Supply

Supply’ of taxable goods and/or services is the ‘taxable event’ or the threshold/jurisdictional requirement for the consequential levy (subject to other prescribed conditions and/or provisions) of Goods & Services Tax (GST), and is also the distinguishing feature of GST as an indirect form of taxation, which under existing law has multiple such events.

Taxable supply’ has been defined to mean the supply of goods and/or services which are chargeable to tax under the Draft Model GST Law (as revised) for ‘intra-state’ supplies and Draft Model Integrated GST Law/IGST Law (as revised) for ‘inter-state’ supplies.


Meaning and Scope

Section 3 of the said Model GST Law provides the meaning and scope of ‘supply’ for ‘intra-state’ supply of goods/services (for the imposition of CGST/SGST) as well as ‘inter-state’ supply for levy of IGST, and includes the following*

  • All forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business
  • Importation of services, for a consideration whether or not in the course or furtherance of business
  • Schedule I (see below) specified supply (Matters to be treated as Supply even if made or agreed to be made, without Consideration)
  • Schedule II (see below) (Matters to be treated as Supply of Goods or Services) shall apply for determining what is, or is to be treated as a supply of goods or services, in respect of matters mentioned therein.

* Not apply to activities or transactions specified in Schedule III or Schedule IV


Notified Supply

Pursuant to section 3 of the Model GST Law, the Central or a State Government may, upon recommendation of the GST Council via notification, also specify the transactions that are to be treated as —

  • Supply of goods and not as a supply of services
  • Supply of services and not as a supply of goods
  • Neither a supply of goods nor a supply of services

 

Composite/Mixed Supply

The above said provision also determines the tax liability of ‘Composite Supply‘ and ‘Mixed Supply‘ in the following manner —

  • Composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply
  • Mixed supply comprising two or more supplies shall be treated as supply of that particular supply which attracts the highest rate of tax

Section 2 of the Model GST Law defines “Composite Supply” to mean a supply made by a taxable person to a recipient comprising two or more supplies of goods or services, or any combination thereof, which are naturally bundled and supplied in conjunction with each other in the ordinary course of business, one of which is a principal supply.

The said provision also defines “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.

SCHEDULE I
MATTERS TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION
[IN TERMS OF CLAUSE (c) OF SUBSECTION (1) OF SECTION 3]

1. Permanent transfer/disposal of business assets where input tax credit has been availed on such assets.

2. Supply of goods or services between related persons, or between distinct persons as specified in section 10, when made in the course or furtherance of business.

3. Supply of goods—
(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal, or
(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.

4. Importation of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.


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SCHEDULE II
MATTERS TO BE TREATED AS SUPPLY OF GOODS OR SERVICES

1. Transfer
(a) Any transfer of the title in goods is a supply of goods.
(b) Any transfer of goods or of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of services.
(c) Any transfer of title in goods under an agreement which stipulates that property in goods will pass at a future date upon payment of full consideration as agreed, is a supply of goods.

2. Land and Building
(a) Any lease, tenancy, easement, licence to occupy land is a supply of services.
(b) Any 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.

3. Treatment or process
(a) Any treatment or process which is being applied to another person’s goods is a supply of services.

4. Transfer of business assets
(a) Where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration, such transfer or disposal is a supply of goods by the person.
(b) Where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, whether or not for a consideration, the usage or making available of such goods is a supply of services.
(c) 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—
(i) the business is transferred as a going concern to another person; or
(ii) the business is carried on by a personal representative who is deemed to be a taxable person.

5. The following shall be treated as “supply of service”
(a) renting of immovable property;
(b) 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.

Explanation.- For the purposes of this clause-

……………….

(2) the expression “construction” includes additions, alterations, replacements or remodeling of any existing civil structure;

(c) temporary transfer or permitting the use or enjoyment of any intellectual property right;
(d) development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software;
(e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act;
(f) works contract including transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;
(g) 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
(h) 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.

6. The following shall be treated as supply of goods
(a) supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.


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