Advocate Manu Gupta
The most important aspect of any taxation statute is the incidence of taxation i.e. the point at which the tax shall apply to a particular transaction. In the case of GST in India, the incidence of taxation is ‘Supply’. Supply has not been defined anywhere under the definitions clauses in the GST statutes but it has been given an inclusive definition under Section 7 of the CGST Act 2017.
The generic meaning of Supply is provide in Section 7(1)(a) of the CGST Act 2017 which is reproduced as under:
“7(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 for a consideration by a person in the course or furtherance of business;”
Supply has been provided an inclusive definition in law which implies that the scope of Supply has not been limited to the incidences and transactions mentioned in the said provision but the incidences and transactions mentioned in the said provision are only illustrative. The transactions which are included in Supply are sale, transfer, barter, exchange, licence, rental, lease or disposal of goods or services or both.
It is also required for the supply to be made in the course/furtherance of business. This implies that a transaction shall be treated as supply only if it is made in the course or furtherance of business (‘business’ is defined under Sec 2(17) of the CGST Act. An exception to this rule is the import of a service. As per Sec 7(1)(b) of the CGST Act reproduced below, the import of services for a consideration whether or not in the course or furtherance of business is to be treated as Supply.
“(b) import of services for a consideration whether or not in the course or furtherance of business;”
Supply with respect to the above noted transactions is also required to be made in return for some consideration. Certain transactions are provided under Schedule I of CGST Act 2017 which are to be considered as Supply even without Consideration as per Section 7(1(c) as reproduced below:
(c) the activities specified in Schedule I, made or agreed to be made without a consideration;”
The activities specified in Schedule I which are to be treated as Supply even without consideration are as follows:
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 made in the course or furtherance of business with an exception that gifts below Rs. 50,000/- in value in a financial year by an employer to an employee shall not be treated as supply.
3. 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.
There are certain activities listed in Schedule II of CGST Act 2017 which are to be treated as Supply as per Section 7(1)(d) reproduced herein below:
“(d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II.”
The activities specified in Schedule II which are to be treated as Supply even without consideration are as follows:
1. Transfer of Title in goods and a Transfer of Title in goods as per an agreement of the goods passing at a future date are to be treated as Supply of Goods whereas, a Transfer of rights/undivided share in Goods without the transfer of title shall be treated as Supply of Services.
2. Any lease, tenancy, easement, licence to occupy land is a supply of services or leasing/renting out commercial, industrial or residential property is to be treated as Supply of Services.
3. Any treatment or process which is applied to another person’s goods is a supply of services.
There are certain transactions listed in Schedule III which are neither to be considered supply of goods nor services as per Section 7(2) of CGST Act 2017. These transactions are:
(i) Services by an employee to an employer in the course or in relation to his employment;
(ii) Services by any Court or Tribunal established under any law for the time being in force;
(iii) Functions performed by MPs, MLAs, etc.; the duties performed by a person who holds any post in pursuance of the provisions of the Constitution in that capacity; the duties performed by specified persons in a body established by the Central State Government or local authority, not deemed as an employee;
(iv) Sale of land and Sale of Building (except sale of under-construction premises where the part or full consideration is received before issuance of completion certificate or before its first occupation, whichever is earlier.;
(v) Actionable claims, other than lottery, betting and gambling and
(vi) Services of funeral, burial, crematorium or mortuary including transportation of the deceased.
The Government also has the power to notify such activities or other transactions which have neither be treated as supply of goods nor supply of services. Such notification would be made on recommendation of GST council. The government has notified the following us/ 7(2):
“Services by way of any activity in relation to a function entrusted to Panchayat under Article 243G of the Constitution” (Inserted vide Notification No. 14/2017 Central Tax (Rate) dated 28.06.2017)
|Section 7(1)(a)||Section 7(1)(b)||Section 7(1)(c)||Other matters – Section 8|
|All forms of supply of goods and/ or services
• for a consideration
• in the course or furtherance of business
• such as:
• lease or
|Import of service,
• for a consideration
• whether or not
in the course or furtherance of business
To be treated as supplies made without a consideration
1. Permanent transfer/ disposal of business assets for which ITC availed on such assets
2. Supplies between related persons/ distinct persons (as specified in section 25) in the course or furtherance of business
3. Supply of goods by principal (or agent) to agent (or principal)
4. Import of service from a related person in the course or furtherance of business.
|• Composite Supply
• Mixed Supply
To conclude, I would like to say that GST is a new law and is in its nascent stage. The new law and the new regime has brought with itself several new concepts and even transformed the meanings of older concepts. Hence, as Accountancy and Legal professionals, the onus is upon us to clarify the position of law and to provide the best of services and to clarify the doubts of our clients. We all shall endeavor to study, improve, develop and embrace the GST tax regime.
(Advocate Manu Gupta [BBALLB; LLM(Taxation)] is Partner with CKG Legal)