The Revised Model GST Law was placed in public domain on 26th November 2016. In the GST Law, the taxable event would be SUPPLY. Under the existing laws there were multiple taxable events, i.e. manufacturing, provision of services, sales, etc. Under the GST law a single taxable event ‘supply’ will replace the multiple taxable events. Hence it is the most important part of the GST law, as it will determine the taxability or otherwise in the GST law.
Let us discuss the concept of Supply, as provided under the Model GST Law. The definition of Supply in the Model GST Law, is an inclusive one. It is contained in Section 3 of the Model GST Law. Apart from Section 3, Schedules I to IV are provided which explain various provisions related to supply.
SUPPLY includes 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.
IMPORT OF SERVICES
MATTERS TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION
The Central Government or State Government, may upon recommendation of the Council, notify the transactions that are to be treated as a supply of goods and not as supply of services, or a supply of services and not as supply of goods. Schedule II of the Model law specifies the matters to be treated as supply of goods or supply of services.
Matters to be treated as Supply of Goods
Matters to be treated as Supply of Services
ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES
ACTIVITIES OR TRANSACTIONS UNDERTAKEN BY THE CENTRAL GOVERNMENT, A
STATE GOVERNMENT OR ANY LOCAL AUTHORITY WHICH SHALL BE TREATED
NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES
1. Services provided by a Government or local authority to another Government or local authority excluding the following services:
(i) services by the Department of Posts by way of speed post, express parcel post, life insurance and agency services;
(ii) services in relation to an aircraft or a vessel , inside or outside the precincts of a port or an aircraft; or
(iii) transport of goods or passengers.
2. Services provided by a Government or local authority to individuals in discharge of its statutory powers or functions such as-
(i) issuance of passport, visa, driving licence, birth certificate or death certificate; and
(ii) assignment of right to use natural resources to an individual farmer for the purpose of agriculture.
3. Services provided by a Government or local authority or a governmental authority by way of:
(i) any activity in relation to any function entrusted to a municipality under article 243W of the Constitution;
(ii) any activity in relation to any function entrusted to a Panchayat under article 243G of the Constitution;
(iii) health care; and
4. Services provided by Government towards-
(i) diplomatic or consular activities;
(ii) citizenship, naturalization and aliens;
(iii) admission into , and emigration and expulsion from India;
(iv) currency, coinage and legal tender , foreign exchange;
(v) trade and commerce with foreign countries , import and export across customs frontiers, interstate trade and commerce; or
(vi) maintenance of public order.
5. Any services provided by a Government or a local authority in the course of discharging any liability on account of any tax levied by such Government or authority.
6. Services provided by a Government or a local authority by way of –
(i) tolerating non-performance of a contract for which consideration in the form of fines or liquidated damages is payable to the Government or the local authority under such contract; or
(ii) assignment of right to use any natural resource where such right to use was assigned by the Government or the local authority before the 1st April, 2016:
PROVIDED that the exemption shall apply only to service tax payable on one time charge payable, in full upfront or in installments, for assignment of right to use such natural resource.
7. Services provided by Government by way of deputing officers after office hours or on holidays for inspection or container stuffing or such other duties in relation to import or export of cargo on payment of Merchant Overtime Charges (MOT).
8. Services provided by Government or a local authority by way of-
(i) registration required under any law for the time being in force; or
(ii) testing, calibration, safety check or certification relating to protection or safety of workers, consumers or public at large, required under any law for the time being in force.
The concepts of Composite Supply and Mixed Supply have been introduced in the Model GST Law.
COMPOSITE SUPPLY means a supply made by a taxable person to a recipient comprising two or more supplies of goods or services, 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 a principal supply;
Illustration : 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.
A composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply.
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;
Illustration: 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.
A mixed supply comprising two or more supplies shall be treated as supply of that particular supply which attracts the highest rate of tax.