Section 7(1) of the CGST Act; includes Activities to be considered supply
WITH A CONSIDERATION
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a considerations by a person in the course / furtherance of business.
(b) importations of services whether or not in the course or furtherance of business
WITHOUT A CONSIDERATION
( c) Activities specified in Schedule 1
Sections 7(1)( c) of the CGST Act : Activities to be treated as supply even without a consideration
Para; 1 Permanent transfer or disposal of business assets (PTOBA) where input tax credit has been availed on such assets.
Here the following parameters are required to be satisfied to be attract under para-1
(a) There should be permanent transfer or disposal of business assets
(b) Transfer in kind of permanent in nature
(c) ITC has been availed on such business assets
- Business assets including non –current asset & current asset ( stock) also
- Temporary transfer of business assets without considerations not covered under this clause
- Registered person for any reason ITC though, eligible but not availed such business assets but person such permanent transfer or disposal of business assets made without consideration will not be attract any gst
Note: only such assets permanent transfer or disposal of business assets but no further any processing on such assets ( minor) then this para not applicable
For example
1) ABC Ltd. Is manufacturing of uniform purchased raw material from market and has stitched (convert) uniform, later donating uniform to the school even ITC taken at time of purchase on such ram material does it qualify as a supply ?
Ans : yes this transaction will be qualify as a supply because ABC Ltd donating uniform to the school not a raw material , this clause cover only such assets no further any minor processing hence gst is applicable
ITC was taken at time of purchase therefore as a ABC Ltd. Need to be reversal of ITC for the reasons donating uniform ( foc) no ITC will be available under section 17(5)(h)
Note; this clause cover only without considerations but if it involves any considerations then gst always applicable
2) Mr. X purchased one motor car for the purpose of his business on which no ITC was allowed u/s 17(5) and subsequently it was gifted by him to one of his friends does it qualify as a supply ?
Ans: in this case it will not be considerations as a supply because no ITC was taken at time of purchase of such business assets hence gst is not applicable on this transactions
3) Mr. X is a dealer engaged exclusively in supply of AC his taken ITC at time of purchase & later donating an air conditioner to a school does it qualify as a supply? Even though AC from his stock in trade
Ans; this transaction will be constitute as a supply because it is permanent transfer /disposal of business of assets & ITC should have been availed on such assets hence gst is applicable
4) A Chartered Accountant has rendered services to one of its client without consideration does it qualify as supply?
Ans: this transactions will not be constitute as a supply because services have not been covered under this clause para- 1 of schedule -1
5) A Chartered Accountant has purchased one laptop for use in his office and tax credit of `60000 was taken but after 2 years it was given by him to one of his friend without consideration does it qualify as supply ?
Ans: yes in this case it will be considered to be supply because a chartered accountant has taken ITC at the time of purchase of such laptop hence gst is applicable
6) An individual buys a car for personal purpose & sells it to a car dealer. Does it qualify as a supply?
Ans; this transaction will not be supply because an individual is not engaged any exclusively business (non-business) further no ITC was admissible on such car at time of acquisition hence, in the above case gst is not applicable
7) XYZ Ltd. Has 2 branches A and B in different states. A in Bangalore has supply of old capital goods to B branch in tamil nadu for uses purpose but A branch not taken ITC at the time of purchase does it qualify as a supply ?
Ans: this transaction will not be cover under this clause because A branch no ITC was taken at the time of acquisition even though as A branch supply of business assets gst is not applicable
8) A proprietor gives mobile (phone) from his business stock to his friend, as a gift on his birth day. He claimed ITC such mobile at the time of purchases does it qualify as a supply?
Ans: this transaction will be qualify as a supply in term of section 7(1)( c ) of cgst act because proprietor permanent transfer or disposal of business assets where ITC has been availed on such assets hence gst is applicable
9) XYZ & CO. a manufacture of goods donated old furniture to schools (NGO) on account of renovation of office. The company has taken ITC such furniture at the time of purchase does it qualify as a supply?
Ans: this transaction will be qualify as a supply because company permanent transfer or disposal of business assets & ITC availed such assets at time of purchases Hence gst is applicable
10) Mr. X is a trader of plywood & he made a chair out of plywood later donating to school but Mr. X is taken ITC at time of purchased does it qualify as a supply? Even without a considerations
Ans: yes this transaction will be qualify as a supply because Mr. X is donating of chair not a raw material ( plywood) even without a considerations hence gst is applicable
Note :i) if supply made a without considerations in the course or furtherance of business as a taxable persons ITC was taken at time of purchase. Then this clause covered
ii) if supply made a with considerations in the course or furtherance of business as a taxable persons irrespective whether ITC was taken or not but gst is applicable
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