Meaning and scope of supply under GST – 8 Questions Answered: All You Need To Know about Meaning and scope of supply under GST Regime. This article explains GST (Goods and service tax), Meaning of Supply, Scope of supply under GST, GST effective date, Short term impact & latest updates related to Supply under GST Regime. Lets understand what is the Scope of supply under GST, how it is different from other taxes,Applicability in GST Regime, GST rates, its impact on your business and latest updates about GST Act 2017.
Meaning and scope of supply under GST
Q1. What is the scope of the term ‘supply’ as defined in CGST Act, 2017?
Ans. As per Sub-section (1) of Section 7, Supply includes:
- 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;
- import of services for a consideration whether or not in the course or furtherance of business;
- the activities specified in Schedule I, made or agreed to be made without a consideration; and
- the activities to be treated as supply of goods or supply of services as referred to in Schedule II.
Q2. Is it required to distinguish whether a particular supply involves supply of goods or services or both?
Ans. Yes. The CGST Act, 2017 specifies certain provisions separately for supply of goods and supply of services viz., Section 12 and Section 13 provides for ascertaining time of supply of goods and time of supply of services respectively; similarly separate provisions have been specified for ascertaining place of supply of goods and place of supply of services. Further, the rate of tax applicable to supply of goods and supply of services may be different. Accordingly, it is important to distinguish whether a particular transaction involves supply of goods or supply of services.
Q3. How to distinguish whether a particular supply involves supply of goods or services or both?
Ans. The Schedule II appended to CGST Act, 2017 enlists the activities which are to be treated as supply of goods or supply of services. One may refer Schedule II with reference to Section 7 to classify whether the transaction involves supply of goods or supply of services.
Q4. Whether supply of goods or services without consideration is liable to tax?
Ans. The activities enumerated in Schedule I will qualify as supply even if made without consideration. Accordingly, such supplies in the absence of consideration are liable to tax. To illustrate, following are the activities which will qualify as supply in the absence of consideration and eventually would be liable to tax:
- Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.
- 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 fifty thousand 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—
(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 taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.
Q5. Whether transfer of goods to another branch located outside the State is taxable?
Ans. In terms of Section 25(4) of the CGST Act, 2017, every person is required to obtain separate registration for every branch located in different state or union territory and shall be treated as distinct persons. Accordingly, the supply of goods (stock transfers) to a branch located outside the State would qualify as supply liable to tax in terms of clause 2 to Schedule I of the CGST Act, 2017. Further, it is important to note that, supply of goods to a branch / unit located within the same State having separate registration would also be liable to tax since both such units (supplying unit and recipient unit) would qualify as distinct person in terms of Section 25(4).
Q6. Whether gifts given by employer to employee will also qualify as supply?
Ans. In terms of Explanation appended to Section 15 it is clarified that employer and employee will be deemed to be related persons. Accordingly, in terms of proviso to clause 2 of Schedule I, gift by an employer to employee will be a supply and will be liable to tax. However, any gifts for a value not exceeding fifty thousand rupees in a financial year will not qualify as supply and as such will not be liable to tax.
Q7. Whether supply of goods by principal to his agent or by agent to his principal is taxable in the absence of consideration?
Ans. In terms of Section 7 read with Schedule I, following would qualify as supply:
- Supply of goods by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or
- Supply of goods by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.
Q8. Whether import of services will be liable to tax under GST regime?
Ans. The following import of service will qualify as supply under CGST Act, 2017:
- import of service for a consideration whether or not in the course or furtherance of business is a supply;
- import of service by a taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.
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