CA ANANT VJ TYAGI
Government has prescribed the revised Model GST law after adding or deleting some major issues & suggestions. Now government is trying to target on the implementation of GST by 1st April’2017. However, demonetization may cause some hurdle in this target. But government is looking firm determined to implement GST by 1st April 2017. Here, we are providing decoding and analysis of meaning and scope of supply.
DECODING OF MEANING AND SCOPE OF SUPPLY
Model GST Law states that:
(1) 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,
(b) Importation of services, for a consideration whether or not in the course or furtherance of business, and
(c) A supply specified in Schedule I, made or agreed to be made without a consideration.
Supply includes all the following forms for a consideration namely:
- Sale: means “Exchange of commodity for money & the action of selling something”. Therefore, sale means selling of commodity for money.
- Transfer: means “paperwork is recorded in the courthouse that indicates the commodity ownership is being changed from one owner to another owner for consideration.
- Barter: means “exchange of goods/services for other goods/services without using money. In this case, fair market value of such exchanged goods/services shall be considered as taxable value for the purpose of taxation.
- License: means “where one person grants to another, a right to do or continue to do, in or upon the property for a consideration.
- Rental, lease or disposal of commodity for a consideration shall be treated as supply.
- Such supply should be in course of business or furtherance of business. Activities which are in the course of other than business shall not be treated as supply.
- All importation of services only for a consideration, whether it relates to business or not, shall be treated as supply under GST. In other words, one can say that importation of goods whether or not for a consideration shall be liable to IGST.
- Although, importation of goods/services shall be chargeable under GST irrespective of fact that they are imported in course of business or not.
- Some supplies made without a consideration shall also be chargeable to GST. Those are as under:
- Where business assets are permanently transferred or disposed off without any consideration and input tax credit of such assets has been availed, such activity shall be treated as supply under GST.
- Supply of goods/services between related persons or distinct persons without any consideration shall be treated as supply under GST. It should be in course of business.
- Where goods are supplied by principal to his agent or vice-versa shall be treated as supply under GST.
- Import of services (not goods) from a foreign related party/person in course of business shall be treated as supply. It means import of goods whether or not from related person shall be liable to GST.
- Under revised Model GST Law, stock transfer from one entity to another entity shall also be taxed.
- Some confusion under old Model GST Law, now, has been aloof such as car given to employee for personal use – would be liable to GST etc.
(2) Some activities which shall be treated neither as a supply of goods nor a supply of services. Those are as under:
- Services by an employee to the employer in the course of or in relation to his employment.
- Services by any Court or Tribunal established under any law for the time being in force.
- The functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities;
- The duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or
- 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.
- Services by a foreign diplomatic mission located in India.
- Services of funeral, burial, crematorium or mortuary including transportation of the deceased.
- Some services provided by central government or state government as a public authority shall be treated neither as supply of goods nor a supply of services.
(3) Treatment of composite and mixed supply:
- Composite supply comprising two or more supply shall be treated as a supply of such principal supply.
- Mixed supply comprising two or more supply shall be treated as supply of that supply which attracts the highest rate of tax.
- In other words, we may say that – composite supply shall be determined through principal supply & mixed supply shall be determined through supply which attracts highest tax rate.
- Services which are exempted under current regime like services provided by employee to employee etc shall be exempted under GST regime. (see point.2)
- New concept of composite supply & mixed supply has been introduced. It is updated concept of bundled services which was provided under service tax law.
- Stock transfer would also be taxed under GST. It may create more hurdles to business entities under GST.
- Goods supplied by principal to agent or vice-versa would also be liable to GST, whether or not for a consideration. Therefore, it is very bold move and will affect all such transactions undertaken by principal or agent. Currently, such transactions are not liable to tax as it is not sale. Now, it would create impact on working capital requirement for agent or principal.
- However, move of government to revise Model GST law is appreciable. Older ambiguity has now been aloof. But some clarification on some major issues is also required yet.