SUPPLY UNDER GST

Supply is considered a taxable event for charging tax as per Section 9 of the Central Goods and Service Tax Act, 2017 (CGST Act). 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.

As per Section 7 of CGST Act, Supply 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.

Certain activities are considered as supply even if it is made without consideration. These activities are listed in schedule 1 of the CGST Act. These transactions are mostly between parties which are related or between an agent and a principal. The parties pay GST can later claim it as input tax credit.

• Transaction between related person

When parties are related the price are controlled and they would not sometimes be the price that would have otherwise been charged, had the transaction taken place between unrelated parties.

Related persons are defined u/s 2(84) of the GST Act. People shall be deemed to be related if they fall under any of the categories below

• Officer or director of one business is the officer or director of another business.
• Businesses legally recognised as partners.
• An employer and an employee.
• They are under common control or management.
• One of them controls the other directly or indirectly.
• Any person who holds atleast 25% of shares in another company, either directly or indirectly.
• The entities together control another entity.
• The promoter or managerial persons are members of the same family.

• Supply of Goods via agent

• By a principal to his agent and the agent will supply them on behalf of the principal.
• By an agent to his principal when the agent receives these goods on behalf of the principal.

• Taxable person importing services from a related person
• Permanent transfer of business assets where ITC has been availed on such assets.

There are few supplies which are made together with two or more items such supply is further classified into composite supply and mixed supply.

A supply comprising of two or more goods or 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 to the entire supply. This is a composite supply.

A supply comprising of two or more goods/ services, where in the supplies are independent of each other and are not necessarily required to be sold together is called a mixed supply. The first condition 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.

Following are the transactions covered under negative list:

• Services provided by an employee to the employer
• Gifts up to Rs.50,000/- in value in a Financial Year, by an employer to an employee
• Services of the funeral, burial, crematorium or mortuary including transportation of the deceased
• Services by any court or Tribunal
• Duties performed by the MP/MLA/MLC/ Members of Local Bodies
• 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
• Duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity
• Sale of Land
• Sale of Building (However, If construction of a complex /building intended for sale to a buyer and part of the consideration is received before completion, then it will be treated as Supply of Services)
• Actionable claims, other than lottery, betting and gambling

Thus, GST law has simplified tax treatment by clearly classifying activities considered as goods/services or transactions considered as neither sale of goods or services.

• Mr. A buys a table for Rs.10,000 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. A for the furtherance of business.
• Mrs. B provides free coaching to neighboring students as a hobby. This is not considered as supply as this act is not performed for a consideration.