Meaning and Scope of Supply

and
Time and Valuation of Supply

D.P. Nagendra Kumar

Pr. Additional Director General
DGCEI Bengaluru
2
Presentation Plan

 Constitutional Provisions
 Supply – Meaning and Scope
 International Approach
 Time of Supply
 Valuation of Supply
 Schedule-I
 Schedule-II
3

Constitutional Provisions
 Constitutional Provisions
4

 Goods and services tax means any tax on supply of goods, or

services or both except taxes on the supply of the alcoholic liquor
for human consumption. Art. 366(12A)

 Parliament has exclusive power to make laws with respect to

goods and services tax where the supply of goods, or of services,
or both takes place in the course of inter-State trade or
commerce Art. 246A(2)
 Goods and Services Tax on supply of goods in the course of inter-
State trade or commerce to be levied and collected by the Govt.
of India and apportioned between the Union and States in the
manner as may be provided by Parliament by law on the
recommendations of the GST Council Art. 269A
 … Constitutional Provisions
5

 Supply of goods or services in the course of import in to the

territory of India shall be deemed to be a supply made in the
course of inter-State trade or commerce-Explanation to Art.269A
 Parliament, by law, to formulate the principles for determining the
place of supply and when a supply of goods or of services or both
takes place in the course of inter-State trade or commerce
 Parliament may, by law, formulate the principles for determining
the place of origin from where supply of goods take place in the
course of inter-State trade or commerce
 ‘Supply’ not defined in the 122nd Constitutional Amendment Bill,
2014
6

Supply – Meaning
 Supply- Basics
7

Supply of
Goods or
Services
Taxable Supply in
Supply India

SUPPLY

Taxable
Consideration
Person

In the course
or furtherance
of business
 Liability to GST
8

A transaction is liable to GST if:

 there is a supply of goods or services
 the supply is for a consideration [subject to specified exceptions]
 the supply is made in the course or furtherance of
business
 the supply is made in India
 the supply is a taxable supply, and
 the supply is by a taxable person
 Supply – Meaning
9

 In certain circumstances, there can be a supply for

GST purposes even when one or more of the
requirements are not met

 For example, a supply may not be in the course

or furtherance of business or made without
consideration. Such a transaction could be
deemed (by law) to be a supply for GST purposes
 .. Supply – Meaning
1 0

‘Supply’
 Includes all forms of supply of goods and/or services such as sale, transfer,
barter, exchange, license, rental, lease, or disposition made or agreed to be
made for a consideration in the course or furtherance of business
 Importation of service, whether or not for a consideration and whether or not in
the course or furtherance of business, and
 Transaction between a principal and agent
 Supply of any branded service by an aggregator under a brand name
 Supply specified in Schedule I, made or agreed to be made without a
consideration
 Schedule II, in respect of matters mentioned therein, shall apply for determining
what is, or is to be treated as a supply of goods or a supply of services
[Section 3 of Model GST Law]
 Sale Transfer Barter Exchange Licence Rental Lease

Importation of Service

SUPPLY Agent - Principal

Aggregator

Deemed Supply – Schedule – I

11
 .. Supply – Meaning
1 2

 ‘Supply of goods’ means the transfer of right to dispose

off tangible property as owner which means the transfer
of both title to the goods and possession of, or control
over, the goods

 ‘Supply of services’ means supply which is not a supply of

goods, made for consideration which may include grant,
assignment or surrender of any right, assignment of
intangible property, obligation to refrain from or tolerate
an act, lease, hire, right to access any premises etc.
 Goods / Services
1 3

 ‘Goods’ means every kind of movable property other than actionable

claim and money but includes securities growing, crops, grass and things
attached to, or forming part of land which are agreed to be severed
before supply or under the contract of supply

Explanation: For the purpose of this clause, the term movable

property shall not include any intangible property
[Section 2(48) of Model GST Law]

 Services means anything other than goods

Explanation: Services include intangible property and actionable claim but

does not include money
[Section 2(88) of Model GST Law]
 Supply of Goods
1 4
 Supply of goods means the transfer of both the title to any goods and
possession of, or control over, the goods. Possession refers to control
over the goods, in the sense of having the immediate facility for their
use
 Following situations illustrate different ways in which title and/ or
possession may be transferred:
 Transfer of title as well as possession- In a simple sale, title as well
as possession is transferred, such as across-the counter sale of a
drug or a garment
 Transfer of possession but not title- In a case of sale on approval
basis or hire-purchase, possession of goods is transferred, under a
clear contemplation of transfer of title at a later date
 Possession of goods is transferred but title is retained- When
goods are let out on hire or lease, it would be a supply of services
 .. Supply of Goods
1 5

