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Grasping the Meaning and Scope of Supply under GST in India

Under GST, both supplies of goods and services are taxable. Goods and Service Tax is defined as any tax on supply of goods or services, or on both, except on the supply of alcoholic liquor. Both Central and State government have powers to levy GST on intrastate supply. However, in the case of interstate supply, the Parliament alone has the exclusive rights of authority to levy Goods and Service Tax (GST).

Understanding Supply

In the transaction of business, supply includes all forms of supply of goods and services like sale, transfer, exchange, barter, rental, license, or any disposal made or agreed to be made for some consideration made by a person.

As per the new taxation act, the meaning and scope of supply as per GST can be defined under the following parameters:

  • In GST, supply means the supply of goods and services. A supply made on something apart from goods and service does not attract GST.
  • Supply should be made while business is processed.
  • Supply should be made for a consideration.
  • Supply of goods and service should be made by a taxable person.
  • A supply made should be a taxable supply.
  • Supply should be made within the taxable supply.

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Defining Supply according to Schedule-1

All the following matters will be considered as supply without any consideration:

  • Services which are put to a private, non-business use.
  • Business assets transferred permanently or disposed-off.
  • Temporary application of business assets to a private or non-business use.
  • Supply of goods and services from a taxable person to another taxable or non-taxable person while doing business.
  • Assets which are retained after deregistration.

As per Section 43A, the supply of goods by a registered taxable person to an employed person will not be treated as a supply of goods.

Defining Supply according to Schedule-2

Matters to be treated as supply of goods and services are mentioned as:

1. Transfer
  • Transfer of the title of goods is considered as the supply of goods.
  • Transfer of goods or rights over goods or undivided share in goods without transferring the title is a supply of services.
  • Transferring the title in goods under an agreement which specifies that upon full payment the property in goods will be handed over on a specified date, post the payment, which will be considered as the date for supply of goods.
2. Land and Building
  • Tenancy, lease, easement, license to occupy land are all supply of services.
  • If property like any commercial, industrial or residential complex is let-out or given on lease for business either wholly or partly, it will be considered as the supply of service.
3. Treatment or Process

If some process or treatment is being applied to another person’s goods then it is a supply of services.

4. Transfer of Business Assets
  • When goods that form part of assets in a business get transferred or disposed under the directions given by the person who is carrying on the business, for some consideration or not, such transfer or disposal is treated as a supply of goods.
  • When any person ceases to be a taxable person, a good which is a part of an asset of any business carried by him shall be deemed to be supplied by him while doing business immediately before he ceases to be a taxable person, unless:
    • The business is carried on by a personal representative who is supposed to be a taxable person.
    • The business is transferred as a concern to another person.
  • By or under the direction of the person carrying the business, goods which were held for the use of business are put to be used for private purpose or given to any person for use for any purpose other than the business purpose, for some consideration or not, the usage or making available of such goods is supply of services.
5. Supply of Services
  • Renting of immovable property.
  • Construction of the building, complex, civil structure or some part thereof, including a building or complex ready for sale to a buyer partly or wholly. If in case, full consideration is received after issuing completion certificate as required by the competent authority or before its first occupation, whichever is earlier from the both.
  • The explanation for this clause:
    • Here “Competent Authority” means the government or any other authority authorized to issue a completion certificate, for a time being, under any law. Factors for non-requirement of such certificate from any authority or from the following:
      • An Architect who is registered with the Council of Architecture which is constituted under the Architect Act 1972.
      • A chartered engineer who is registered with the institution of Engineers (India).
      • A licensed surveyor of the respective local body of the city or town or development authority.
    • The term “Construction” includes alteration, replacements, additions or remodeling of any existing civil structure.
  • Either temporary transfer or permitting the rights to use any property.
  • Programming, development, design, customization, up gradation, implementation of Information Technology Software and adaptation.
  • Contract works, including the transfer of property in goods involved in the execution of work contract.
  • Transferring the right to use the goods for any purpose either cash or for some other valuable consideration.
  • Supply, as a part of service or in any other manner, of goods, being food or any other item for human consumption or any drink, where such supply is for cash or for any other valuable consideration.
6. Supply of Services

Goods supplied to a member by any incorporated association or Body of Persons (BOP) either for cash or for some other valuable barter.

Defining Supply according to Schedule-3

Following below are those activities or transactions which can neither be treated as a supply of goods nor as the supply of services.

  • Service rendered to an employer by an employee during the tenure of employment.
  • Services provided by any court or tribunal which is established under any law for the time being.
  • Power of central government:
    • a) Functions performed by the members of parliament, members of panchayats, members of state legislature, members of municipalities and members of any other local authorities.
    • b) Duties performed by any person who holds a post with the provisions of the Constitution.
    • c) Duties carried out by the chairperson, by a member, a director in a body established by either the Central or State government or by any Local Authority.
  • Service provided by any Foreign Diplomate located in India.
  • Services of burial, funeral, crematorium or mortuary including transportation of the deceased body.

Defining Supply according to Schedule-4

  • Services provided by Government or Local Authority to another Government or Local Authority.
  • Services provided by a Government or Local Authority to the individuals in discharge its statutory powers.
  • Services provided by Government or Local Authority by way of healthcare, education etc.
  • Services provided by the government towards the maintenance of public order, citizenship, currency etc.