What is Supply Under GST?
Under Goods and Services Tax, supply means the point of taxation or taxable event. The term supply includes the following attributes:
- You should make a supply that either involves goods or services.
- If you supply anything that is not categorized as goods or services, it is not considered a supply.
- In case you undertake any Barters or Exchanges, then GST is applicable even on such transactions.
- The term “Supply” also includes licences, leases, rentals with or without transfer of right to use. Therefore, GST is levied on such transactions as well.
- You should supply goods or services for a consideration. Consideration can be in the form of money or otherwise.
- In case, a third party pays money in lieu of or on behalf of the recipient, the same shall be considered a part of supply.
- Under GST, if you make any deposit as a recipient is not regarded as consideration. Unless the same is specifically applied to by the supplier.
- You should make a supply that is in the course of or for the furtherance of business.
- If you make a supply for personal consumption or in personal capacity, such supplies do not attract GST.
- You are eligible to make a supply only if you are a taxable person.
- If you are a non-taxable person and you make a supply to another non-taxable person, then such a supply is not leviable to GST.
- Under GST, you can make a supply to a non-taxable person also.
- A taxable person is the one who is registered or who is liable to be registered under the law.
Activities Under Schedule I, II And III
Besides the above definition, there are three schedules that mention the activities that are considered as Supply under GST.
- Schedule I mentions the transactions that are considered supply even if there is no consideration involved.
- Activities are treated as supply of goods and supply of services are mentioned under GST Schedule II .
- Schedule III lists the activities that are treated as neither supply of goods nor supply of services under GST.
There are certain activities that are construed as supply even if there is no consideration involved. Such supplies are referred to as “Deemed Supplies” under GST. Following are the list of all such activities:
- Permanent transfer or disposal of business assets. Provided Input Tax Credit has been availed on such assets.
- Supply of goods or services between related persons or distinct persons as mention under section 25. Provided such a supply is made in the ordinary course of business or for furtherance of business.
- Principal supplying goods to his agent. Provided the agent undertakes to supply such goods on behalf of the principal.
- Agent supplying goods to his Principal. Provided the agent undertakes to receive such goods on behalf of the principal.
- Taxable person importing services from either a related person or any of his establishments outside India.
Activities Treated As Supply of Goods
Following are the activities that form “Supply of Goods” under GST:
- Any transfer of title in Goods
- Transfer of title in goods under an agreement stipulating that the property in goods shall pass at a future date upon payment of full consideration as agreed.
- Goods forming part of the assets of a business transferred or disposed of by or under the direction of the person carrying on the business. Provided such goods are transferred so that they no longer form part of those assets. Moreover, such a transfer takes place whether or not for a consideration.
- There are cases where a person ceases to be a taxable person. In such a case, goods forming part of the assets of any business carried on by the said person shall be deemed to be supplied by him in the course or furtherance of his business. Provided such goods are supplied immediately before the person ceases to be a taxable person, unless:
- The business is transferred as a going concern to another person
- Business is carried on by a personal representative who is deemed to be taxable
- Supply of goods by any unincorporated association to a member for cash, deferred payment or other valuable consideration.
Activities Treated As Supply of Services
Following are the activities that form “Supply of Services” under GST:
- Transfer of right in goods or of undivided share in goods without the transfer of title
- Any lease, tenancy, easement, licence to occupy land
- Lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly
- Any treatment or process which is applied to another person’s goods
- Transfer of business assets:
- By or under the direction of a person carrying on a business
- Goods held assets 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 the purpose of the business, whether or not for a consideration
- Renting of immovable property
- 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. This is except the cases where:
- the entire consideration has been received after issuance of completion certificate, where required by the competent authority or
- after its first occupation, whichever is earlier.
- Temporary transfer or permitting the use of any intellectual property right
- Development, design, programming, customization, adaptation, up-gradation, enhancement, implementation of information technology software
- Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act.
- 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.
- Composite supply of works contract as defined in clause (119) of section 2.
- Composite 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).
Provided such supply or service is for cash, deferred payment or other valuable consideration.
There are certain activities that are not to be treated as Supply under GST. Hence, following activities are neither treated as supply of goods not supply of services:
- Services given by an employee to the employer
- Any person performing duties as a Chairperson or a Member or a Director of a government body. Provided the person is not regarded as an employee before the commencement of this clause.
- Functions performed by members of:
- State Legislature
- Other Local Authorities
- Duties performed by a person holding any designation in order to pursue constitutional provisions.
- Funeral, burial, crematorium or mortuary including transporting the deceased.
- Sale of land
- Actionable claims besides lottery, gambling and betting
- Sale of building subject to clause (b) of paragraph 5 of Schedule II
So, to explain the concept of supply under GST, here is an infographic that explains the concept in a much simple way.