 Title in goods may be transferred immediately or at a

future date

 Instances of immediate transfer are:

 A contract of sale, an outright sale, or a credit sale
(payment by instalments etc)
 Part-exchange, or barter
 Transfer free of charge, such as gift
 Supply of Goods – Future Transfer
1 6
 Instances of future transfer of title are:
 Contract of sale
 Hire purchase contract
 An agreement for the sale of goods under which the seller retains
ownership until the goods are fully paid for, or sometimes until
everything owed by the customer has been paid
 An agreement for the hire of goods, where the hirer has the option
to purchase
 Sale or return
 Conditional sale (title is transferred when some condition is met)
 Ownership remains with the supplier until the goods are ‘adopted‘
by the customer. ‘Adoption‘ means that the customer pays for
them or otherwise indicates his wish to keep them
 Supply of Goods – Other Cases
1 7

 Transfer of business assets without consideration

 Business assets for private use- temporary application is

supply of services
 Business gifts and samples supplied free
 Competition Prizes
 Supply made on behalf of another, towards satisfaction of
debt
 .. Supply of Goods – Other Cases
1 8

 Disposal of goods on closure of business or deregistration

 Self-supply or captive use

 Supplies on commission basis

 Supply on approval basis

 Return & replacement

 Inter-state supply to an entity with same PAN

 Supply of Services
1 9

 Anything which is not a supply of goods but is done for a

consideration (including, if so done, the granting, assignment or
surrender of any right) is a supply of services
 The following transactions will be considered as supply of services:
 the assignment of intangible property
 the obligation to refrain from an act, or to tolerate an act or
situation, or to do an act
 the performance of services in pursuance of an order made by or in
the name of a public authority
 the right to enter any premises
 ..Supply of Services
2 0

 In some situations, supplies involving goods may be treated as

service:
 The following are supply of services, even though they may
involve supply of goods
 lease/hire of goods
 transfer/ sale of an undivided share of title in goods
 the temporary application of business assets for non-business
use
 .. Supply of Services
2 1

 Supply of land or building involving transfer of title will be outside the

scope of GST
 However, the grant, assignment or surrender of a major interest in land
or building will be treated as a supply of services
This includes:
 rights in rem giving the holder thereof a right of use over immovable
property
 shares or interests equivalent to shares giving the holder thereof de
jure or de facto rights of ownership or possession over immovable
property or part thereof
 Renting of immovable property including vacant land
 Job Work
2 2

Treated as supply of services

“job work” means undertaking any treatment or process by a

person on goods belonging to another registered taxable person
and the expression “job worker” shall be construed accordingly
[Section 2(62) of Model GST Law]

When goods are sent by principal manufacturer to job-worker, this

will not constitute supply
 What is Consideration
2 3

“Consideration” means
 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
and/or services, whether by the said person or by any other person

 the monetary value of any act or forbearance, whether or not voluntary, in

respect of, in response to, or for the inducement of, the supply of goods
and/or services, whether by the said person or by any other person
 However, a deposit, whether refundable or not, given in respect of the
supply of goods and/or services shall not be considered as payment made
for the supply unless the supplier applies the deposit as consideration for
the supply [Section 2(28)of Model GST Law]
 Indicators of ‘Consideration’
2 4

 “All payments may not be ‘consideration’

 ‘Consideration’ is different from profit

There should be
 a direct link between the supply and the ‘consideration’
 a ‘reciprocal performance’ to the supply
 a transaction between the parties

It should be capable of being expressed in monetary terms

 Supply without Consideration
2 5

Certain transactions made for no consideration are deemed to be

supplies for GST purposes
Examples:
 the permanent transfer/disposal of business assets
 the temporary application of business assets to a private or
 non- business use
 when services are put to a private or non-business use
 self-supply of goods or services
 assets are retained after deregistration
 Inter-State supplies made by the same PAN entity
 In the Course or furtherance of
Business
2 6

