DEMYSTIFYING SUPPLY AS PER REVISED MODEL GST LAW
By: – Chitresh Gupta
Goods and Services Tax – GST
Dated:- 13-2-2017
Article 366(12A) of the Constitutional (101st Amendment) Act, 2016 defines the Goods and Services tax (GST) as “a tax on supply of goods or services or both, except supply of alcoholic liquor for human consumption”. The term 'supply' is, however, not defined in the Constitution.
The concept of 'supply' is the key stone of the proposed GST architecture. In other words, supply is life blood of GST regime. GST is a multi-stage tax levied on supply of goods and / or services, collected at each stage of the production and distribution, in proportion to the value added by each taxable person in the chain of supply. In the GST regime, the entire value of supply of goods and / or services is proposed to be taxed in an integrated manner, unlike the existing indirect taxes, which are charged independently either on the manufacture or sale of goods, or on the provi
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A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in
goods to the buyer for a price. There may be a contract of sale between one part-owner and another. It may
be absolute or conditional.
Transfer
Merriam- Webster
* to give over the legal possession or ownership of
* to cause (something) to pass from one to another
* to cause to go or be taken from one place to another
* to shift possession of (something) from one person to another
Barter
Merriam- Webster
to trade by exchanging one commodity for another
Exchange
Transfer Of Property Act,1882
When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both
things being money only, the transaction is called an "exchange".
License
Merriam- Webster
* a permission granted by competent authority to engage in a business or occupation or in an activity otherwise unlawful
* a document, plate, or tag evid
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n 2(49): “goods'' means 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;
Section 2(92) : “services'' means anything other than goods;
Explanation 1 -Services include transactions in money but does not include money and securities;
Explanation 2 – Services does not include transaction in money other than an activity 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.
It may be noted that the term 'service' has been defined in the wider sense as any transaction which is not goods, shall be services except money and securities.
Section 2(1): “actionable claim” shall have the meaning assigned to it in section 3 of the Transfer of Property
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recharge vouchers issued by service companies for enabling clients/consumers to avail services like mobile phone communication, satellite TV broadcasts, DTH broadcasts etc be 'actionable claims?
No. Such recharge vouchers do not create a 'beneficial interest' in a moveable property but only enable a person to enjoy a particular service.
Section 2(90) : Securities shall have meaning assigned to it in sub-section (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956).
Thus, activities that are in the nature of only transfer of title by way of sale, redemption, purchase or acquisition of securities on principal-to principal basis would not be liable to GST since excluded from the definition of 'goods' or 'services'.
However, the services of dealers, brokers or agents in relation to such transactions would be liable to GST. The activities which are not in the nature of transfer of title in securities (for example a person agreeing not to exercise h
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wever, for a draft or a payorder made by bank the service provided would be only to the extent of commission charged for the bank draft or pay order. The money received for the face value of such instrument would not be consideration for a service since to the extent of face value of the instrument it is only a transaction in money.
* Debt collection services or credit control services would not be considered as transaction in money since provided for a consideration and would be liable to GST.
made or agreed to be made for a consideration
One of the essential conditions for the supply of goods and/or services to fall within the ambit of GST is that a supply is made for a consideration. For GST purposes, consideration does not refer only to money. It covers anything which might be possibly done, given or made in exchange for something else.
For instance, it might be something exchanged in a barter arrangement, such as in a part exchange, or where a service is performed in return
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sideration.
* Advances forfeited for cancellation of an agreement to provide service could be treated as “monetary value of any act” and therefore, could be considered as consideration.
PROVIDED that a deposit, whether refundable or not, given in respect of the supply of goods or services shall not be considered as payment made for the supply unless the supplier applies the deposit as consideration for the supply;
Example: Donations to a charitable organization are not consideration unless charity is obligated to provide something in return e.g. display or advertise the name of the donor in a specified manner or such that it gives a desired advantage to the donor.
Examples of Non-monetary Consideration [para 2.2.4 of 'Taxation of Services -An Education Guide' dated 20-06-2016]
Non-monetary consideration essentially means compensation in kind such as the following:
♦ Supply of goods and services in return for provision of service
♦ Refraining or forbearing to do an a
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sed Model GST Act and includes an individual, Hindu undivided family, company, firm, LLP, AOP, BOI, local authority, government, trust, society etc.
Supply made In the course or furtherance of business
A transaction made in the course or furtherance of business, alone will be treated as a supply under GST. The term “in the course or furtherance of” has not been defined under the Model GST Law.
The term “in the course” means in the process or progress of. The term “furtherance” as understood in common parlance means the advancement of a scheme or interest, promotion, furthering, advancement, forwarding, improvement, development, betterment, stimulation.
There is no exhaustive definition or test for determining whether an activity is in the course or furtherance of business. Internationally, the business test has emerged through judicial decisions. Generally, whether an activity carried by a taxable person constitutes a business or not is determined by considering the whole of the a
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e it will be considered as 'import of service' in India provided place of supply of services is in India.
Further, it may be noted that importation of services is included within the meaning of 'supply' under CGST / SGST Acts. However, it would be liable to IGST since it would be an inter-state supply. In fact, section 2(30) of IGST Act has adopted the meaning of 'supply' from CGST Act.
It may be noted that Importation of services for personal use still continues to be considered as a supply thus if a person takes a career counseling from a foreign university for his daughter and pays the consideration for the same in foreign currency to such university, it will amount to importation of service and will be within the ambit of supply and GST will be charged on the same.
Importation of service without consideration will not tantamount to supply. Thus if A's brother who is in United States and is an architect , has send the designs for A's house out of love and affection and where ther
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, when made in the course or furtherance of business
Example:
* Inter Unit stock transfers from one State to another State.
* Transfer of goods from the unit in one state to its R&D centre in another state.
* Employees of Holding company sent on deputation to the associate companies.
Supply of goods by a Principal to his Agent or vice a versa
Example:
* Principal supplying goods to the agent for onwards sale in various parts of the country
* Agent procuring input for supplying to the factory of the Principal
TAXABILITY OF COMPOSITE OR MIXED SUPPLY [SECTION 3(5)]
The tax liability on a composite or a mixed supply shall be determined in the following manner –
Composite Supply : A composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply.
The term word composite supply has been defined in section 2(27)as under:
“composite supply” means
* a supply made by a taxable person to a recipient
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, chocolates, cakes, dry fruits, aerated drink and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately.
Additionally Supply also consists of following schedules
* Schedule II- List of transactions to be classified as supply of goods or supply of service.
* Schedule III- list of activities or transactions which shall be treated neither as a supply of goods nor a supply of services
* Schedule IV- Activities or transactions undertaken by the central government, a state government or any local authority which shall be treated neither as a supply of goods nor a supply of services
Conclusion
Thus Supply is a very comprehensively defined under Revised GST Law. However the practical implications of the same is very farfetched and it is imperative for the professionals and industry to grasp the new concepts so as undertake
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