The term ‘supply’ has been defined under Section 7 of the Central Goods & Services Act (CSGT Act) as follows:
– All forms of supply of goods or services or both such as sale, transfer, exchange, barter, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.
– The activities specified in Schedule I, made or agreed to be made without a consideration, and
– The activities to be treated as supply of goods or supply or services as referred to in Schedule II.
The word includes shows that the intention of the legislature is to keep the activities under the supply to be unlimited and not exhaustive. Therefore, if the person undertakes to perform any or all of the above activities during the course or furtherance of business for consideration, it will be covered under the ambit of supply under GST laws.
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Please note that in order to constitute a supply, the following criteria’s must be fulfilled:
i) Supply of goods or services, or both
ii) Supply is done for a consideration
iii) Supply is done in course of business
iv) Supply should be a taxable one
Supply of goods or services, or both
The word ‘goods’ as well as ‘services’ have been well defined under the CGST Act.
“Goods” has been defined under Section 2(52) of the Act as every kind of movable property other than money and securities but includes actionable claim, growing crops, grass and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.
“Services” has been defined under Section 2(102) and means anything other than goods, money and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged. The expression “services” includes facilitating or arranging transactions in securities.
Supply is done for a consideration
The word ‘consideration’ has also been well defined under the CGST Act, 2017. As per this Section, the consideration can be in money or kind. Any subsidy given by the Central Government or a State Government is not considered as consideration. It is immaterial whether the payment is made by the recipient or by any other person. A deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply. Further, when there is barter of goods or services, the same activity constitutes supply as well as a consideration.
For example, when a vendor gives 1 kg rice in exchange of clothes by tailor, giving 1 kg rice is a supply of services by the vendor. Similarly, supply of clothes is supply by tailor and the clothes form consideration for 1 kg rice.
Exception to the Requirement of Consideration
There are exceptions to the requirement of ‘Consideration’ as a pre-condition for a supply to be called a supply as per GST. As per Schedule I to CGST Act, 2017, activities as mentioned below shall be treated as supply even if made without 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 fifty thousand 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.
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Supply is done in course of furtherance of business
The term ‘in course of furtherance of business’ has not been defined under the GST laws but the word ‘business’ has been defined under the CGST Act. The literal meaning of the phrase ‘in course of business’ suggests the activity is during the act of or in continuation of carrying out such act in future’ Thus, in course of furtherance of business means either of following:
– Anything done in relation to business, while carrying out business or
– Simply a revenue-generating ordinary activity of that organisation/concern.
However, there is one exception to this ‘Course or Furtherance of Business’ rule i.e., import of services for a consideration. Import of services for consideration, even if not in the course -or furtherance of business are liable to GST.
Example 1: Ram buys a laptop for Rs.50,000 for his personal use and sells it off after 10 months of use to a dealer. This is not considered as supply under GST laws as this is not done by Ram in course of furtherance of business.
Example 2: Lakshman provides free coaching to neighboring students as a hobby. This is not considered as supply under GST laws as this is not done by Lakshman in course of furtherance of business.
Example 3: Karan who owns a stationery shop, sold 500 registers to Arjun for Rs. 12,000/-. This is considered as supply as supply under GST laws, as this is done by Karan in course of furtherance of business.
Supply in the Taxable Territory
In order to attract GST, the supply must be made by a taxable person in a taxable territory. Hence, a supply between two non-taxable persons does not constitute supply under GST. A “taxable person” is a person who is registered or liable to be registered under section 22 or section 24 of the CGST Act. This is how even an unregistered person who is liable to be registered is a taxable person for the purposes of GST. Similarly, a person who is not liable to be registered but has taken voluntary registration and got himself registered is also considered to be a taxable person.
It should be noted that GST in India is State-centric. Hence, a person making supplies from different States need to take a separate registration in each State. Further the person has an option to take more than one registration within a State, if the person has multiple place of business. A person who has obtained or is required to obtain more than one registration, whether in one State or Union territory or more than one State or Union territory shall, in respect of each such registration, be treated as distinct persons for the purposes of GST. Hence a supply between these entities constitutes supply under GST.
A person being a SEZ Unit or SEZ developer shall obtain a separate registration, as distinct from his place of business located outside the SEZ in the same State or Union Territory. Taxable Supply For a supply to attract GST the supply must be taxable.
Taxable supply has been broadly defined and means any supply of goods or services or both which is leviable to tax under the Act. Exemptions may be provided to the specified goods or services or to a specified category of persons / entities making supply.
For a supply to attract GST the place of supply should be in whole of India. The place of supply of any goods or services is determined based on Sections 10, 11, 12 and 13 of Integrated Goods and Services Tax Act, 2017.
The location of the supplier and the place of supply determine whether a supply is treated as an intra-State supply or an inter-State supply.
Determination of the nature of supply is essential to ascertain whether integrated tax is to be paid or Central plus State tax are to be paid. Inter-State supply of goods means a supply of goods where the location of the supplier and place of supply are in different States or Union territories. Whereas, intra-State supply of goods means supply of goods where the location of the supplier and place of supply are in the same State or Union territory. Imports, Exports, Supplies from and to SEZs, etc. are treated as deemed inter-State supplies.
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