The term, “supply” has been clearly defined in the GST Act. As per Sec.7 of the CGST Act, Supply includes, “Taxable supply of goods or services or both, made by a taxable person, within taxable territory, in the course or furtherance of business, for a consideration.” From this definition, the meaning and scope of supply under GST can be understood in terms of following parameters, which can be adopted to characterize a transaction as supply, subject to exceptions given under the subsequent para:
- Supply of goods or services or both (Supply of anything other than goods or services does not attract GST).
- Supply should be made for a consideration.
- Supply should be made in the course or furtherance of business.
- Supply should be a taxable supply.
Exceptions:
(1) Import of services for a consideration whether or not in the course or furtherance of business:
(2) Activities mentioned under Schedule-I of the Act, even made without consideration.
Activities Treated as Supply – Section 7(1)
(1) All forms of supply of goods or services or both such as sale, transfer, disposal, barter, exchange, license, lease or rental, made or agreed to be made for a consideration, by a person, in the course or furtherance of business;
(2) Import of services for a consideration, whether or not in the course or furtherance of business;
(3) Activities specified under Schedule-I, made or agreed to be made even without a consideration;
(4) Activities specified under Schedule-II, those are treated either as supply of goods or supply of services.
Activities Not Treated as Supply – Section 7(2)
(1) Activities specified under Schedule-III;
(2) Activities undertaken by the Central government or a State government or a Union territory or a Local authority in which they are engaged as public authorities, as may be notified by the government on recommendations of the GST council.
Schedule-I of CGST Act 2017
Schedule-I gives a comprehensive list of activities treated as supply, even if made or agreed to be made without consideration. The list of such activities is given below:
(1) Permanent disposal of business assets on which ITC is availed.
(2) Supply of goods or services between related persons, or distinct persons (as per section 25), made in the course or furtherance of business.
Definition of related persons as per Section 25 (4): A person who has obtained or required to obtain more than one registration, whether in one state/union territory or more than one state/union territory, shall be treated as a distinct person in respect of each such registration.
Definition of distinct person as per Section 25(5): Where a person, who has obtained or is required to obtain registration in a State or UT in respect of an establishment, has an establishment in another State or Union Territory, then such establishments shall be treated as establishments of distinct persons for the purposes of this Act.
Exception – Goods not exceeding Rs. 50.000 in a financial year, from an employer to his employee shall not be treated as a supply of goods or services.
(3) Supply of goods by a principal to his agent, where the agent undertakes to supply such goods on behalf of the principal.
(4) Supply of goods 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 person from a related person or any of his establishments outside India, in the course or furtherance of business.
Schedule-II of CGST Act 2017
This schedule gives a comprehensive list of activities which are either treated as supply of goods or supply of services. The list of such activities is given below:
(1) Title or right in goods: (a) Transfer of title in goods is treated as supply of goods; (b) Transfer of right in goods or undivided share in goods without transfer of the title thereof is treated as supply of services; (c) Transfer of title in goods by an agreement, which stipulated that the property in goods shall pass on a future date upon discharge of full consideration as agreed, is treated as supply of goods.
(2) Land & Building: (a) Lease, tenancy, easement or license to occupy land, is supply of services. (b) Lease or tenancy of building (commercial/residential) either wholly or partly, for business purpose, is supply of services.
(3) Treatment or process of goods: Treatment or process applied to goods of another person is a supply of services.
(4) Transfer of Business assets:
(a) Transfer or disposal of goods forming part of assets of a business, by or under direction of the person carrying on the business, so as no longer to form part of those assets, whether or not with a consideration, is a supply of goods;
(b) Goods held or used for business purposes, when put to a private use or made available to any person for a use other than business, either by or under direction of the person carrying on the business, is treated as a supply of services;
(c) If a person ceases to be a taxable person, goods forming part of his business assets shall be deemed to be supplied in course or furtherance of business (supply of goods), immediately before he ceases as a taxable person, unless the business is transferred to another person as a going concern, or his personal representative deemed as a taxable person.
(5) Supply of Services:
(a) Renting of an immovable property;
(b) Construction of a building, complex, civil structure, including those intended for sale either wholly or partly, unless the entire consideration received after getting completion certificate if required or its first occupation, whichever is earlier;
(c) Temporary transfer or permitting the use of an intellectual property right;
(d) Development, design, programming, customization, adaptation, up-gradation, enhancement or implementation of IT software;
(e) Agreeing to the obligation to refrain from an act, or to tolerate an act/situation, or to do an act;
(f) Transfer of right to use any goods for any purpose (whether or not for a specified period) for cash or deferred payment or any other consideration.
(6) Composite Supply of services:
(a) Works contract as defined under clause 119 of section 2 of CGST Act;
(b) Supply, by way of or as part of a service or any other manner whatsoever, of goods, being food or any other article for human consumption or drinks other than alcoholic liquor for human consumption, whether for cash or deferred payment or any other consideration.
Schedule-III of CGST Act 2017
Schedule III gives a comprehensive list of activities not treated as supply. List of such activities is given below:
(1) Services by an employee to the employer in the course of or in relation to his employment.
(2) Services by a court or tribunal.
(3) Functions performed by the Members of parliament, Members of State legislator, Members of Municipalities, Members of Panchayats or Members of any local authorities.
(4) Duties performed by any person who holds any post in pursuance of any provisions under the constitution in that capacity.
(5) Duties performed by any person as a chairperson or a member or director in a body, established by the central government or state government or local authority and who is not deemed as an employee before commencement of this clause.
(6) Services of funeral, burial, crematorium, or mortuary including transportation of the deceased.
(7) Sale of land and subject to clause b of paragraph 5 of schedule II, sale of building.
(8) Actionable claims, other than lottery, betting and gambling.
(9) Supply of goods from a non-taxable territory to another non-taxable territory, without entering into India.
(10) Supply of goods by the consignee to any other person, by endorsement of documents to title of goods, after the goods being dispatched from the port of origin outside India but before clearance for home consumption.
(11) Supply of warehoused goods to a person before clearance for home consumption.
Conclusion
Supply is indeed the linchpin of the GST system, and correctly identifying whether a transaction constitutes a supply is pivotal in determining the taxability of that transaction under GST. This concept ensures that GST is applied consistently and uniformly to all relevant transactions, whether they are of a commercial or non-commercial nature.
For more details on scope of supply, please follow the link of GST Council–https://gstcouncil.gov.in/sites/default/files/fielers/50-The_Meaning_and_Scope_of_Supply07032018.pdf
For a more clear understanding on all basics on “scope of supply”, you can view the video class of ICAI by clicking on this Link–https://www.youtube.com/watch?v=2d7nAiA-FSw
You may also Like–https://anptaxcorp.com/understanding-time-of-supply-under-gst-a-comprehensive-analysis/
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