From origin based taxation system (in case of Excise and VAT/CST), GST will shift to consumption based tax system (i.e. the Taxes will go to the states where the goods and / or services are consumed). The taxable event of charging indirect tax system is going to changed from an event based (i.e. manufacture in case of Excise Duty, provision of Service in case of Service tax and Sale in case of VAT / CST) to an act based (i.e. supply whether of goods and / or services).
The definition of the term “SUPPLY” as is given under section 3 of the Model GST Law , like the definition of “manufacture” is an inclusive one.
Inclusive definitions have always resulted in litigation between the Assessee’s and the Tax Department. As to what constitutes “manufacture” has always been a matter of dispute between Assessee and the Excise Department. The term “manufacture” has come to be decided by the numerous judgment’s of the Hon’ble Supreme Court and various High Courts.
Similar is the case with the definition of the term “Input” and “Input Service”, both of which are inclusive definitions under the CENVAT Credit Rules, 2004.
The term “Supply” has been defined to include all forms of supply of goods and / or services, which includes 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.
Importation of Service whether or not for consideration and whether or not in the course of or for the furtherance of business is also a “Supply”.
It should be noted that the supply should be in the course of business or for the furtherance of business.
Thus any supply of goods by an Assessee undertaken in the course of his business whether or not for the purpose of furtherance of business, will constitute Supply and the supply will be subject to GST – either CGST & SGST (if the supply is within the State) or IGST (in case the supply is Inter-state).
Eg. A company is giving its used computers, tables, air-conditioners etc. to a school or charitable organization. The disposal of computers, tables and air-conditioners is supply of goods and is subject to GST.
If the supply is for the furtherance of business like supply of free sample, supply for testing and analysis, then also the supply will attract GST.
The Central Government or the State Government shall specify by way of Notification, transactions which are to be treated as –
i. Supply of goods and not as supply of services; or
ii. Supply of services and not as supply of goods; or
iii. Neither Supply of goods nor supply of services
Such Notification shall be issued by the Central Government / State Government on the recommendation of the GST Council.
As per Section 3 (1)(c) of the Model GST Law, the term “Supply” will include supply made or agreed to be made without consideration. The contents of Schedule I and some illustrative examples of such supply are tabulated below –
Schedule I – MATTER TO BE TREATED AS SUPPLY WITHOUT CONSIDERATION – SOME EXAMPLES:
Matters under Schedule I
Illustrative examples of transactions
|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 de-registration|
Supply of goods and / or services by a taxable person to another taxable or non-taxable person in the course or furtherance of business
Similarly Schedule II specifies the matters which are to be treated as whether they are supply of goods or supply of services. The matters enumerated therein are listed below –
Matters under Schedule II
Supply of Goods / Services
Illustrative examples of transactions
|Transfer of Title in goods||Goods|
|Transfer of right to use the goods without transfer of title in goods||Services|
|Transfer of title in goods with the agreement that property in goods will pass at a future date||Goods|
|Lease, Tenancy, easement, licence to occupy land or building||Services|
|Treatment or process||Services|
|Transfer of business assets on the direction of the management / person carrying on the business||Goods|
|Private use or non-business use of business assets or goods||Services|
|Sale of goods by another person to recover the debts of the taxable person||Goods|
|Person ceases to be taxable person||Goods|
|Renting of immovable property||Services|
|Construction of Complex, building, civil structure where the consideration is received either in part or in full before the issuance of the completion certificate or before its occupation whichever is earlier||Services|
|Temporary transfer or permitting the use of any intellectual property rights||Service|
|Development, designing, programming, customisation, adaption, upgradation, enchancement or implementation of information technology software||Service|
|Agreeing to the obligation to refrain from an act, to tolerate an act or situation or to do an act||Service|
|Works Contract including transfer of property involved in the execution of works contract||Service|
|Transfer of right to use the goods whether or not for specified period||Services|
|Supply by way of or as a part of services of food or any other article for human consumption or any drink (other than alcoholic drink)||Service|
|Supply of goods by an unincorporated association or body of persons to its members for cash or deferred payment||Goods|
Thus it can be seen that the word “Supply” is of very vide import and many transactions are covered under this term which otherwise were not taxable either under VAT or Central Excise or Service Tax.