Draft GST- Meaning and Scope of Supply

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Courtesy : CA Pradeep Sharma

SECTION-3

Meaning and scope of supply

Supply includes

  • all forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business
  • importation of service, whether or not for a consideration and whether or not in the course or furtherance of business, and
  • a supply specified in Schedule I, made or agreed to be made without a consideration.

Schedule II, in respect of matters mentioned therein, shall apply for determining what is, or is to be treated as a supply of goods or a supply of services.

2A. Where a person acting as an agent who, for an agreed commission or brokerage, either supplies or receives any goods and/or services on behalf of any principal, the transaction between such principal and agent shall be deemed to be a supply.

Subject to sub-section (2), the Central or a State Government may, upon recommendation of the Council, specify, by notification, the transactions that are to be treated as—

  1. a supply of goods and not as a supply of services; or
  2. a supply of services and not as a supply of goods; or
  3. neither a supply of goods nor a supply of services.

Notwithstanding anything contained in sub-section (1), the supply of any branded service by an aggregator, as defined in section 43B, under a brand name or trade name owned by him shall be deemed to be a supply of the said service by the said aggregator.

Analysis:  The taxable for levy of GST is “Supply”.

In generally supply is a fundamental economic concept that describes the total amount of a specific good or service that is available to consumers.

But supply includes

“all forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business”

In other words if person provides services or supply of goods for consideration then he is liable to pay GST.

And “Person” includes—

  1. an individual;
  2. a Hindu undivided family;
  3. a company;
  4. a firm;
  5. a Limited Liability Partnership;
  6. an association of persons or a body of individuals, whether incorporated or not, in India or outside India;
  7. any corporation established by or under any Central, State or Provincial Act or a Government company as defined in section 2(45) of the Companies Act, 2013 (18 of 2013);
  8. any body corporate incorporated by or under the laws of a country outside India;
  9. a co-operative society registered under any law relating to cooperative societies;
  10. a local authority;
  11. government;
  12. society as defined under the Societies Registration Act, 1860 (21 of 1860);
  13. trust; and
  14. every artificial juridical person, not falling within any of the preceding sub-clauses;

Interestingly “Secondly”

importation of service, whether or not for a consideration and whether or not in the course or furtherance of business,

means like reverse charge in service tax if any person receive service from abroad then he will be liable to pay GST under reverse charge whether used for business or not.

Thirdly

a supply specified in Schedule I, made or agreed to be made without a consideration.

Following list of supply is liable to GST even provides without consideration.

SCHEDULE I

MATTERS TO BE TREATED AS SUPPLY WITHOUT CONSIDERATION

  1. Permanent transfer/disposal of business assets.
  2. Temporary application of business assets to a private or non-business use.
  3. Services put to a private or non-business use.
  4. Assets retained after deregistration.
  5. Supply of goods and / or services by a taxable person to another taxable or nontaxable person in the course or furtherance of business.

Provided that the supply of goods by a registered taxable person to a job-worker in terms of section 43A shall not be treated as supply of goods.

For clarification the following is list of matters which are treated as Supply of tax purpose.

SCHEDULE II

MATTERS TO BE TREATED AS SUPPLY OF GOODS OR SERVICES

1. Transfer

  • Any transfer of the title in goods is a supply of goods.
  • Any transfer of goods or of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of services.
  • Any transfer of title in goods under an agreement which stipulates that property in goods will pass at a future date upon payment of full consideration as agreed, is a supply of goods.

2. Land and Building

  • Any lease, tenancy, easement, licence to occupy land is a supply of services.
  • Any lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services.

3. Treatment or process

Any treatment or process which is being applied to another person’s goods is a supply of services

4. Transfer of business assets

1. Where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration, such transfer or disposal is a supply of goods by the person.

2. Where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, whether or not for a consideration, the usage or making available of such goods is a supply of services.

3. Where any goods, forming part of the business assets of a taxable person, are sold by any other person who has the power to do so to recover any debt owed by the taxable person, the goods shall be deemed to be supplied by the taxable person in the course or furtherance of his business.

4. Where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of his business immediately before he ceases to be a taxable person, unless—

  1. the business is transferred as a going concern to another person; or
  2. the business is carried on by a personal representative who is deemed to be a taxable person.

5. The following shall be treated as “supply of service”

a. renting of immovable property;

b. construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partly, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or before its first occupation, whichever is earlier.

Explanation.- For the purposes of this clause-

the expression “competent authority” means the Government or any authority authorized to issue completion certificate under any law for the time being in force and in case of non-requirement of such certificate from such authority, from any of the following, namely:–

  1. an architect registered with the Council of Architecture constituted under the Architects Act, 1972; or
  2. a chartered engineer registered with the Institution of Engineers (India); or
  3. a licensed surveyor of the respective local body of the city or town or village or development or planning authority;

the expression “construction” includes additions, alterations, replacements or ;remodeling of any existing civil structure

  1. temporary transfer or permitting the use or enjoyment of any intellectual property right;
  2. development, design, programming, customisation, adaptation, up gradation, enhancement, implementation of information technology software;
  3. agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act;
  4. works contract including transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract;
  5. transfer of the right to use any goods for any purpose (whether or not for a specified period) for cash, deferred payment or other valuable consideration; and
  6. supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration.

6. The following shall be treated as supply of goods

supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.

“2A.Where a person acting as an agent who, for an agreed commission or brokerage, either supplies or receives any goods and/or services on behalf of any principal, the transaction between such principal and agent shall be deemed to be a supply.

3. Subject to sub-section (2), the Central or a State Government may, upon recommendation of the Council, specify, by notification, the transactions that are to be treated as—

  1. a supply of goods and not as a supply of services; or
  2. a supply of services and not as a supply of goods; or
  3. neither a supply of goods nor a supply of services.”

Where any person who receive commission/brokerage etc for agent service and provide services on behalf of his principal then transaction between principal and agent will treated as “Supply”.

But according to section 3 Central or State Government will notify the transaction which are not treated as “Supply”

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