 Unless a transaction is in the course or furtherance of

business, it will not be liable to GST
 Activities deemed to be ‘in the course or furtherance of
business’:
 Admission, for a consideration, of persons to a premises
 Services supplied by a person when he holds an office in
the course or furtherance of a trade, profession or a
vocation
 Disposal of a business as a going concern
 Business Test
2 7

 There is no exhaustive definition or test for determining if an activity

is business

 Six-point test to determine whether an activity is in the course of

business. These are:
 Is the activity a serious undertaking earnestly pursued

 Is the activity an occupation or function which is actively pursued

with reasonable or recognizable continuity

 Does the activity have a certain measure of substance in terms of the

quarterly or annual value of taxable supplies made?
 .. Business Test
2 8

 Is the activity conducted in a regular manner and on

sound and recognized business principles

 Is the activity predominately concerned with the making

of taxable supplies for a consideration

 Are the taxable supplies that are being made of a kind

which are commonly made by those who seek to profit
from them
 .. Business Test
2 9

 The business test requirement ensures that occasional

supplies, even if for a consideration, will not be subject
to GST

 For example, when a household makes a one-time sale

of some paintings, if it is not in the business of selling
paintings, the sale will not be a supply for GST purposes.
But a painter, who sells his paintings on a regular basis,
even if infrequently, will be liable to pay GST since he is
in the business of selling paintings
 Supply in India
3 0

 India means-
 the territory of the Union as referred to in clauses (2) and (3) of Article 1 of the
Constitution
 its territorial waters, continental shelf, exclusive economic zone or any other
maritime zone as defined in the Maritime Zones Act, 1976

 the seabed and the subsoil underlying the territorial waters

 the air space above its territory and territorial waters and
 the installations, structures and vessels located in the continental shelf of India
and the exclusive economic zone of India, for the purposes of prospecting or
extraction or production of mineral oil and natural gas and supply thereof
[Section 2(88) of Model GST Law]
 When it is not a ‘Supply’
3 1

 A transaction will not be a supply for GST purposes in the

following cases:
 If the transaction is within the same legal entity (same PAN),
and within the same state. However, where an option of
multiple registrations within the same legal entity is exercised
within a state, then supplies among such registrants will be
liable to GST
 Where there is a specific exclusion in GST legislation (for
instance, supplies made under employer-employee
relationship)
 Types of Supply
3 2

 Taxable supplies, Exempt supplies

 Zero-rated supplies

 Single supply, Mixed supply, Composite supply

 Continuous supply, Deemed supply

 Inter-state supply, Intra-state supply

 Inward supply, Outward supply

 Types of Supply
3 3

Taxable • Standard / Reduced Rated

Supply • Zero Rated

Non
• Exempt Supply
Taxable
Supply • Out of Scope Supply
 Taxable, Exempt & Zero-rated Supply
3 4

 Taxable Supply - Supplies that are subject to GST

 Exempt supply means supply of any goods and / or services which are
not taxable under this Act and include such supplies of goods and / or
services which are specified in the Schedule…. of the Act or which may
be exempt under Sec.10 [Section 2(42) of Model GST Law]

 Zero-rated supply means, a supply of any goods and / or services on

which not tax is payable but credit of the input tax related to that
supply is admissible – Export shall be treated as Zero-rates supply

[Section 2(109) of Model GST Law]

 Composite Supply
3 5

 Many transactions that fall within the scope of GST may consist of more
than one element. These elements may be a mix of goods, or services, or
both. Sometimes these elements, if supplied separately, may have
different GST liabilities
 To avoid disputes about whether the supplier is making a single supply
with one liability, or multiple supplies with different liabilities, it has to be
determined whether the supply is one of goods, or of services, or it is a
supply constituted of both goods and services
 Composite supply means a supply consisting of – (a) two or more goods;
(b) two or more services; or (c) a combination of goods and services
provided in the course of furtherance of business whether or not the
same can be segregated [Section 2(27) of Model GST Law]
 .. Composite Supply
3 6

 To determine whether a particular supply consisting of various

elements should be treated as a single supply or as multiple
supplies, one has to first identify the essential features of the
transaction. This involves, in the first stage, ascertaining what the
customer is actually receiving. If a component of the supply is to
be treated separately from the overall supply of which it is a part,
it should be distinct and independent, and should amount to
more than merely a component of the overall supply.
 .. Composite Supply
3 7

 To illustrate, when a car is given for servicing, as part of the

service, engine oil may be replaced. The supply of the oil cannot
be considered as distinct or independent in the context of the
overall service required by the customer

