SCOPE AND MEANING OF SUPPLY IN GST
By: – Dr. Sanjiv Agarwal
Goods and Services Tax – GST
Dated:- 15-7-2017<\/p>\n
Statutory Provisions
\nSection 7 of CGST Act 2017 provides for scope of supply as under:
\n (1) For the purposes of this Act, the expression “supply” includes
\n (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;
\n (b) import of services for a consideration whether or not in the course or furtherance of business;
\n (c) the activities specified in Schedule I, made or agreed to be made without a consideration; and
\n (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II.
\n (2) Notwithstanding anything contained in sub-section (1),
\n (a) activities or transactions specified in Schedule III; or
\n (b) such activities or transactions undertaken by <\/p>\n
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\nSupply is the taxable event in GST. The term 'Supply' has been defined in an inclusive manner. The word 'includes' in definition is used to enlarge the meaning of the words or phrases occurring in the body. Thus the specific transactions listed in Section 7 are only illustrative and the definition would be widened to include other similar kind of transactions.
\n It may be noted that the term 'transfer' used in the definition of supply has not been used in rest of GST law. Whereas the term 'removal' has been defined in the Act but the same has not been included in the definition of supply. The provisions in section 31 in respect of issuance of invoice are in reference to removal. The term 'transfer' included in the definition of 'supply' can be read as including removal also.
\nThe 'barter' is different from 'exchange' only to the extent that in barter goods and\/or services are exchanged for goods and\/or services. In exchange, goods and\/or services besides other goods and\/or services<\/p>\n
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\nLeasing is a contract by which one party agrees to convey an estate in property to another person for a consideration. The lease could be of immovable property or movable property. In the contract of lease, the ownership is not transferred and is retained by the lessor but the possession and right to use is transferred to the other party called lessee.
\nThough the terms rental and leasing are used inter-changeably, there is a slight difference in the two. Lease is a contract to rent an asset for a set period of time and for set terms and conditions. Lease is generally for a longer period of time in which both the parties are required to observe terms and conditions of lease provided in the lease agreement.
\nDisposal means alienate the ownership of the goods. Example: Sharp Limited is a manufacturer of calculators. It decided to donate 1000 calculators to a school. This transaction would be called disposal of calculator (finished goods) by Sharp Limite<\/p>\n
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\nAny subsidy received from Central or State Government would not be includable in taxable value but subsidy received from any other source which is linked to the product will be part of taxable consideration.
\nThe taxability of deposits will depend on the treatment given to such deposits. In case these deposits are not adjustable, then these will not become part of consideration but in case some kind of adjustments are made in the deposit amount, then such deposit will be considered as advance payment received and would be taxable.
\nAny transaction of supply of goods and\/or services to be taxable should be in the course or furtherance of business. In case the supply is determined not made in the course or furtherance of business, it will not be leviable to GST.
\nThe terms 'commerce' and 'trade' are often used inter-changeably. While commerce refers to large scale business activity<\/p>\n
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\n * Supply of goods,-
\n by a principal to his agent, where the agent undertakes to supply goods on behalf of principal.
\n * by an agent to his principal, where the agent undertakes to buy such goods on behalf of his principal.
\n * Importation of services by a taxable person from a related person or any of his establishment outside India, in the course or furtherance of business.
\nThe transactions of supply between a principal and agent and also between two branches of the same person would be considered as a taxable supply. The transactions of stock transfers would become taxable in GST.
\n In respect of importation of services by a taxable person, it is important to note that the importation of services for a consideration has been considered as taxable supply in section 7(1)(b) and importation of services without consideration from a related person or own establishment located outside India has been considered taxable under Schedule I. Hence, importation of<\/p>\n
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\n * Services performed by foreign diplomatic Missions in India.
\n * Services of funeral, burial, cremation etc.
\n * Sale of land and building.
\n * Actionable claims other than betting and gambling
\nSuch services carried out by Central or State Governments or a local authority. It is important to note that the services which are taxable in the hands of other persons would be taxable even if carried out by Government or a local authority.
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\n Reply By KASTURI SETHI as =
\nSir,
\n Pl. refer to Schedule-III (Sale of land and building). The inclusion of 'sale of land' in the negative list (Schedule-III) is justified. How inclusion of 'building' into this Schedule is justified ? Any building cannot come into existence without construction service. No building can be completed without involving labour and supervision of contractor. The ingredient of providing taxable service from one person to another per<\/p>\n
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