MEANING AND SCOPE OF SUPPLY – UNDER GOODS AND SERVICES TAX
Supply is the taxable event in GST Act. Determination of the taxable event in any tax law is of utmost significance as the levy of tax is based on occurrence of that event. Under Goods and services tax (GST), a uniform and single taxable event ‘supply’ would replace multiple taxable events i.e. manufacture, provision of service and sale, etc., those were present in the previous tax regime. Thus, the term ‘supply’ will hold the importance in determining the taxability of all transactions, whether commercial or otherwise.
Being in opinion that the fundamental element of Goods and services tax (GST) depends on concept of Supply, I have tried simplifying the provisions into very simple language for better understanding of the students.
DEFINITION OF SUPPLY IN GST
Meaning & Scope of Supply: Section 7 of the Central GST Act, 2017 gives an inclusive definition for the term “Supply” to cover any form of supply of goods or services. The term ‘supply’ includes all forms of supply of goods or services for a consideration, in the course of or forfurtherance of business or even without a consideration.
Supply can be broadly categorized as following:
- Supply for consideration
- Supply without consideration
- Deemed Supply
- Specific Exclusions
- Composite Supply
- Mixed Supply
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Supply for Consideration – Section 7(1)(a)
Supplies include all forms as laid under for goods and services made for a consideration in the course of or for furtherance of business:
- lease or
Supply without consideration – Section 7(1)(c) & Schedule I
This provision specifies services which are made or agreed to madewithout a consideration. Thus, the following transaction will be subject to Goods and Services Tax, even if there is no consideration. Viz
- Permanent transfer/ disposal of business assets (whereinput tax credit has been availed)
- Goods transfer to related or distinct person
- Supply of goods by a principal to his agent or vice versa
- Importation of services by a taxable person from related person or establishment outside India
Deemed Supply – Section 7(1)(d) & Schedule II
The provision for deemed supply was felt necessary to provides clarity on determining the type of supply assupply of goods or supply of services. This helps in removing the ambiguity. The schedule list out certain transactions to be considered as deemed supply they are:
- Any transfer of the title in goods is a supply of goods
- Any transfer of title of goods under an agreement in whichthe property in goods will pass at a future dateupon payment of full consideration as agreed
- Permanent transfer or disposal of business assets with orwithout consideration
- Supply of goods by any unincorporated association orbody of persons to a member thereof
- Transfer of right or undivided share in goods withouttransfer of title
- Any lease, tenancy, easement, license to occupy land
- Any lease or letting out of the building for business orcommerce either wholly or partially
- Any treatment or process applied on another person’sgoods like job work
- Any business assets put for private use whether or not forconsideration
- Renting of immovable property
- Construction of a complex, building, civil structure or partthereof
- Temporary transfer or permitting the use or enjoyment ofany intellectual property right
- Development, design, programming, customization,adaptation, up -gradation, enhancement, implementationof information technology software
- Agreeing to the obligation to refrain an act or totolerate an act or a situation, or to do an act
Specific Exclusions- Section 7(2)(A) & Schedule III
There are certain categories of services which are specifically excluded from the levy of GST. May be for easy understanding it is an exemption list for GST, for instance a negative list in service tax. Under this provision the following matters shall be treated as neither supply of goods nor supply of services.
- Services by an employee to the employer in the course ofor in relation to his employment.
Services by any court or tribunal
- The functions performed by any Members of Parliament, State legislature, Panchayats, Municipalities and other local authorities
- The duties performed by any person as aChairperson/Member/Director in a body established bythe Central Government, State Government or local authority
- Services of funeral, burial, crematorium or mortuaryincluding transportation of deceased
- Sale of land, sale of building after the issuance ofcompletion certificate and
- Actionable claims other than lottery, betting andgambling
Composite Supply – Section 8(a)
“Composite supply” means a supply made by a taxable person to a recipient comprising two or more supplies of goods orservices, or any combinations thereof, which are naturally bundled and one of which is principal supply.
For instance: If a dealer sells Laptop along with bags. Here Laptop is a principal supply. In this case, the rate of Laptop shall be applicable on such composite supply.
Mixed Supply – Section 8(b)
“Mixed supply” means two or more individual supplies ofgoods or services, or any combination thereof, made inconjunction with each other by a taxable person for a single price where such supply does not constitute a compositesupply.
For instance: In case of supply of a package consisting ofwatch, tie, belts as a combo pack then although always theseitems can be sold individually and are not dependent on each other. Then such a supply would be termed as mixed supply. In these cases, the highest rate of tax out of the items shall be the applicable rate.
Browse the video on Time of Supply in case of reverse charge– Chapter 7
TIME OF SUPPLY
Time of supply of goods – Section 12 – The time of supply determines the point when the liability to charge GST arises. The liability to pay tax on goods shall arise at the time of supply. As per the provisions the time of supply of goods shall be the earlier of the following dates, namely:–
(a) the date of issue of invoice by the supplier or
(b) the date on which the supplier receives the payment with respect to the supply
Time of supply of service – Section 12
Similar to supply of goods, the liability to pay tax on services shall arise at the time of supply, as determined in accordance with the provisions.
Basically, the time of supply of services shall be the earliest of the following dates, namely:–
(a) the date of issue of invoice by the supplier, or
(b) the date of receipt of payment,
whichever is earlier
Value of Supply – Section 15
This section deals with determining the transaction value. As pointed out earlier the tax rate is applied to value of goods and services for arriving at the tax liability. As per the provisions, the Transaction Value shall be the he value of a supply of goods or services or both-
- shall be the transaction value,
- which is the price actually paid or payable for the said supply of goods or services or both
- where the supplier and the recipient of the supply are not related and
- the price is the sole consideration for the supply
READ MORE: Goods and Services Tax – GST – Overview, Scope & Benefits.
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