 Having identified separate supplies, the next step is to ascertain

whether each supply can be properly regarded as a principal
supply or whether some of them are merely ancillary to a
principal supply
 Continuous Supply of Goods &
Services
3 8

 “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 [Section 2(30) of Model GST Law]

 “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 and includes supply of such service as the Central or
a State Government may, whether or not subject to any conditions, by
notification, specify [Section 2(31) of Model GST Law]
 Inward & Outward Supply
3 9

“Inward Supply” in relation to a person, shall mean receipt of goods

and / or services whether by purchase, acquisition or any other
means and whether or not for any consideration
[Section 2(61) of Model GST Law]

“Outward supply” in relation to a person, shall mean supply of

goods and / or services, whether by sale, transfer, barter, exchange,
licence, rental, lease or disposal made or agreed to be made by such
person in the course or furtherance of business except in case of
such supplies where the tax is payable on reverse charge basis
[Section 2(73) of Model GST Law]
 Intra-State Supply of Goods/Services
4 0

“Intra-State Supply of Goods” means, subject to Section 5

of IGST Act, supply of goods where the location of the
supplier and the place of supply are in the same state
[Section 3A(1) of Model IGST Law]

“Intra-State Supply of Services” means, subject to Section 6

of IGST Act, supply of services where the location of the
supplier and the place of supply are in the same state
[Section 3A(2) of Model IGST Law]
 Inter-State Supply of Goods/Services
4 1

“Inter-State Supply of Goods” means, subject to Section 5

of IGST Act, supply of goods where the location of the
supplier and the place of supply are in different states
[Section 3(1) of Model IGST Law]

“Inter-State Supply of Services” means, subject to Section 6

of IGST Act, supply of services where the location of the
supplier and the place of supply are in different states
[Section 3(2) of Model IGST Law]
 Imports & Exports
4 2

 Imports
 Imports not treated as supplies made in India, as the
place of supply is outside India
 GST charged through a specific provision on import of
goods and services
 Exports
 Exports are supplies made in India, and the place of
supply is in India
 Exports are treated as zero-rated supplies
 Supply by Public Authorities
4 3

 Supplies of goods & services by public authorities, wherever they

compete with supplies of those goods and services made by the
private sector may be taxed to GST
 In particular, the following supplies made by public authorities
could be taxed under GST
 Telecommunications services
 Transport of goods
 Port and airport services
 .. Supply by Public Authorities
4 4

 Passenger transport
 Supply of new goods manufactured for sale
 Organization of trade fairs and exhibitions
 Warehousing
 Activities of commercial publicity bodies
 Activities of travel agents
 Running of staff shops, cooperatives and industrial
 Canteens, and similar institutions
 Activities carried out by radio and television bodies
 Support Services to business and commerce
4 5

Supply – International Approach

 Supply – EU Council Directive 2006
4 6

 “supply of goods” shall mean the transfer of right to

dispose of tangible property as owner
 Additionally, the following shall be regarded as supply of
goods:
 Transfer of the ownership of property
 Actual handing over of goods pursuant to a contract for hire of
goods, where ownership is to pass at the latest upon payment of
final instalment
 Transfer of goods pursuant to a contract under which commission is
payable on purchase or sale
 Handing over certain works of construction as supply of goods
 .. Supply – EU Council Directive 2006
4 7

 ‘supply of services’ shall mean any transaction which does not

constitute supply of goods
 ‘supply of services’ may consist, inter alia, any one of the
following transactions:
 Assignment of intangible property
 Obligation to refrain from an act, or to tolerate an act or
situation
 Performance of services in pursuance of an order made by or in
the name of public authority or in pursuance of law
 Specified transactions shall be treated as a supply of services for
consideration
 Supply – UK VAT Law
4 8

 “supply” includes all forms of supply, but not anything

done otherwise than for a consideration

 Anything which is not a supply of goods but is done for a

consideration(including if so done, the granting,
assignment or surrender of any right) is a supply of
services

 A “taxable supply” is a supply of goods or services made

in the United Kingdom other than exempted supply
 .. Supply – UK VAT Law
4 9

 VAT shall be charged on any supply of goods or services

made in the United Kingdom, where it is a taxable
supply made by a taxable person in the course of or
furtherance of any business carried on by him

