Supply

The Indian Parliament has recently (6 April 2017) passed Acts (below listed) on Goods and Services Tax (GST) and provided more certainty to their expected ‘roll-out’ as law on 1 July 2017. ‘Supply’ for the purposes of GST is arguably its core concept as its factual establishment provides the Government/Revenue authorities the legal jurisdiction to levy taxes^ on ‘taxable supplies‘ under the said Acts (though subject to other applicable and relevant provisions there under, such as those determining the exact quantum of tax, time and manner of payment, classification of goods/services etc).


Scope

Section 7 of the CGST Act details the ‘scope’ of Supply as including ––

  • All forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
  • Import of services for a consideration whether or not in the course or furtherance of business;
  • Schedule I activities (see below), made or agreed to be made without a consideration; and
  • Schedule II activities (see below), treated as supply of goods or supply of services.


Goods and Services Tax (GST) Acts

> The Central Goods and Services Tax (CGST) Act 2017 (pdf)
> The Integrated Goods and Services Tax (IGST) Act 2017 (pdf)
> The Union Territory Goods and Services Tax (UTGST) Act 2017 (pdf)
> The Compensation Cess Act 2017 (pdf)


^
CGST/UTGST (as the case may be) on all ‘intra-State’ supplies of goods or services or both (except on the supply of alcoholic liquor for human consumption), on the value determined under section 15 of the CGST Act and at such rates, not exceeding 20 percent.

^IGST on all ‘inter-State’ supplies of goods or services or both (except on the supply of alcoholic liquor for human consumption), on the value determined under section 15 of the CGST Act and at such rates not exceeding 40 percent.

Section 2 of the Central Goods and Services Tax Act 2017 (CGST Act) lists the various definitions (subject to context) to various key words, terms and phrases, some of which for the purpose of ‘supply‘ have been provided below ––

Aggregate turnover” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess.

Business” includes––

(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity, whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency, continuity or regularity of such transaction;
(d) supply or acquisition of goods including capital goods and services in connection with commencement or closure of business;
(e) 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;
(h) services provided by a race club by way of totalisator or a 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.

Casual taxable person” means a person who occasionally undertakes transactions involving supply of goods or services or both in the course or furtherance of business, whether as principal, agent or in any other capacity, in a State or a Union territory where he has no fixed place of business.

Central tax” means the central goods and services tax levied under section 9.

Consideration” in relation to the supply of goods or services or both includes––

(a) 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 or services or both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government;
(b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or
both, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government:

Provided that a deposit given in respect of the supply of goods or 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.

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 and includes supply of such goods as the Government may, subject to such conditions, as it may, by notification, specify.

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 services as the Government may, subject to such conditions, as it may, by notification, specify.

Electronic commerce” means the supply of goods or services or both, including digital products over digital or electronic network.

Electronic commerce operator” means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce.

Exempt supply” means 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 the Integrated Goods and Services Tax Act, and includes non-taxable supply.

Fixed establishment” means a place (other than the registered place of business) which is characterised by a sufficient degree of permanence and suitable structure in terms of human and technical resources to supply services, or to receive and use services for its own needs.

Goods” means every kind of movable property other than money and securities but includes 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.

Intra-State supply of goods” shall have the same meaning as assigned to it in section 8 of the Integrated Goods and Services Tax Act.

Intra-State supply of services” shall have the same meaning as assigned to it in section 8 of the Integrated Goods and Services Tax Act.

Inward supply” in relation to a person, shall mean receipt of goods or services or both whether by purchase, acquisition or any other means with or without consideration.

Job work” means any treatment or process undertaken by a person on goods belonging to another registered person and the expression “job worker” shall be construed accordingly.

Non-resident taxable person” means any person who occasionally undertakes transactions involving supply of goods or services or both, whether as principal or agent or in any other capacity, but who has no fixed place of business or residence in India.

Non-taxable supply” means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act.

Non-taxable territory” means the territory which is outside the taxable territory.

Other territory” includes territories other than those comprising in a State and those referred to in sub-clauses (a) to (e) of clause (114).

