] 0.9 State whether the following supplies would be treated as supply of goods or supply of services as per Schedule I of the CGST Act: 1. Adirector using car provided by the company for personal travels 2. 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. Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or after its first occupation, whichever is earlier, 4, Supplies made under hire purchase, 5, ‘Temporary transfer or permitting use or enjoyment of any intellectual property right [Ans.: Supply of Goods (4); Supply of Services (1), (2), (3) & (5)} oNNVIWXVE,‘TAXMANN® ™ SUPPLY UNDER GST - i fF > (0-10 Examine whether the following activites should be classified as 8 a, Zi title in g (@) ‘Transfer of right in goods/undivided share in goods without transfer 0 (®) Transfer of title in goods © Siri of title in goods under an agreement which stipulates that late, or services? oods property shall pass at a future (@) Transfer of right to use any goods for any purpose (€) Works contract services () Agreeing to obligation to refrain from an act, or to tolerate an act oF situation, [Ans.: Supply of Goods (b) & (c); Supply of Services (a), (4), (¢) & (H] Q.11 Examine whether the following activities would amount to supply under CGST Act, 2017: (2) A cloth retailer gives clothes from his business stock to his friend free of cost. The retailer had claimed input tax credit on his purchase of the business asset. (®) Amodni Fabrics transfers 250 suit lengths from their factory located in Surat to their retail show. Foom in Delhi so that the same can be sold from there. (© Nath & Sons received legal consultancy services from its head office located in USA. The head office has rendered such services free of cost to its branch office. [Ans.: All the three activities constitute supply] or to do an act