What is Supply under GST?
Supply under GST includes sale, transfer, exchange, barter, license, rental, lease, and disposal. If a person undertakes either of these transactions during the course or furtherance of business for consideration, it will be covered under the meaning of Supply under GST. The supply of services under GST is considered as a taxable event for charging tax. The liability to pay tax arises at the ‘time of supply of goods or services’. Thus, determining whether or not a transaction falls under the meaning of supply is important to decide GST’s applicability.
Details about Supplies
||Contract to allow the right to use for a period without transfer of title
||Transfer of goods/right in goods without the transfer of title
||To swap or transfer for an equivalent with use of money
||Exchange one commodity for another without money
||Permission granted to exercise certain privileges
||Periodical payment for the use of someone else’s property
||Transfer of ownership of goods
||To part with or alienate
Activities Under Schedule I, II, And III
There are three schedules that mention the activities that are considered as Supply under GST.
- Schedule I: This mentions the transactions that are considered supply even if there is no consideration involved.
- Schedule II: Activities are treated as supply of goods and supply of services.
- Schedule III: It lists the activities that are treated as neither supply of goods nor supply of services under GST
Schedule I of Supply Under GST
“Deemed Supplies” under GST are certain activities that are construed as supply even if there is no consideration involved. Following are the list of all such activities.
- Permanent transfer or disposal of business assets.
- Supply of goods or services between related persons or distinct persons as mention under section 25.
- Principal supplying goods to his agent. Provided the agent undertakes to supply such goods on behalf of the principal.
- Agent supplying goods to his Principal. Provided the agent undertakes to receive such goods on behalf of the principal.
- Taxable person importing services from either a related person or any of his establishments outside India
Schedule II of Supply Under GST
Activities Treated As Supply of Goods
- Any transfer of title in Goods
- Transfer of title in goods under an agreement stipulating that the property in goods shall pass at a future date upon payment of full consideration as agreed.
- Goods forming part of the assets of a business transferred or disposed of by or under the direction of the person carrying on the business.
- There are cases where a person ceases to be a taxable person. In such a case, goods forming part of the assets of any business carried on by the said person shall be deemed to be supplied by him in the course or furtherance of his business. Provided such goods are supplied immediately before the person ceases to be a taxable person, unless:
- The business is transferred as a going concern to another person
- Business is carried on by a personal representative who is deemed to be taxable.
- Supply of goods by any unincorporated association to a member for cash, deferred payment or other valuable consideration.
Activities Treated As Supply of Services
These are the Activities Treated As Supply of Services
- Transfer: Transfer of right or share in goods without the transfer of title
- Land and Building: Lease, rent, tenancy, license to occupy land, Lease or letting of building for business purposes
- Treatment or process: Any treatment or process which is applied to another person's goods is a supply of services.
- Transfer of business asset: The owner allows to use business assets for personal use
- Renting of immovable property
- Construction of a building including a complex or building intended for sale to a buyer
- Temporary transfer or permitting the use of IPR
- Development of IT service
- Agreeing to refrain from an act
- Transfer of the right to use any goods for any purpose
- Composite supply: Works contract, Supply by service of food and drink
- Supply of goods by an unincorporated AOP or BOP for consideration
Schedule III of Supply Under GST
There are certain activities that are not to be treated as Supply under GST. Hence, the following activities are neither treated as supply of goods not the supply of services:
- Services given by an employee to the employer
- Any person performing duties as a Chairperson or a Member or a Director of a government body
- Functions performed by members of parliament:, State Legislature, Panchayats, Municipalities, Other Local Authorities
- Duties performed by a person holding any designation in order to pursue constitutional provisions.
- Funeral, burial, crematorium or mortuary including transporting the deceased.
- Sale of land
- Actionable claims besides lottery, gambling and betting
- Sale of building subject to clause of paragraph 5 of Schedule II.
Elements of Supply
Supply has a compendious definition under the Act. Its most important elements are the following:
- Supply is done for a consideration
- Supply is done in course of furtherance of business
- Supply should be of goods and services. Supply of anything other than goods or services like money, securities etc. does not attract GST.
