Definition of Supply in GST – Scope of Supply

As per Sec 9 of the CGST Act, GST is levied on all intra-state ‘SUPPLIES’. So we see that supply is the ‘charging event’ in GST.

In this article, let us understand the term “Supply’ as per GST in a simplified way.

The term Supply has been defined in Section 7.

Section 7: Scope of Supply

1) Supply Includes –

• –All forms of supply like sale, exchange, barter, rental, disposal etc., for a consideration, for business purpose.
• –Import of Services – for a consideration, for any purpose.
• –Activities in Schedule I – Even if Without Consideration
• –To determine an activity to be treated as supply of goods or services – See Schedule II

2) Notwithwstanding Anything above in sub-section 1, following treated as neither supply of goods, nor services (thus outside GST) –

• –Activities/ Transactions specified in Schedule III
• –Activities/ Transactions by Central Govt/ State Govt/ Local Authority, where they are engaged as public authorities, and notified by government

3) Subject to Sub-Section (1) & (2), Govt may notify, transactions to be treated as goods or services. (means govt may say that a particular transaction is a supply of goods/ supply of services, and then it will be covered under ‘supply’ and chargeable to GST)

Schedules to the CGST Act

These schedules are a part of the definition of the term ‘Supply’, which is the charging event in GST

Schedule I: Activities treated as supply even if without consideration

• Permanent transfer/ disposal of business assets – on which ITC had been availed
• Supply between related parties – in furtherance of business (Gifts upto Rs. 50,000 by employer to employee = excluded)
• Supply by-
  • Principal to Agent (When agent helps in selling)
  • Agent to Principal (When agent helps in receiving/ buying)
• Import of services from related person / own establishment outside India (for business)

Schedule II: Activities to be treated as supply of goods or supply of services

Following shall be Supply of Goods

• Transfer of the title in goods
• Transfer of the title under an Agreement – stipulates property shall pass at a future date upon payment of full consideration (Hire Purchase)
• Business assets disposed off
• Where ceases to be taxable person, all assets deemed supplied by him (unless transferred as Going Concern, or representative carries on the business)
• Supply of goods by any unincorporated association or body of persons to a member thereof

Following shall be Supply of Services

• Transfer of right/ undivided share in goods (without title)
• Lease, tenancy, easement, licence to occupy land
• Lease or letting out of the building either wholly or partly
• Renting of any Immovable Property
• Construction (except where entire consideration received after issue of Completion Certificate)
• Private/ Non business use of assets
• Temporary transfer/ permitting the use of any intellectual property right
• Transfer of the right to use any goods for any purpose
• Development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software
• Agreeing Refrain from/ tolerate/ or to do – an act
• Any treatment or process which is applied to another person’s goods
• Works Contract
• Restaurant/ catering

Schedule III: Activities treated as neither a supply of goods nor/ services

• Services by an employee to the employer
• Services by any court or Tribunal (“court” includes District Court, High Court and Supreme Court.)
• Services of funeral, burial, crematorium or mortuary incl. transportation of the deceased.
• The functions/ duties performed by-
  • MPs/ MLAs/ Panchayat, Municipalities, other Local Authority Members
  • Constitutional Position Holders (Ex – President/ Governor etc.)
  • Chairperson or a Member or a Director in a body established by CG/ SG/ LA – who is not deemed employee
• Sale of land & Sale of Building (Other than under-construction one, where consi. before CC)
• Actionable claims, other than lottery, betting and gambling.

Now let us look at some definitions

These are important to get a deep understanding of the above provisions we discussed.

Section 2(1) – Actionable Claim

As per Transfer of Property Act

Section 2(17) – Business

• Trade, commerce, manufacture, profession, vocation, adventure, wager, similar activity (whether or not for monetary benefit), Irrespective of volume, frequency, continuity, regularity. (So, if we do any transaction even once, it can be called ‘business, it does not matter if it is not regular, provided it is covered in definition)
• Activity/ transaction – Connected to/ Incidental to/ Ancillary to the above.

Additionally, following are also covered –

Supply/ receipt of goods (including capital goods) or services – with respect to starting/ closing business

Provision of facilities/ benefits to members by club/ association/ society/ etc

Admission to Premises for consideration

Services by office holder, where office held for furtherance of trade/ profession/ vocation

Services of – License to book maker/ totalisator – provided by race club

Any activity by Central Govt/ State Govt/ Local Authority, where they are engaged as public authorities

Section 2(52) – Goods

All movable property (other than money & securities) including actionable claims; growing crops/ grass/ things attached to land or forming part of land, agreed to be severed before supply.

Section 2(19) – Capital Goods

Goods used/ intended to be used in furtherance of business, and whose value is capitalised in books.

Section 2(102) – Services

Anything other than goods, money, securities; includes activity relating to use of money/ conversion for which separate consideration charged.

Section 2(101) – Securities

As per Sec 2(h) of Securities Contracts (Regulation) act, 1956.

 

Thus, we discussed the Scope of Supply in GST in an exhaustive and comprehensive manner!