Section-7 of CGST Act defines the scope of supply. There are three parameters which describes the concept of supply. However there are few exceptions to 2nd & 3rd parameters. The meaning and scope can be understood as under:
1. Supply should be of goods or service
Definition of supply as per section-7 starts with “all forms of supply of goods or services or both……”, by which it can be understood that Supply should be of goods or services which means supply of anything which is not either good or service such as money, securities etc. does not attract GST.
Supply includes all forms of supply of goods or services or both such as Sale, Transfer, Barter, Exchange, License, Rental, Lease, Disposal. Definition of supply illustrates some forms of supply but the word “such as” used in definition substantiate that it is not exhaustive list.
Some examples are –
1. Swami purchased a new television worth Rs. 50,000/- in exchange of his old television along with paid Rs. 30,000/- for said purchase. It is an example of exchange.
2. A doctor provided medical consultancy to a barber and in return barber cuts his hair. Here doctor provided service of medical consultancy and hair cut by barber is consideration for service given by doctor.
Similarly, Hair cutting service provided by barber is supply and medical consultancy given by doctor is consideration for barber.
2. Supply should be made for consideration.
Consideration does not always means money. It can be in money or in kind. It is also not necessary that consideration always floe from recipient of supply. It can also be made by a third person. Further, a deposit given in respect of supply of goods or services or both shall not be considered as consideration for such supply unless supplier claims it as consideration for such supply.
For example – A product sent by a company for display in Trade Fair/Exhibition is not a supply because there is no consideration flows. Similarly, product sent for demonstration does not attract supply.
Note: Any subsidy given by Central Government or a State Government is not considered as consideration.
Exception to this parameter are provisions as given in Schedule –I of the CGST Act
Schedule-I describes the provisions where any activity will be considered as supply for GST even if it is not made or not agreed to be made for consideration, which is given as follows:
1. When any person permanently transfers or dispose all BUSINESS ASSETS, on which ITC has been availed at the time of purchase of such Business assets.
2. Supply of goods or services or both between RELATED persons or DISTINCT persons in course or furtherance of business.
Definition of related person is given under explanation to sub-section 5 of section -15 of CGST Act, 2017, while meaning of distinct person is specified under section 25 of CGST Act, 2017.
There is one exception to this clause and that is gifts having value of Fifty thousand rupees or less in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.
- Supply of goods –
1. By a principal to his agent where agent undertakes to supply such goods on behalf of principal
2. By a agent to his principal where agent undertakes to receive such goods on behalf of principal
3. Import of services by a taxable person from a related person or from any of his other establishment outside India, in course or furtherance of business.
3. Supply should be made in course or furtherance of business.
GST is essentially a tax only on commercial transactions. Hence, only those supplies that are in the course or furtherance of business qualify as Supply under GST. If an individual made any supply in personal capacity, then it does not come under ambit of GST. There should be business activity.
Business includes any activity/transaction which is incidental or ancillary to any trade, commerce, manufacture, profession, vocation, adventure, wager or any other similar activity. To qualify as business, frequency, volume, continuity or regularity of such transaction is not a pre-requisite.
Services provided by the club/association to its members for consideration is a supply.
There is one exception to ‘course or furtherance of business’ rule and that is import of services for a consideration.
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