Introduction To Word Supply
The word supply itself is not defined anywhere but the general meaning of supply is make something available to someone that can be done by way of sale, transfer, barter or exchange.
According to Black law Dictionary “Supply means total amount of a goods or service that is available to be purchased at any set period of time”.
According to Concise Oxford Dictionary “Supply means provide or furnish (a thing needed), provide, meet or make up for (a deficiency or need etc.)”
Thus, ‘Supply’ is a very broad term in itself.
Supply under GST-
When it comes to taxation law it becomes very important because it is taxable event under GST for that purpose first we need to understand the meaning of supply under GST. It is a deciding criterion for imposing GST whether a particular transaction falls under the diameter of taxable event or not.
A definition can be seen in GST Act under section 7 of CGST Act. Where the word supply includes both supply of goods as well as services where
A) Goods means
As per section 2(52) of CGST “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.
B) Service Means
As per section 2(102) of CGST “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.
Under [Sec. 7(1)(a)] Supply includes all forms of supply of goods and 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 course of or furtherance of business, where the meaning of different terms are
Inclusive vs. Exhaustive Definition
The Supreme Court in West Bengal state warehousing corporation Vs. Indrapuri studio Pvt. Ltd. has examined the meaning of inclusive and exhaustive definition as appearing in various statues. The word “include” when used, enlarge the meaning of expression defined so as to comprehend not only such things as they signify according to their natural import but also those things which the clause declared that they shall includes.
Whereas the definition of supply has the word include in it which gives the wider scope to the definition and open for interpretation to the word supply which is based on case to case.
Essential Elements Of Supply
Supply has two important elements:
If the aforementioned elements are not met with, it is not considered as a supply.
Under Sec. 2(31) of CGST which is 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.
Meaning of “in respect of, in response to, or for the inducement of”
It means there must be a direct link between the supply and the consideration. Inducement means to gives something to a person so that he will do something else in return.
Effect of consideration in supply
A prerequisite is that the supply and the payment of consideration thereof must have reciprocity with each other.
The concept of non-monetary consideration is well recognized in GST law. This is evident from the definition of “consideration” under Section 2(31) of the Central Goods & Services Act, 2017 (CGST Act) which includes any payment (in money terms or otherwise) or monetary value of any act or forbearance can constitute consideration if it is made in respect of, in response to or for the inducement of supply.
Supply without consideration
The general rule is supply without consideration is invalid but exception to this general rule is Schedule 1 of GST, some specified transaction between the related person for no consideration shall be treated as supply under GST. The normal GST provisions are applicable to these supplies too.
In general, the definition of supply for GST purpose covers all forms of supply where goods and services are supplied in return for a consideration. Any supply of goods and services without consideration is not a supply, unless it is deemed to be a supply.
Section 7(1)(c), read with Schedule I of the CGST Act, 2017 covers the circumstances where a supply of goods or services without consideration may be deemed as a supply. Also, in the similar fashion, Schedule III lists out the activities which although involve consideration but will not be treated as supply.
“Business” is defined under Section 2(17) include any trade, commerce, manufacture, profession, vocation etc. whether or not undertaken for a pecuniary benefit. Business also includes any activity or transaction which is incidental or ancillary to the aforementioned listed activities. In addition, any activity undertaken by the Central Govt. or a State Govt. or any local authority in which they are engaged as public authority shall also be construed as business. From the above, it may be noted that any activity undertaken included in the definition for furtherance or promoting of a business could constitute a supply under GST law.
Under [Sec. 7(1) (b)] Import of services
Import of services for a consideration whether or not in the course or furtherance of business;
Under [Sec. 7(1) (c)] Supply without consideration
The activities specified in Schedule I, made or agreed to be made without a consideration;
Under [Sec. 7(1) (d)] Supply of goods or supply of services
The activities to be treated as supply of goods or supply of services as referred to in Schedule II
Under [Sec. 7(2)] Nor supply of goods or services
Notwithstanding anything contained in sub-section (1),
(a) Activities or transactions specified in Schedule III; or
(b) Such 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,
Under [Sec. 7(3)] Issue of Notification by Government
Subject to the provisions of sub-sections (1) and (2), the Government may, on the recommendations of the Council, specify, by notification, the transactions that are to be treated as— (a) a supply of goods and not as a supply of services; or (b) a supply of services and not as a supply of goods.
The definition of supply is going to be much above of sale, lease, barter, exchange, etc but it will have deemed supplies also included under its purview.
However, it leaves a scope for everyone to draw an independent interpretation on this aspect till the time Courts of law starts analysing the term supply in detail. Further, each limb of the definition of supply is independent to each other. Therefore, there was a compulsion to draft the definition of supply in such a manner so that different conditions and schedules can be incorporated therein whereby each limb has independent existence and conditions as well.
Author- Rashmi Jain who is practicing Advocate in the corporate law provides the service in planning advisory and compliances. You may reach to us –[email protected]
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