Outward supply” in relation to a taxable person, 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.

Place of business” includes––

(a) a place from where the business is ordinarily carried on, and includes a warehouse, a godown or any other place where a taxable person stores his goods, supplies or receives goods or services or both; or
(b) a place where a taxable person maintains his books of account; or
(c) a place where a taxable person is engaged in business through an agent, by whatever name called.

Place of supply” means the place of supply as referred to in Chapter V of the Integrated Goods and Services Tax Act.

Principal place of business” means the place of business specified as the principal place of business in the certificate of registration.

Proper officer” in relation to any function to be performed under this Act, means the Commissioner or the officer of the central tax who is assigned that function by the Commissioner in the Board.

Recipient” of supply of goods or services or both, means—
(a) where a consideration is payable for the supply of goods or services or both, the person who is liable to pay that consideration;
(b) where no consideration is payable for the supply of goods, the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available; and
(c) where no consideration is payable for the supply of a service, the person to whom the service is rendered, and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply and shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied.

Registered person” means a person who is registered under section 25 but does not include a person having a Unique Identity Number.

Removal’’ in relation to goods, means—
(a) despatch of the goods for delivery by the supplier thereof or by any other person acting on behalf of such supplier; or
(b) collection of the goods by the recipient thereof or by any other person acting on behalf of such recipient.

Services” 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.

Supplier” in relation to any goods or services or both, shall mean the person supplying the said goods or services or both and shall include an agent acting as such on behalf of such supplier in relation to the goods or services or both supplied.

Taxable supply” means a supply of goods or services or both which is leviable to tax under this Act.

Taxable territory” means the territory to which the provisions of this Act apply.

Telecommunication service” means service of any description (including electronic mail, voice mail, data services, audio text services, video text services, radio paging and cellular mobile telephone services) which is made available to users by means of any transmission or reception of signs, signals, writing, images and sounds or intelligence of any nature, by wire, radio, visual or other electromagnetic means.

Turnover in State” or “Turnover in Union territory” means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis) and exempt supplies made within a State or Union territory by a taxable person, exports of goods or services or both and inter-State supplies of goods or services or both made from the State or Union territory by the said taxable person but excludes central tax, State tax, Union territory tax, integrated tax and cess.

Usual place of residence” means––
(a) in case of an individual, the place where he ordinarily resides;
(b) in other cases, the place where the person is incorporated or otherwise legally constituted.

Union territory tax” means the Union territory goods and services tax levied under the Union Territory Goods and Services Tax Act.

Union Territory Goods and Services Tax Act” means the Union Territory Goods and Services Tax 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.

 


Get Professional Help – Understand, Plan and Setup for GST

(click the “MinusTax Professionals” red banner below and fill-up/submit the pop-up form)

Need Tax Help?
  • Under the relevant provisions of the above mentioned Acts, tax^ is to be levied on the ‘supply’ of goods and/or services, at the ‘value‘ of such ‘supply’ (as determined under section 15 of the Union Act) and at prescribed rates (as notified and applicable).
  • CGST on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the recommendations of the GST Council.
  • Tax is required to be paid on ‘reverse charge’ basis by the recipient of such categories of goods or services (or both) as notified for such purposes.
  • CGST on supply of ‘taxable goods or services’ (or both) by an unregistered supplier to a registered person, is required to be paid by the latter recipient on ‘reverse charge’ basis.
  • Tax on ‘intra-State’ supplies of notified categories of services, is required to be paid by an ‘electronic commerce operator**, where such services are supplied through it.

**Where an electronic commerce operator does not have a ‘physical presence’ in the taxable territory, any person representing such electronic commerce operator for any purpose in the taxable territory shall be liable to pay tax.

**Where an electronic commerce operator does not have the said physical presence in the taxable territory nor a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax, who then shall be liable to pay tax.


Get Professional Help – Understand, Plan and Setup for GST

(click the “MinusTax Professionals” red banner below and fill-up/submit the pop-up form)

Need Tax Help?

