Supply Under GST

Taxable event

For any transaction to be taxed under any law, there has to be some taxable event i.e. event which attracts the levy of Tax. Under GST, this taxable event is supply. GST is levied on all intra-state supplies and inter-state supplies of Goods or Services or both. So any transaction to be taxed under GST, first and foremost test is to check whether that transaction is supply or not.

Definition and Meaning of Supply

The term supply has been defined under section 7 of CGST Act, 2017.

Section 7(1) says Supply Includes

1. all forms of supply of goods or services or both 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;
2. import of services for a consideration whether or not in the course or furtherance of business;
3. the activities specified in Schedule I made or agreed to be made without a consideration

Four activities are mentioned in Schedule I which are as follows:

1. Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.
2. Supply of goods or services or both between related persons or between distinct persons, when made in the course or furtherance of business

Provided that gifts not exceeding 50,000 rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.

3. Supply of goods by principal to his agent or by  agent to principal
4. Import of services by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business

The definition of supply is inclusive definition which means that the term “Supply” does not restrict itself to those items that are being mentioned in there, i.e. those items mentioned there are just indicative in list.

Parameters of Supply

1. Supply should be of goods or services or both. Supply of anything other than Goods or services like money, securities does not attract tax.
2. Supply should be made for a consideration except in case of transactions specified in Schedule 1. That means activities done free of charge does not constitute supply and hence does not attract GST. Further, deposit paid are not treated as consideration. They are treated as consideration only when they are adjusted against amount due from recipient.
3. Supply should be made in the course or furtherance of business except in case of import of service for a consideration. GST is essentially a tax only on commercial transactions. The word business as defined u/s 2(17) of CGST Act, 2017includes any trade, commerce, manufacture, profession, vocation etc. whether or not undertaken for a monetary benefit. Further transactions to qualify as business, frequency, volume, continuity or regularity of such transactions is not a pre- requisite.

Example : Mr. A buys a car for personal use and sells it after a year. This transaction is not supply since sell has not been made in course or furtherance of business. This view is taken on basis of Departmental FAQs and GST flyers. However another view can also be taken that business includes any transaction whether or not there is frequency, volume or regularity and this transaction can be considered as Supply.

Activities treated neither as supply of goods nor supply of services

There are some activities mentioned in Schedule III which shall treated neither as supply of goods nor supply of services.

1. Services by employee to employer in course of his employment
2. Services by court or tribunal
3. Functions performed by MLA, MP, Member of Panchayat, Member of Municipalities
4. Services of Funeral, burial etc. including transportation of deceased
5. Sale of land and, subject to Para 5(b) of schedule II, sale of building
6. Actionable claims other than Lottery, betting and Gambling
7. High-sea sale

These transactions are neither treated as supply of goods nor supply of services, hence not liable to GST.

Taxable Supply

• A ‘Taxable supply’ means a supply of goods or services or both which is chargeable to goods and services tax under the GST Act. – Sec 2(108) of CGST Act, 2017.
• After determining whether a particular transaction is supply or not, next step is to check whether such supply is taxable supply or not. Every supply is not taxable in GST. Several exemption have been provided vide notifications in GST on supply or goods or services or both. For example, service of Yoga provided by entity registered u/s 12AA of Income tax act, 1961 is exempted from GST.

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