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Supply under GSTThis article deals with the concept of supply under the GST. This article does not deal with certain special cases of supply without consideration which have been dealt with in separate articles to be published at a later date.

Scope of Supply:

GST is leviable only when there is either a supply of goods or services or both under the provisions of law. If something cannot be defined to constitute a supply within the GST Act than no liability to pay tax under the GST Act would arise. So it is essential to understand the context in which the term supply is used.

As per section 7 of the CGST Act the expression “supply” includes––

a)   all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
b)  import of services for a consideration whether or not in the course or furtherance of business;
c)   the activities specified in Schedule I, made or agreed to be made without a consideration; and
d)  the activities to be treated as supply of goods or supply of services as referred to in Schedule II.

The above definition is an inclusive one and a one of wide import and covers within its ambit all forms of supply which a man would consider a supply in normal parlance provided it is for a consideration and in the course of furtherance of business. Further supply has to include two or more distinct persons with one or more persons being the supplier and the others being recipient of the supply. Import would constitute supply under GST in all cases even if the import is for non-business purposes.

Normally supply has to be for a consideration but there are certain activities as specified in Schedule I which would be considered a supply irrespective of whether they are for a consideration or without consideration.

Following activities have been specified under Schedule I:-

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. Provided that 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 taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.

Activities which would not constitute Supply

As per section 7(2) of the CGST Act the following activities shall be treated neither as a supply of goods nor a supply of services:-

a)     activities or transactions specified in Schedule III; or
b)    such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council,

As these activities would be treated as neither goods nor services they will not be subject to tax under the GST law.

Following activities have been specified under Schedule III:-

1.     Services by an employee to the employer in the course of or in relation to his employment.
2.     Services by any court or Tribunal established under any law for the time being in force.
3.

a.      the functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities;
b.     the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or
c.      the 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 and who is not deemed as an employee before the commencement of this clause.

4.     Services of funeral, burial, crematorium or mortuary including transportation of the deceased.
5.     Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.
6.     Actionable claims, other than lottery, betting and gambling.

The purpose of this article is to create awareness about the soon to be implemented Goods and Service Tax in India.

ca rishabhkumarThe author is a fellow member of the Institute of Chartered Accountants of India and also a qualified Company Secretary. The author has also done DISA(ICAI), certificate on IFRS (ICAI), Certificate on Forex and Treasury Management (ICAI), Certificate on Forensic Accounting and Fraud Prevention (ICAI). The author practices as a Chartered Accountant under the name and style of Rishabh Kumar Barmecha and Associates and is an expert in auditing, financial investigation, direct and indirect taxation. The author can be reached at rishabhkumarbarmecha@gmail.com or 91 9007909221 or Twitter @CARKBarmecha.
CA Rishabh Kumar Barmecha

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