LEVY AND COLLECTION OF TAX
(1) For the purposes of this Act, the expression “supply” includes––
(a) 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 (i.e for future transaction) for a consideration by a person in the course or furtherance of business;
(b) import of services for a consideration whether or not in the course or furtherance of business;
(c) the activities specified in Schedule I (given below), made or agreed to be made without a consideration; and
(d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II (given below).
(2) Notwithstanding anything contained in sub-section (1),––
(a) activities or transactions specified in Schedule III (given below); 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,
shall be treated neither as a supply of goods nor a supply of services.
(3) 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.
As per Section 2(52) of Act “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;
As per Section 2(1) “actionable claim” shall have the same meaning as assigned to it in section 3 of the Transfer of Property Act, 1882;
As per Section 2(31) “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 (payment in nature of kind) 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;
The taxable for levy of GST is “Supply”.
In generally supply is a fundamental economic concept that describes the total amount of a specific good or service that is available to consumers.
But supply includes
a) “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”
In other words, if person provides services or supply of goods for consideration then he is liable to pay GST.
And “Person” includes— (As per Section 2(84) of Act)
a. an individual;
b. a Hindu undivided family;
c. a company;
d. a firm;
e. a Limited Liability Partnership;
f. an association of persons or a body of individuals, whether incorporated or not, in India or outside India;
g. any corporation established by or under any Central, State or Provincial Act or a Government company as defined in section 2(45) of the Companies Act, 2013 (18 of 2013);
h. any body corporate incorporated by or under the laws of a country outside India;
i. a co-operative society registered under any law relating to cooperative societies;
j. a local authority;
l. society as defined under the Societies Registration Act, 1860 (21 of 1860);
m. trust; and
n. every artificial juridical person, not falling within any of the preceding sub-clauses;
b) importation of service, whether or not for a consideration and whether or not in the course or furtherance of business, means like reverse charge in service tax if any person receive service from abroad then he will be liable to pay GST under reverse charge whether used for business or not.
c) a supply specified in Schedule I, made or agreed to be made without a consideration.
Following list of supplies is liable to GST even provides without consideration
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 (i.e. registration of multiple premises of same assesse), when made in the course or furtherance of business:
(3) Provided that gifts not exceeding fifty thousand rupees in value 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—
(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.
- In case of disposal of business assets where input tax credit has been availed- If any assets on which no input tax credit was taken then at the time of sale liability of tax under this act will not arise if no consideration is receive. So, that only assets on which input tax credit was taken consider as supply for the purpose of this clause.
Further any business assets (whether on which credit taken or not) transfer for consideration is supply as per clause 4 of Schedule II.
- Transfer between agent and principal also cover under supply.
ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES (Deemed Supply)
(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; (like in general power of attorney gives right to buyer to stay in house)
(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.
(like in property title transfer on condition that payment will be made in future dates in installments)
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. (for example: – Polish of furniture before delivery made to customers is treated as 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;
(i.e. transfer of business assets for consideration is treated as supply)
(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;
(i.e goods use for personal use or available to any other person for use is consider as supply)
(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.
(i.e. If a person held business assets on the date on which he is ceased to be taxable person, transfer such assets after such date is treated as supply)
5. Supply of services
The following shall be treated as supply of services, 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. (Like restaurants services)
As per Section 2(30) “composite supply” means a supply made by a taxable person to a recipient consisting of two 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;
Illustration.— Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is a principal supply;
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.
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.
(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. (like council of GST)
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.
Explanation.—For the purposes of paragraph 2, the term “court” includes District Court, High Court and Supreme Court.
The tax liability on a composite or a mixed supply shall be determined in the following manner, namely: —
(a) a 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 (Naturally Composite)
For Example: – A hotel provides 4-D/3-N package with the facility of breakfast. This natural bundling of supply in the ordinary course of business. The service of hotel accommodation gives the bundle the essential character and would, therefore, be treated as service of providing hotel accommodation.
(b) a mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax. (Not naturally composite)
For Example:- A house given on rent, one floor of which is to be used as residence and the other for housing a printing press. Such renting for two different purpose is not naturally bundled in the ordinary course of business. Therefore, if a single rent deed is executed it will be treated as a service comprising entirely of such service which attracts highest liability of service tax. In this case renting for use as residence is a negative list service while renting for non-residence use is chargeable to tax. Since the latter category attracts highest liability of service tax amongst the two services bundled together, the entire bundle would be treated as renting of commercial property.
(1) Subject to the provisions of sub-section (2), there shall be levied a tax called the central goods and services tax 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 and at such rates, not exceeding twenty per cent., as may be notified by the Government on the recommendations of the Council and collected in such manner as may be prescribed and shall be paid by the taxable person.
– Central Goods and service tax levied
– On intra sale supplies
– Except on alcoholic liquor for human consumtion
– On value determined u/s 15
– At rate specified not more than 20%
(2) The central tax 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 Council.
– CGST from the date notified
(3) The Government may, on the recommendations of the Council, by notification, specify categories of supply of goods or services or both, the tax on which shall be paid on reverse charge basis by the recipient of such goods or services or both and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
– Recommendation of the Council by notification
– Specify categories of supply of goods or services or both
– Tax on which shall be paid on reverse charge
– All provision of act applies accordingly
(4) The central tax in respect of the supply of taxable goods or services or both by a supplier, who is not registered, to a registered person shall be paid by such person on reverse charge basis as the recipient and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the tax in relation to the supply of such goods or services or both.
