GST – the term ‘supply’ decoded

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Courtesy: CA Unnikrishnan Nair N

ALL the major indirect taxes viz. Central Excise, Service Tax and VAT/CST would be subsumed in to GST. The concepts of manufacture of goods, provision of service and sale of goods would no longer be relevant under GST as the taxable event under GST is supply of goods and/or service. ‘Supply’ is defined under sec. 3 of the draft GST Act in a very extensive manner. The broad contours of the term ‘supply’ are discussed below.

Forms of Supply

Analysis

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.

 

This is the general part of definition which is extensively drafted. As of now, the taxable event is “manufacture” under Central Excise, “sale or purchase of goods” under VAT and ” service provided or agreed to be provided” under Service Tax.
Importation of service, whether or not for a consideration and whether or not in the course or furtherance of business.

 

Import of service may be liable to GST whether or not such import is in the course or furtherance of business. Import of service is presently taxable under reverse charge.
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.

 

Presently, commission agents are liable to service tax on the commission. But transfer of goods from principal to agent is not liable to VAT. Under GST, transfer of goods from principal to agent would amount to supply and would attract GST.
The supply of any branded service by an aggregator 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.

 

 

Under the proposed GST law, services provided under the brand name of aggregator is a deemed supply of service by the aggregator. They are liable to service tax under the present law.
Any transfer of the title in goods is a supply of goods.

 

Under present law, transfer of title in goods is not a service and hence liable to VAT only.
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.

 

Presently, transfer of right to use goods without transfer of possession and control is service and with transfer of possession and control is deemed sale. Without any such distinction, said transfer is a supply of service under the draft GST law.
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.

 

Financial lease/Hire purchase transaction would amount to supply of goods under the GST. Under present law, such transactions are liable to service tax and VAT.
Any lease, tenancy, easement, licence to occupy land is a supply of services.

 

Presently this activity is a taxable service. But leasing of land for agriculture purpose is in the negative list. Under the GST law, this activity amounts to supply of service.
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.

 

Under existing law, renting of residential dwelling for residence is in the negative list. Renting of precincts of religious place and renting of individual units having daily rent below Rs. 1,000/- are exempt. Under the GST law, renting for business or commercial purpose only amounts to supply of service.
Any treatment or process which is being applied to another person’s goods is a supply of services. Presently, no service tax on Job work amounting to manufacture. GST will be applicable in all situations of job work without the distinction of manufacture or non-manufacture.
Transfer of business assets 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.

 

Business assets transferred for non-business purpose with or without consideration is a supplyof goods under GST.
Transfer of business assets 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.

 

Business assets put to private use or non-business is a supply of service under GST.
Transfer of business assets 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.

 

Transfer of business assets for recovery of debts is supply of goods under GST.
Transfer of business assets 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—

a. the business is transferred as a going concern to another person; or

b. the business is carried on by a personal representative who is deemed to be a taxable person.

 

When a person ceases to become taxable person, the business assets shall be deemed to be supplied by him except in two specified situations.
Renting of immovable property is service.

 

Presently, taxable as declared service under Sec.66E(a) of the Finance Act, 1994. No VAT is levied.
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 is a service.

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

 

 

Under existing law, taxable as declared service under Sec.66E(b) of the Finance Act, 1994. VAT is also levied.
Temporary transfer or permitting the use or enjoyment of any intellectual property right is service.

 

Presently, this activity is a declared service under 66E(c) of The Finance Act, 1994 and is liable to service tax.
Development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software is service.

 

Under the present tax laws, software can be liable to tax under Service Tax, VAT or Central Excise, depending upon the nature of transaction whether it is sale of ‘goods’ or ‘service’ or ‘both’. Under the GST law, this activity is supply of service.

 

Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act is service.

 

Presently,this activity is a declared service under 66E(e) of The Finance Act, 1994 and is liable to service tax.
Works contract including transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract is service.

 

Both, pure labor contracts and works contracts involving transfer of property are service under the GST law. Under present law, both service tax and VAT are attracted on works contracts.
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 is service.

 

Under existing law, transfer of right to use goods without transfer of possession and control is service and with transfer of possession and control is deemed sale. Under GST law, transfer of right to use goods is supply of service.
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 is service.

 

Restaurant and outdoor catering are service under GST law. Under present law, both service tax and VAT are attracted.
Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.

 

 

Supply of services by such associations to members is not mentioned in the GST law. Under present law,both service tax and VAT are attracted but the levy is disputed on the ground of mutuality.
Permanent transfer/disposal of business assets.

 

 

Under GST law, permanent transfer of business assets without consideration is supply of goods.
Temporary application of business assets to a private or non-business use. Under GST law, temporary application of business assets to private use without consideration is supply of goods.
Services put to a private or non-business use.

 

Services put to a private or non-business use without consideration is supply of services.

 

Assets retained after deregistration Assets retained after deregistration without consideration is supply of goods.
Supply of goods and / or services by a taxable person to another taxable or non-taxable person in the course or furtherance of business.

 

Free samples supplied in the course of business is a deemed supply under GST. Under present law Excise Duty is payableon free supply of goods but VAT is not payable . No service tax on service without consideration.
The supply of goods by a registered taxable person to a job-worker shall not be treated as supply of goods.

 

Under present law Excise Duty or VAT is not payable on transfer of goods to job worker subject to procedural compliance. Under GST law, sending goods to job worker is not supply of goods.

Source:http://www.taxindiaonline.com/RC2/inside2.php3?filename=bnews_detail.php3&newsid=27472

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