CBEC’s FAQs on Meaning and Scope of Supply under GST
The FAQs related to “Meaning and Scope of Supply under GST” as per compilation made by the CBEC to acquaint the Taxpayers and the Stakeholders with various GST Laws, like CGST, IGST, UTGST, SGST, etc., are as under:
Q 1. What is the taxable event under GST?
Ans. The taxable event under GST shall be the supply of goods or services or both made for consideration in the course or furtherance of business. The taxable events under the existing indirect tax laws such as manufacture, sale, or provision of services shall stand subsumed in the taxable event known as ‘supply’.
Q 2. What is the scope of ‘supply’ under the GST law?
Ans. The term ‘supply’ is wide in its import covers all forms of supply of goods or services or both that includes 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. It also includes import of service. The model GST law also provides for including certain transactions made without consideration within the scope of supply.
Q 3. What is a taxable supply?
Ans. A ‘taxable supply’ means a supply of goods or services or both which is chargeable to goods and services tax under the GST Act.
Q 4. What are the necessary elements that constitute supply under CGST/SGST Act?
Ans. In order to constitute a ‘supply’, the following elements are required to be satisfied, i.e.-
(i) the activity involves supply of goods or services or both;
(ii) the supply is for a consideration unless otherwise specifically provided for;
(iii) the supply is made in the course or furtherance of business;
(iv) t h e supply is made in the taxable territory;
(v) the supply is a taxable supply; and
(vi) t h e supply is made by a taxable person.
Q 5. Can a transaction in which any one or more of the above criteria is not fulfilled, be still considered as supply under GST?
Ans. Yes. Under certain circumstances such as import of services for a consideration whether or not in the course or furtherance of business or supplies made without consideration, specified under Schedule-I of CGST /SGST Act, where one or more ingredients specified in answer to question no.4 are not satisfied, it shall still be treated as supply for levy of GST.
Q 6. Import of Goods is conspicuous by its absence in Section 3. Why?
Ans. Import of goods is dealt separately under the Customs Act, 1962, wherein IGST shall be levied as additional duty of customs in addition to basic customs duty under the Customs Tariff Act, 1975.
Q 7. Are self-supplies taxable under GST?
Ans. Inter-state self-supplies such as stock transfers, branch transfers or consignment sales shall be taxable under IGST even though such transactions may not involve payment of consideration. Every supplier is liable to register under the GST law in the State or Union territory from where he makes a taxable supply of goods or services or both in terms of Section 22 of the model GST law. However, intra-state self-supplies are not taxable subject to not opting for registration as business vertical.
Q 8. Whether transfer of title and/or possession is necessary for a transaction to constitute supply of goods?
Ans. Title as well as possession both have to be transferred for a transaction to be considered as a supply of goods. In case title is not transferred, the transaction would be treated as supply of service in terms of Schedule II (1) (b). In some cases, possession may be transferred immediately but title may be transferred at a future date like in case of sale on approval basis or hire purchase arrangement. Such transactions will also be termed as supply of goods.
Q 9. What do you mean by “supply made in the course or furtherance of business”?
Ans. “Business” is defined under Section 2(17) include any trade, commerce, manufacture, profession, vocation etc. whether or not undertaken for a pecuniary benefit. Business also includes any activity or transaction which is incidental or ancillary to the aforementioned listed activities. In addition, any activity undertaken by the Central Govt. or a State Govt. or any local authority in which they are engaged as public authority shall also be construed as business. From the above, it may be noted that any activity undertaken included in the definition for furtherance or promoting of a business could constitute a supply under GST law.
Q 10. An individual buys a car for personal use and after a year sells it to a car dealer. Will the transaction be a supply in terms of CGST/SGST Act? Give reasons for the answer.
Ans. No, because supply is not made by the individual in the course or furtherance of business. Further, no input tax credit was admissible on such car at the time of its acquisition as it was meant for non-business use.
Q 11. A dealer of air-conditioners permanently transfers an air conditioner from his stock in trade, for personal use at his residence. Will the transaction constitute a supply?
Ans. Yes. As per Sl. No.1 of Schedule-I, permanent transfer or disposal of business assets where input as credit has been availed on such assets shall constitute a supply under GST even where no consideration is involved.
Q 12. Whether provision of service or goods by a club or association or society to its members will be treated as supply or not?
Ans. Yes. Provision of facilities by a club, association, society or any such body to its members shall be treated as supply. This is included in the definition of ‘business’ in section 2(17) of CGST/ SGST Act.
Q 13. What are the different types of supplies under the GST law?
Ans. (i) Taxable and exempt supplies. (ii) Inter-State and Intra-State supplies, (iii) Composite and mixed supplies and (iv) Zero rated supplies.
Q 14. What are inter-state supplies and intra-state supplies?
Ans. Inter-state and intra-state supplies have specifically been defined in Section 7(1),(2) and Section 8(1),(2) of the IGST Act respectively. Broadly, where the location of the supplier and the place of supply are in same state it will be intrastate and where it is in different states it will be inter-state supplies.
Q 15. Whether transfer of right to use goods will be treated as supply of goods or supply of service? Why?
Ans. Transfer of right to use goods shall be treated as supply of service because there is no transfer of title in such supplies. Such transactions are specifically treated as supply of service in Schedule-II of CGST/ SGST Act.
Q 16. Whether Works contracts and Catering services will be treated as supply of goods or supply of services? Why?
Ans. Works contracts and catering services shall be treated as supply of services as both are specified under Schedule-II..
Q 17. Whether supply of software would be treated as supply of goods or supply of services under GST law?
Ans. Development, design, programming, customization, adaptation, upgradation, enhancement, implementation of information technology software shall be treated as supply of services as listed in Schedule-II.
Q 18. Whether goods supplied on hire purchase basis will be treated as supply of goods or supply of services? Why?
Ans. Supply of goods on hire purchase shall be treated as supply of goods as there is transfer of title, albeit at a future date.
Q 19. What is a Composite Supply under CGST/ SGST/UTGST Act?
Ans. 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 conjunction with each other in the ordinary course of business, one of which is a principal supply. For example, 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.
Q 20. How will tax liability on a composite supply be determined under GST?
Ans. 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.
Q 21. What is a mixed supply?
Ans. Mixed Supply means two or more individual supplies of goods or services or any combination thereof, made in conjunction with each other by a taxable person for a single price where such supply does not constitute a composite supply. For example, a supply of package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drink and fruit juice when supplied for a single price is a mixed supply. Each of these items can be supplied separately and it is not dependent on any other. It shall not be a mixed supply if these items are supplied separately.
Q 22. How will tax liability on a mixed supply be determined under GST?
Ans. A mixed supply comprising two or more supplies shall be treated as supply of that particular supply which attracts the highest rate of tax.
Q 23. Are there any activities which are treated as neither a supply of goods nor a supply of services?
Ans. Yes. Schedule-III of the model GST law lists certain activities such as
(i) services by an employee to the employer in the course of or in relation to his employment,
(ii) services by any Court or Tribunal established under any law,
(iii) functions performed by members of Parliament, State Legislatures, members of the local authorities, Constitutional functionaries
(iv) services of funeral, burial, crematorium or mortuary and
(v) sale of land and
(vi), actionable claims other than lottery, betting and gambling shall be treated neither a supply of goods or supply of services.
Q 24. What is meant by zero rated supply under GST?
Ans. Zero rated supply means export of goods and/or services or supply of goods and/or services to a SEZ developer or a SEZ Unit.
Q 25. Will import of services without consideration be taxable under GST?
Ans. As a general principle, import of services without consideration will not be considered as supply under GST. However, 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, even without consideration will be treated as supply.