Section 7 of the IGST Act (subject to the provisions of section 10 (for ‘goods’)/section 12 (for ‘services’) of the said Act) treats the supply of ‘goods’ and/or ‘services‘ as an ‘inter-State supply’ (or in the course of inter-State trade or commerce), where the location of the supplier and the place of supply are in ––

  • Two different States;
  • Two different Union territories; or
  • A State and a Union territory.

> Read more on ‘Inter-State Supply’


Get Professional Help – Understand, Plan and Setup for GST

(click the “MinusTax Professionals” red banner below and fill-up/submit the pop-up form)

Need Tax Help?

 

Notified Transactions

The Central Government on the recommendations of the GST Council, may specify by notification, transactions that are to be treated as—

  • Supply of goods and not as a supply of services; or
  • Supply of services and not as a supply of goods.

 

Composite and Mixed Supply

Composite supply” is defined by the CGST Act to mean a supply made by a taxable person to a recipient consisting of 2 or more taxable supplies of goods or services or both (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“.

Mixed supply” is defined by the CGST Act to mean 2 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.

Principal supply” too is adefined by the CGST Act to mean the supply of goods or services which constitutes the predominant element of a composite supply, and to which any other supply forming part of that composite supply is ancillary.


Tax Liability

The tax liability on a composite or a mixed supply is to be determined 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; and
  • Mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.


Excluded Activities

Following activities or transactions are not to be treated as supply of goods or services and are excluded from the ‘scope’ of ‘supply’ ––

  • Schedule III activities or transactions (see below); or
  • Above said activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities (as may be notified by the Government on the recommendations of the Council).

Activities to be treated as Supply even if made without Consideration

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

2. Supply of goods or services or both between related persons or between distinct persons as specified in section 25, when made in the course or furtherance of business:
Provided that gifts not exceeding Rs.50,000 in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.

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. Import 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.


Get Professional Help – Understand, Plan and Setup for GST

(click the “MinusTax Professionals” red banner below and fill-up/submit the pop-up form)

Need Tax Help?

Activities to be treated as Supply of Goods or Supply of Services

1. Transfer
(a) any transfer of the title in goods is a supply of goods;
(b) any transfer 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 shall 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
Any treatment or process which is 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. Supply of services
The following shall be treated as supply of service, namely:—
(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 after its first occupation, whichever is earlier.

Explanation.—For the purposes of this clause—
(1) the expression “competent authority” means the Government or any 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:—
(i) an architect registered with the Council of Architecture constituted under the Architects Act, 1972; or
(ii) a chartered engineer registered with the Institution of Engineers (India); or
(iii) a licensed surveyor of the respective local body of the city or town or village or development or planning authority;
(2) the expression “construction” includes additions, alterations, replacements or remodelling 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; and
(f) 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.

6. Composite supply
The following composite supplies shall be treated as a supply of services, namely:—
(a) works contract as defined in clause (119) of section 2; and
(b) 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.

7. Supply of Goods
The following shall be treated as supply of goods, namely:—
Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.


Get Professional Help – Understand, Plan and Setup for GST

(click the “MinusTax Professionals” red banner below and fill-up/submit the pop-up form)

Need Tax Help?

Activities or Transactions which shall be treated neither as a Supply of Goods nor a Supply of Services

1. 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.—For the purposes of paragraph 2, the term “court” includes District Court, High Court and Supreme Court.

3. (a) the functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities;
(b) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or
(c) the duties performed by any person as a Chairperson or a Member or a Director in a 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.

4. Services of funeral, burial, crematorium or mortuary including transportation of the deceased.

5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.

6. Actionable claims, other than lottery, betting and gambling.


Get Professional Help – Understand, Plan and Setup for GST

(click the “MinusTax Professionals” red banner below and fill-up/submit the pop-up form)

Need Tax Help?


Administrative Help

For administrative assistance and general queries, please feel free to contact via —
Telephone: +91 8800 38 1950
Email: contact@minustax.com

Alternatively, please contact for an appointment and visit our representational office in DLF Phase IV, Gurgaon (click for Google Map directions).

Latest Updates

Follow us @MinusTax

Need Tax Help?
Need Tax Help?