 Treasury may by order provide with respect to

description of any transaction: (i) that it is to be treated
as supply of goods; (ii) that it is to be treated as supply
of services;(iii) that it is to be treated as neither
 Supply –Australian GST
5 0

A supply is any form of supply and includes;

 Supply of goods
 Supply of services
 A provision of advice or information
 A grant, assignment or surrender of real property
 A creation, grant, transfer, assignment or surrender of
any right;
 A financial supply
 .. Supply –Australian GST
5 1

 You make a taxable supply if

 you make a supply for consideration; and
 the supply is made in the course or furtherance of an
enterprise that you carry on; and
 the supply is connected with Australia; and
 you are registered or required to be registered

 However the supply is not a taxable supply to the extent

that it is GST-free or input taxed
 Supply – Singapore GST
5 2

 “supply” includes all forms of supply but not anything done

otherwise than for consideration

 Any thing which is not a supply of goods but is done for a

consideration(including, if so done, the granting, assignment or
surrender of any right) is a supply of services

 Minister may order with respect to any description of transaction:

(i)that it is to be treated as supply of goods and not a supply of
services; (ii) that it is to be treated as supply of services and not as
a supply of goods; (iii) that it is to be treated as neither a supply of
goods nor a supply of services
 Supply – Canadian GST
5 3

 “supply” means, subject to sections 133 and 134, the

provision of property or a service in any manner,
including sale, transfer, barter, exchange, license, rental,
lease, gift or disposition
 “taxable supply” means a supply made in the course of
commercial activity
 “supplier” in respect of a supply means the person
making the supply
 “exempt supply” means a supply included in schedule V
 .. Supply – Canadian GST
5 4

 “service” means anything other than (i) property;(ii) money;

and(iii) anything that is supplied to an employer by a person
who is or agrees to become an employee of the employer in
the course of or in relation to the office or employment of
that person

 “property” means any property, whether real or personal,

movable or immovable, tangible or intangible, corporeal or
incorporeal, and includes a right or interest of any kind, a
share and a chose in action, but does not include money
 Supply – Malaysian GST
5 5

 “supply” means all forms of supply, including supply of

imported services, done for a consideration and anything
which is not a supply of goods but is done for a
consideration is a supply of services

 Matters to be treated as a supply of goods or a supply of

services shall be as specified in the First Schedule

 Matters to be treated as neither a supply of goods nor a

supply of services shall be as specified in the Second
Schedule
5 6

Time of Supply
 Time of Supply – Goods
5 7

 Liability to GST arises only when a supply has been made. The time
of supply fixes the point when the liability has to be discharged . It
also indicates when a supply is deemed to have been made
 Separate time of supply provisions for goods and services
 Time of supply of goods could be the earliest of the following:
 the date on which the goods are removed by the supplier for supply to
the recipient, where the goods are required to be removed; or
 the date on which the goods are made available to the recipient, where
the goods are not required to be removed; or
 the date on which the supplier issues the invoice with respect tot the
supply; or
 the date on which the recipient shows the receipt of the goods in his
books of account
[Section 12 of Model GST Law]
 Time of Supply
5 8

Date of Removal/Performance Basic Tax Point

Date of Invoice Date of Receipt of Actual Tax Point

Payment
 .. Time of Supply – Goods
5 9

 Where the goods are made available but not removed;

 the goods are not physically capable of being removed; or
 supplied in assembled or installed form; or
 are supplied by the supplier to his agent or his principal
 the time of supply shall be the date on which the goods are made
available
 In case of supplies in respect of which tax is paid on reverse charge
basis, the time of supply shall be the earliest of the following dates:
 the date of the receipt of goods, or
 the date on which the payment is made, or
 the date of receipt of invoice, or
 the date of debit in the books of accounts
 .. Time of Supply – Goods
6 0

Continuous Supply of Goods:

Where successive statements of accounts or successive payments are involved,
the time of supply shall be the date of expiry of the period to which such
successive statements of accounts or successive payments relate
If there are no successive statements of account, the date of issue of the invoice
(or any other document) or the date of receipt of payment, whichever is earlier,
shall be the time of supply
Supply on Approval Basis / Sales Return:
If the goods (being sent or taken on approval or sale or return or similar terms) are
removed before it is known whether a supply will take place, the time of supply
shall be at the time when it becomes known that the supply has taken place or six
months from the date of removal, whichever is earlier
Residual Provisions
 Time of Supply – Services
6 1

