Introduction
The taxable event in GST is supply of goods or services or both. Various taxable events like manufacture, sale, rendering of service, purchase, entry into a territory of State etc. have been done away with in favour of just one event i.e. supply.
The term, “supply” has been inclusively defined in the Act. The expression supply includes:
1. 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.
2. aa) The activities or transactions, by a person, other than an individual, to its members or constituents or vice versa for cash, deferred payment or other valuable consideration. (i.e persons and its members shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another)
3. import of services for a consideration whether or not in the course or furtherance of business and
4. the activities specified in Schedule I, made or agreed to be made without a consideration
The expression supply excludes:
1. activities or transactions specified in Schedule III
2. 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 recommendation of the council.
1. All forms of Supply of goods or services or both for a consideration in the course or furtherance of business
To constitute a Supply, two conditions subject to exceptions stated under the Act must be fulfilled simultaneously.
- Supply shall have been made for a consideration and
- Supply shall have been made in the course or furtherance of business.
2. Import of Services for a consideration whether or not in course or furtherance of business
The import of services shall also be treated as a supply if such import:
- Is for a consideration
- Although such import of service may or may not be in the course or furtherance of business.
3. Activities specified in Schedule I, made or agreed to be made without a 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
However, gifts not exceeding 50,000 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.
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 person from a related person or from any of his other establishments outside India, in the course or furtherance of business
Activities or Transactions which constitute a Supply to be treated as either supply of goods or supply of services as referred to in Schedule II
| S.No. | Transaction | Type of Activity | Nature of Supply | |
| 1. | Transfer of | (a) title in goods
(b) right in goods or of undivided share in goods without the transfer of title thereof (c) 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 |
Supply of Goods
Supply of Services Supply of Goods
|
|
| 2. | Land and Building | (a) any lease, tenancy, easement, licence to occupy land
(b) any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly |
Supply of Goods
Supply of Services |
|
| 3. | Treatment or Process | applied to another person’s goods | Supply of Services | |
| 4. | Transfer of Business Assets | (a) 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
(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 (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. |
Supply of Goods
Supply of Services
Supply of Goods |
|
| 5 | 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 (20 of 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. |
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| 6 | Certain Composite Supplies | (a) Works Contract as defined in Clause 119 of Section 2 and
(b) Supply, by way of or as part of any services or in any other manner, being foods 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. |
Supply of Services |
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| 7 | Supply of goods by any unincorporated association or body of persons | Supply of goods by any unincorporated association or body of persons to a member for cash, deferred payment or other valuable consideration | Supply of Goods | |
Activities which shall be treated neither as a supply of goods nor a supply of services
The following activities or transactions shall be treated neither as a supply of goods nor a supply of services:
- Activities or transaction specified in Schedule III; or
- 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.
Schedule III is reproduced below:
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.
- 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.
3. Services of funeral, burial, crematorium or mortuary including transportation of the deceased.
4. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.
5. Actionable claims, other than lottery, betting and gambling.
6. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India.
(a) Supply of warehoused goods to any person before clearance for home consumption;
(b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption.
Activities/Transactions notified by the government:
1. Services by way of any activity in relation to a function entrusted to a Panchayat under article 243G of the Constitution or to a Municipality under article 243W of the Constitution.
2. Service by way of grant of alcoholic liquor licence, against consideration in the form of licence fee or application fee or by whatever name it is called.
Conclusion
In order to constitute a “supply”, the following elements are required to be satisfied:
- The activity involves supply of goods or services
- The supply is for a consideration unless otherwise specifically provided for. Schedule I specifically provides the activities which shall be treated as supply even if such supply is made or agreed to be made without a consideration
- Supply is made in the course or furtherance of business
- Supply is made in the Taxable Territory
- Supply is a Taxable Supply and
- Supply is made by a taxable person.
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