– Supplies made by non-registered person
– To registered person
– Central tax made by recipient on reverse charges
– All provision applies accordingly.
(5) The Government may, on the recommendations of the Council, by notification, specify categories of services the tax on intra-State supplies of which shall be paid by the electronic commerce operator if such services are supplied through it, and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier liable for paying the tax in relation to the supply of such services:
Provided that 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:
Provided further that where an electronic commerce operator does not have a physical presence in the taxable territory and also, he does not have a representative in the said territory, such electronic commerce operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall be liable to pay tax.
- As per section 2(122) of Act “electronic commerce operator” means any person who owns, operates or manages digital or electronic facility or platform for electronic commerce;
– On recommendations of the council
– Specify the categories of services
– Tax on intra state supplies
– Paid by electronic commerce operator/person representing operator/other person on his behalf
– If supply through it and provision apply accordingly
(1) Notwithstanding anything to the contrary contained in this Act but subject to the provisions of sub-sections (3) and (4) of section 9 (i.e. option not available in reverse charge), a registered person, whose aggregate turnover in the preceding financial year did not exceed fifty lakh rupees, may opt to pay, in lieu of the tax payable by him, an amount calculated at such rate as may be prescribed, but not exceeding, –– (i.e composition scheme)
(a) one per cent. of the turnover in State or turnover in Union territory in case of a manufacturer,
(b) two and a half per cent. of the turnover in State or turnover in Union territory in case of persons engaged in making supplies referred to in clause (b) of paragraph 6 of Schedule II (i.e Restaurants type services), and
(c) half per cent. of the turnover in State or turnover in Union territory in case of other suppliers,
subject to such conditions and restrictions as may be prescribed:
Provided that the Government may, by notification, increase the said limit of fifty lakh rupees to such higher amount, not exceeding one crore rupees, as may be recommended by the Council.
(2) The registered person shall be eligible to opt under sub-section (1), if:—
(a) he is not engaged in the supply of services other than supplies referred to in clause (b) of paragraph 6 of Schedule II;
(b) he is not engaged in making any supply of goods which are not leviable to tax under this Act;
(c) he is not engaged in making any inter-State outward supplies of goods; he is not engaged in making any supply of goods through an electronic commerce operator who is required to collect tax at source under section 52; and
(d) he is not a manufacturer of such goods as may be notified by the Government on the recommendations of the Council:
Provided that where more than one registered persons are having the same Permanent Account Number (issued under the Income-tax Act, 1961), the registered person shall not be eligible to opt for the scheme under sub-section (1) unless all such registered persons opt to pay tax under that sub-section.
(i.e. option available if all registered premises opt to pay tax under this sub-section)
Analysis: Person not eligible for composition scheme if
– not engaged in supply of services except 6(b) of Schedule III (option not available to service provider)
– Sale outside the state is not allowed
– Not providing exempt supply
– Not engaged in making supply of goods through an electronic commerce operator
– Not manufacture goods notified by government.
(3) The option availed of by a registered person under sub-section (1) shall lapse with effect from the day on which his aggregate turnover during a financial year exceeds the limit specified under sub-section (1).
Analysis: Option lapse if turnover exceed maximum limit
(4) A taxable person to whom the provisions of sub-section (1) apply shall not collect any tax from the recipient on supplies made by him nor shall he be entitled to any credit of input tax.
Analysis: Composite dealer
– Not entitled to take tax credit nor
– Collect tax from parties
(5) If the proper officer has reasons to believe that a taxable person has paid tax under sub-section (1) despite not being eligible, such person shall, in addition to any tax that may be payable by him under any other provisions of this Act, be liable to a penalty and the provisions of section 73 or section 74 shall, mutatis mutandis, apply for determination of tax and penalty.
– If person was not eligible for registration
– But still registration under this scheme
– He shall liable to pay tax at normal rate with interest and penalty
(1) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by notification, exempt generally, either absolutely or subject to such conditions as may be specified therein, goods or services or both of any specified description from the whole or any part of the tax leviable thereon with effect from such date as may be specified in such notification.
– Government in public interest
– on recommendation of the council
– exempt generally, absolutely or subject to condition
– goods and service from tax
(2) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by special order in each case, under circumstances of an exceptional nature to be stated in such order, exempt from payment of tax any goods or services or both on which tax is leviable.
– If necessary in public interest
– On the recommendation of council
– By special order
– Circumstances of an exceptional nature in order
– Exempt payment of tax on goods and services
(3) The Government may, if it considers necessary or expedient so to do for the purpose of clarifying the scope or applicability of any notification issued under sub-section (1) or order issued under sub-section (2), insert an explanation in such notification or order, as the case may be, by notification at any time within one year of issue of the notification under sub-section (1) or order under sub-section (2), and every such explanation shall have effect as if it had always been the part of the first such notification or order, as the case may be.
Explanation.––For the purposes of this section, where an exemption in respect of any goods or services or both from the whole or part of the tax leviable thereon has been granted absolutely, the registered person supplying such goods or services or both shall not collect the tax, in excess of the effective rate, on such supply of goods or services or both.