It is not considered as a supply in GST, if the above mentioned elements are not met.
Import of services for a consideration whether or not in the course or furtherance of business will be included in the scope of supply. IGST on Imports would be in addition to the Custom Duty that is leviable on the Imports of Goods and/or Services.
- Mr. X buys a Car for Rs.10,0000 for his personal use and sells it off after 10 months of use to a dealer. This is not considered as supply under CGST as this is not done by Mr X for the furtherance of business.
- Mrs. Y provides free coaching to neighbouring students as a hobby. This is not considered as supply as this act is not performed for a consideration.
However, as specified in Schedule I of GST Act, certain activities are considered as supply even if it is made without consideration.
Classification of Supply and Types
There are a few supplies that are made together with two or more items. The concept of supplies are further classified into two:
- Composite supply
- Mixed supply.
A supply comprising of two or more goods/services, which are necessarily supplied in conjunction with each other as per frequent business practices followed in that area. In other words, these items cannot be supplied individually. There is a principal supply and a secondary supply in the whole transaction. In such cases, the tax rate on principal supply will apply on the entire supply.
A supply comprising of two or more goods/services, wherein the supplies are independent of each other and are not necessarily required to be sold together is called a mixed supply. The first condition to be met for mixed supply is that ‘it should not be a composite supply’. In such cases, the tax rate that is higher of the two supplies will be applicable to the entire supply. The above described are the types of supply under GST.
Scope of Supply
The term ‘supply’ is wide in its import covers all forms of supply of goods or services or both that includes 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. It also includes import of service. The model GST law also provides for including certain transactions made without consideration within the scope of supply.
Following are the activities that are considered as a supply of services as per Schedule II of GST Act:
Transfer of business assets:
- Business assets transferred/disposed of with or without consideration
- If the owner ceases to be a taxable person then his business assets will be assumed to be supplied to him in course of his business.
This is not applicable in the following cases:
- Business is transferred to another person
- Business is carried by a taxable representative
Following are the activities that are considered as a supply of services as per Schedule II of GST Act:
- any transfer of the title in goods is a supply of goods
- any transfer of right in goods or of undivided share in goods without the transfer of title is a supply of services
- 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.
Land and building
- Lease, rent, tenancy, easement, licence to occupy land
- Lease or letting out of the building
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.
Treatment or process
Any treatment or process which is applied to another person’s goods is a supply of services.
Taxable Supply under GST
The taxable supply under GST shall be the supply of goods or services or both made for consideration in the course or furtherance of business. The taxable events under the existing indirect tax laws such as manufacture, sale, or provision of services shall stand subsumed in the taxable event known as ‘supply’.
Supply under GST is considered a taxable event for charging tax. The liability to pay tax arises at the ‘time of supply of goods or services’. Thus, determining whether or not a transaction falls under the meaning of supply, is important to decide GST’s applicability.
Under the GST, supply of goods and services can be classified into two major categories - Taxable supplies and Non-taxable supplies. These are further classified into different types based on the nature of supply made.
These refer to supply of goods and services that are taxable under GST. Registered taxpayers can claim refunds on tax paid during purchases.
- Regular taxable supplies - Whenever you supply an item or service which attract a GST rate greater than 0% within India, it becomes a regular taxable supply.
- Nil-rated supplies - Whenever you supply goods which attract 0% GST by default, such supplies are known as nil rated supplies.
- Zero-rated supplies - Whenever you make exports, supplies to a SEZ unit or deemed exports, the GST associated with the items or services involved becomes 0 even though the same would attract a GST rate greater than 0% when sold within India. Such supplies are deemed as zero rated supplies
Non Taxable Supplies
- Exempt Supplies - The supply of exempt goods or services do not attract GST even though they are within the purview of GST. That said, the registered taxpayer cannot claim ITC on inputs used for making such supplies.
- Non-GST supplies - This refers to supply of items which are outside the purview of the GST law.