Meaning and Scope of Supply
GST Law & Practice Notes
B.Com 6th Sem CBCS Pattern
Meaning of Supply
Taxable event under GST law is supply of goods or services or both. It means no supply no GST.
The term, “supply” has been inclusively defined in the Act. The meaning and scope of supply under GST can be understood in terms of following six parameters, which can be adopted to characterize a transaction as supply:
- Supply of goods or services. Supply of anything other than goods or services does not attract GST.
- Supply should be made for a consideration.
- Supply should be made in the course or furtherance of business.
- Supply should be made by a taxable person.
- Supply should be a taxable supply.
- Supply should be made within the taxable territory
(1) Any transaction involving supply of goods or services without consideration is not a supply, barring few exceptions, in which a transaction is deemed to be a supply even without consideration.
(2) Further, import of services for a consideration, whether or not in the course or furtherance of business is treated as supply.
Scope of Supply
As per Section 7(1) Supply includes
(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;
(b) import of services for a consideration whether or not in the course or furtherance of business;
(c) the activities specified in Schedule I, made or agreed to be made without a consideration; (w.e.f. 29th Aug 2018 ‘and’ omitted retrospectively from 1.7.2017)
(d) w.e.f. 29th Aug 2018, omitted retrospectively from 1.7.2017: the activities to be treated as supply of goods or supply of services as referred to in Schedule II.
w.e.f. 29th Aug 2018, applicable retrospectively from 1.7.2017
(1A) where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II.”
As per Section 7(2) Supply excludes
(a) activities or transactions specified in Schedule III; or
(b) such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council,
Activities specified in Schedule III (i.e. Negative list):
1. Services by employee to employer in the course of or in relation to his employment.
2. Services by court or Tribunal
3. Services by Member of Parliament and others
4. Services by funeral, burial etc.
5. Sale of land/Building
6. Actionable claim other than lottery, betting and gambling.
7. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India.
(a) Supply of warehoused goods to any person before clearance for home consumption;
(b)Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption.”;
Activities to be treated as supply even if made without consideration
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 as specified in section 25, when made in the course or furtherance of business:
Provided that gifts not exceeding ` 50,000/- 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—
(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or
(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.
4. Import of services by a (w.e.f. 1-2-2019 the term ‘taxable’ omitted) person from a related person or from any of his other establishments outside India, in the course or furtherance of business.