Feb 072017
 

Meaning and significance of supply under GST

Supply – Taxable event:

As per section 8(1) of the revised GST act, the supply of goods or services is a taxable event. It states that – There shall be levied a tax called the Central/State Goods and Services Tax (CGST/SGST) on all Intra-State supplies of goods and/or services on the value determined under section 15 and at such rates as may be notified by the Central/State Government in this behalf, but not exceeding fourteen percent, on the recommendation of the Council and collected in such manner as may be prescribed.

Hence, liability to pay have been shifted from sale (as in case of existing sales tax / VAT act) or provision of services (as in the case of service tax) or manufacture (as in the case of excise duty etc.) to supply of goods or services. Hence, here an attempt is made to understand the meaning of term supplies.

What is supply under GST?

Section 3(1) of the act provides an inclusive definition of the term supply. As per definition given in section 3, all supplies may be categories under three heads:

Supplies – where consideration is necessary Supplies – where consideration is not necessary
In the course or furtherance of business Not in the course or furtherance of business
1.     Sale,

2.     Transfer,

3.     Barter,

4.     Exchange,

5.     License,

6.     Rental,

7.     Lease or

8.     Disposal

9.     Importation of services

1.     Importation of services 1.     Permanent transfer/disposal of business assets where ITC has been availed on such assets2.     Supply between related person or distinct person made in the course or furtherance of business.3.     Supply of goods by principle to his agent or vice versa, where agent undertakes to supply / received such goods on behalf of the principle.

4.     Importation of services by a taxable person from –

a.     A related person

b.     Any of his other establishment outside India

All above activities shall be treated as supply and GST will be attracted as the provisions of the GST act.

What is not supply under GST?

Schedule III and Schedules IV specifies activities and transactions which are not to be treated as supply and hence to not liable for GST. Few such items are given below:

Activities undertaken by any person Following activities are undertaken by central government or state government or any local authority to:
1.     Services by an employee to the employer2.     Services by any Court or Tribunal3.     Function / duties performed by:

a.     MP / MLA

b.     Members of Panchayats

c.     Members of Municipalities

d.     Members of other local authorities

e.     Post as provided under constitution

4.     Services by a foreign diplomatic mission

5.     Services of funeral, burial, crematorium or mortuary

1.     Another government or local authority excluding services of post, transport 1.     To individual in discharge of statutory function. 1.     Health care2.     Education etc.

What is composite supply?

As per sec 2(27) “composite supply” means a supply made by a taxable person to a recipient comprising two or more supplies of goods or services, or any combination thereof, which are naturally bundled and supplied in combination with each other in the ordinary course of business, one of which is a principal supply;

Case 1: Where goods are packed and transported with insurance, the supply of goods, packing materials, transport and insurance is a composite supply and supply of goods is the principal supply.

A composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply.

What is mix supply?

As per sec 2(66) “mixed supply” means two or more individual supplies of goods or services, or any combination thereof, made in combination with each other by a taxable person for a single price where such supply does not constitute a composite supply;

Case 2: A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drink and fruit juices when supplied for a single price is a mixed supply. Each of these items can be supplied separately and is not dependent on any other. It shall not be a mixed supply if these items are supplied separately.

A mixed supply comprising two or more supplies shall be treated as supply of that particular supply which attracts the highest rate of tax.