 Time of supply of services shall be the earliest of the following

 the date of issue of invoice/receipt of payment, whichever is earlier, where
the invoice is issued within the prescribed period; or
 the date of completion of the provision of service/receipt of payment,
whichever is earlier, where the invoice is not issued within the prescribed
period; or
 the date on which the recipient shows the receipt of services in his books
of account, where the above two situations do not apply
 Continuous supply of services
 where the due date of payment is ascertainable from the contract, the date
on which the payment is liable to be made by the recipient of service,
whether or not any invoice has been issued or any payment has been
received by the supplier of service
 .. Time of Supply – Services
6 2

 Where the due date of payment is not ascertainable from the contract, each such time when
the supplier of service receives the payment, or issues an invoice, whichever is earlier
 where the payment is linked to the completion of an event, the time of completion of that
event

Reverse Charge

Where the tax is payable on reverse charge basis, the time of supply shall be the earliest of the
following dates, namely -
 the date of receipt of services, or
 the date on which the payment is made, or
 the date of receipt of invoice, or
 the date of debit in the books of accounts

Residual Provisions
[Section 13 of Model GST Law]
 Change in Rate
6 3

 In cases where there is a change in rate of tax in respect of

services, the time supply shall be determined as under:
 Where taxable service has been provided before the change in
the effective rate of tax
 Where the invoice is issued and payment also received after the change in
effective rate of tax, the time of supply shall be the date of receipt of
payment or the date of issue of invoice whichever is earlier
 Where the invoice is issued prior to change in effective rate of tax, but the
payment is received after the change in effective rate of tax, the time of
supply shall be the date of issue of invoice
 Where the payment is received before the change in effective rate of tax,
but the invoice for the same has been issued after the change in effective
rate of tax, the time of supply shall be the date of receipt of payment
[Section 14 of Model GST Law]
 .. Change in Rate
6 4

 Where taxable service has been provided after the change in the
effective rate of tax

 Where the payment is received after the change in effective rate of tax but
the invoice has been issued, prior to the change in effective rate of tax, the
time of supply shall be the date of receipt of payment
 Where the invoice has been issued and payment is received before the
change in effective rate of tax, the time of supply shall be the date of
receipt of payment or date of issue of invoice whichever is earlier
 Where the invoice has been issued after the change in effective rate of tax,
but the payment is received before the change in effective rate of tax, the
time of supply shall be the date of issue of invoice

[Section 14 of Model GST Law]

6 5

Value of Supply
 Valuation of Supply
6 6

Transaction value
 “Value” of a supply of goods and/or services shall be the
transaction value, which is the price actually paid or
payable for the said supply of goods and/or services
where the supplier and recipient of the supply are not
related and the price is the sole consideration for the
supply

 Transaction value to include:

any amount that the supplier is liable to pay but which has
been incurred by the recipient of the supply
 Valuation of Supply
6 7

Price

Taxes, Duties & Fees

Incidental Expenses
Transaction
Value

Royalties & License

Fees

Subsidies
in any form
 .. Valuation of Supply
6 8

 Valuation to be done on the basis of transaction value

 Transaction value is the price actually paid or payable for the goods and/or
services
 Transaction value shall, inter-alia, include:
 any taxes, duties, fees and charges levied under any statute other than
CGST/SGST/IGST Act
 incidental expenses such as commission, packing etc. charged by the supplier
to the recipient of supply
 royalties and license fees related to the supply of goods and/or services
 subsidies provided in any form or manner including subsidies provided by the
Government
 any discount or incentive that may be allowed after supply has been effected
 .. Valuation of Supply
6 9

 Transaction value shall not include trade discounts allowed before or at

the time of supply
 Transaction value shall not include post supply discount which is given
as per the agreement and is known at or before the time of supply
 Where the value cannot be determined on the basis of transaction
value, the same shall be determined in accordance with the Valuation
Rules
 Determination of value by comparison
 Computation method. Cost of production plus an amount towards
profit and general expenses
 Residual method using reasonable means consistent with the
principles and general provisions of valuation rules
 .. Valuation of Supply
7 0

