1. CGST shall be levied by the Central Government on the intra-state supply of goods and / or services.
2. SGST / UTGST shall be levied by the State Government / Union Territories on the intra-state supply of goods and / or services.
3. IGST shall be levied by the Central Government on the inter-state supply of goods and / or services.
Under GST, Taxable event is “SUPPLY” of Goods / Services or both.
Sec. 7 of CGST Act defines the “ Scope of Supply”.
1. All forms of supply made or agreed to be made for a consideration by a person in the course or furtherance of business like:
2. Importation of services for a consideration, whether or not in the course or furtherance of business;
3. Supply as specified in Schedule I, made or agreed to be made even if without consideration;
4. Schedule II defines specified transactions as supply of goods or supply of services.
Schedule-I : 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, when made in the course or furtherance of business:
3. Gifts to Employees by Employer exceeding Rs. 50,000/- treated as supply of goods or services or both.
4. 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.
5. 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.
Schedule-II: Activities to be treated as supply of goods or supply of services
(a) any transfer of the title in goods is a supply of goods; ( like Sale)
(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 Lease or Renting of movable properties)
(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. ( Hypothecation of Goods)
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
3. Treatment or process
Any treatment or process which is applied to another person’s goods is a supply of services ; (Like Job work)
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;
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;
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.
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.
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.
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
Schedule-III: 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.
2. Services by any Court or Tribunal
3. (a) the functions performed by the MPs, MLAs, MLCs, Members of Panchayats, Members of Municipalities and Members of other local authorities;
(b) the duties performed by Constitutional Posts; 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.
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.
Some relevant definitions
Sec. 2(30) of CGST Act – “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 principal supply.
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 the principal supply
As per section 8(a) of CGST Act, a composite supply comprising 2 or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply.
Sec. 2(90) of CGST Act – “Principal Supply” means:
the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary.
Sec. 2(74) of CGST Act – “Mixed Supply” means:
Two or more individual supplies of goods or services, or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply;
A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drink and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately.
As per section 8(b) of CGST Act, A mixed supply comprising 2 or more supplies shall be treated as supply of that particular supply which attracts the highest rate of tax.
Sec. 2(74) of CGST Act – “Inward Supply”
in relation to a person, shall mean receipt of goods or services or both whether by purchase, acquisition or any other means with or without consideration.
Sec. 2(83) of CGST Act – “Outward Supply”
in relation to a taxable person, means supply of goods or services or both, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business.
Sec. 2(107) of CGST Act – “Taxable Person” :
means a person who is registered or liable to be registered under section 22 or section 24.
Sec. 2(94) of CGST Act – “Registered Person” :
means a person who is registered under section 25 but does not include a person having a Unique Identity Number.
Sec. 25(9) of CGST Act – “Unique Identity Number”:
Notwithstanding anything contained in section 25 (1),––
(a) any specialised agency of the United Nations Organisation or any Multilateral Financial Institution and Organisation notified under the United Nations (Privileges and Immunities) Act, 1947, Consulate or Embassy of foreign countries; and
(b) any other person or class of persons, as may be notified by the Commissioner,
shall be granted a Unique Identity Number in such manner and for such purposes, including refund of taxes on the notified supplies of goods or services or both received by them, as may be prescribed.
The author is a practising CA and is registered Insolvency Professional. He can be reached at firstname.lastname@example.org , Mob. +91 9953587496.