Value of Supply •
by Comparison
Rule 4

Value of Supply
by Computed • Rule 5
Method

Residual • Rule 6
Method
 Valuation – Pure Agent
7 1

 Pure Agent – Meaning

 Certain expenditure or costs incurred by the service provider
as pure agent of recipient of service, to be excluded from the
value of taxable service subject to following conditions;
 the service provider acts as a pure agent of the recipient of service
when he makes the payment to third party for the goods or services
procured
 the recipient of service receives and uses the goods or services so
procured by the service provider in his capacity as pure agent of the
recipient of service
 the recipient of service is liable to make payment to the third party
 the recipient of service authorizes the service provider to make
payment on his behalf
 .. Valuation – Pure Agent
7 2

 the recipient of service knows that the goods and services for which
payment has been made by the service provider shall be provided by
the third party
 the payment made by the service provider on behalf of the recipient of
service provider has been separately indicated in the invoice issued by
the service provider to the recipient of service
 the service provider recovers from the recipient of service only such
amount as has been paid by him to the third party
 the goods or services procured by the service provider from the third
party as a pure agent of the recipient of the service or in addition to
the services he provides on his own account
 Valuation - Money Changer
7 3

 Value of taxable services pertaining to purchase or sale of foreign currency,

including money changing shall be determined as under:

 a currency when exchanged from, or to Indian Rupees, the value shall

be equal to the difference in the buying rates or the selling rates, as the
case may be, and the RBI references for that currency at that time,
multiplied by the total units of currency
 where the RBI reference rate for a currency is not available, the value
shall be 1% of the gross amount of Indian Rupees provided or received,
by the person changing the money
 where neither of the currencies exchanged is Indian Rupee, the value
shall be equal to 1% of the lesser of the two amounts the person
changing the money would have received by converting any of the two
currencies into Indian Rupee on that date at the reference rate
provided by RBI
7 4

SCHEDULE-I
 Matters to be treated as Supply
without Consideration
7 5

 Permanent transfer/disposal of business assets

 Temporary application of business assets to a private or non-
business use
 Services put to a private or non-business use
 Assets retained after deregistration
 Supply of goods and / or services by a taxable person to another
taxable or non-taxable person in the course or furtherance of
business
 The supply of goods by a registered taxable person to a job-
worker in terms of section 43A shall not be treated as supply of
goods
7 6

SCHEDULE-II
 Supply – Whether of Goods / Services
7 7

Transfer
 Transfer of the title in goods is a supply of goods
 Transfer of goods or of right in goods or of undivided share in goods without the
transfer of title is a supply of services
 Transfer of title in goods under an agreement that property in goods will pass at a
future date on payment of full consideration, is a supply of goods

Land and Building

 Lease, tenancy, easement, license to occupy land is a supply of services
 Lease or letting out of the building including a commercial, industrial or residential
complex for business or commerce, either wholly or partly, is a supply of services

Treatment or process
 Treatment or process applied to another person’s goods is a supply of services
 Supply – Whether of Goods /
Services
7 8

Transfer of business assets

 Goods forming part of the assets of a business transferred/disposed of by the person
carrying on the business no longer forming part of those assets, whether or not for a
consideration, is a supply of goods
 Goods held or used for the purposes of the business put to any private use, or put to use
other than for business purposes, whether or not for a consideration, the usage or making
available of such goods is a supply of services
 Goods, forming part of the business assets of a taxable person, sold by any other person
who has the power to do so to recover any debt owed by the taxable person, the goods
shall be deemed to be supplied by the taxable person in the course or furtherance of his
business
 Where any person ceases to be a taxable person, any goods forming part of the assets of
any business carried on by him 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, unless—
 the business is transferred as a going concern to another person; or
 the business is carried on by a personal representative who is deemed to be a taxable
person
 Supply – Whether of Goods /
Services
7 9

Following shall be treated as supply of service

 Renting of immovable property
 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 before its first occupation,
whichever is earlier
 Temporary transfer or permitting the use or enjoyment of any intellectual property
right
 Development, design, programming, customization, adaptation, upgradation,
enhancement, implementation of information technology software
 Agreeing to the obligation to refrain from an act, or to tolerate an act or a
situation, or to do an act
 Works contract including transfer of property in goods (whether as goods or in
some other form) involved in the execution of a works contract
 Supply – Whether of Goods / Services
8 0

 Transfer of the right to use any goods for any purpose (whether or not for a
specified period) for cash, deferred payment or other valuable consideration;
and
 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
 Following shall be treated as supply of goods
 Supply of goods by any unincorporated association or body of persons to a
member thereof for cash, deferred payment or other valuable consideration
dpnkumar@gmail.com