The Revised Model GST Law was placed in public domain on 26th
November 2016. In the GST Law, the taxable event would be SUPPLY. Under the
existing laws there were multiple taxable events, i.e. manufacturing, provision
of services, sales, etc. Under the GST law a single taxable event ‘supply’ will
replace the multiple taxable events. Hence it is the most important part of the
GST law, as it will determine the taxability or otherwise in the GST law.
Let us discuss the concept of Supply, as provided under the Model GST
Law. The definition of Supply in the Model GST Law, is an inclusive one. It is
contained in Section 3 of the Model GST Law. Apart from Section 3, Schedules I
to IV are provided which explain various provisions related to supply.
SUPPLY includes all forms of supply of
goods and/or services such as 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.
IMPORT
OF SERVICES
·
To
be treated as supply if received for a consideration, whether for personal use
or business use.
·
However
if import of services is received without any consideration, then it will be
treated as supply if it is received by a Taxable person from a related person
or from any of his other establishment outside India, and it is in course or
furtherance of business.
MATTERS
TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION
·
Permanent
transfer/disposal of business assets where input tax credit has been availed on
such assets.
·
Supply
of goods or services between related persons, or between distinct persons as
specified in section 10, when made in the course or furtherance of business.
·
Supply
of goods—
o
by
a principal to his agent where the agent undertakes to supply such goods on
behalf of the principal, or
o
by
an agent to his principal where the agent undertakes to receive such goods on
behalf of the principal.
The Central
Government or State Government, may upon recommendation of the Council, notify
the transactions that are to be treated as a supply of goods and not as supply
of services, or a supply of services and not as supply of goods. Schedule II of
the Model law specifies the matters to be treated as supply of goods or supply
of services.
Matters to be treated as Supply of
Goods
·
Any
transfer of the title in Goods.
·
Any transfer of title in goods under an
agreement which stipulates that property in goods will pass at a future date
upon payment of full consideration as agreed
·
Where goods forming part of the assets of a
business are transferred or disposed of by or under the directions of the
person carrying on the business so as no longer to form part of those assets,
whether or not for a consideration.
·
Supply of goods by any unincorporated
association or body of persons to a member thereof for cash, deferred payment
or other valuable consideration.
Matters to be treated as Supply of Services
·
Any
transfer of goods or of right in goods or of undivided share in goods without
the transfer of title thereof.
·
Any lease,
tenancy, easement, licence to occupy land.
·
Any lease or letting out of the building
including a commercial, industrial or residential complex for business or
commerce, either wholly or partly.
·
Any treatment or process which is being
applied to another person’s goods.
·
Where, by or under the direction of a person
carrying on a business, goods held or used for the purposes of the business are
put to any private use or are used, or made available to any person for use,
for any purpose other than a purpose of the business, whether or not for a
consideration, the usage or making available of such goods is a supply of
services.
·
Construction of a complex, building, civil
structure or a part thereof, including a complex or building intended for sale
to a buyer, wholly or partly, except where the entire consideration has been
received after issuance of completion certificate, where required, by the
competent authority or before its first occupation, whichever is earlier.
·
Temporary transfer or permitting the use or
enjoyment of any intellectual property right;
·
Development, design, programming,
customisation, adaptation, upgradation, enhancement, implementation of
information technology software;
·
Agreeing to the obligation to refrain from an
act, or to tolerate an act or a situation, or to do an act;
·
Works contract including transfer of property
in goods (whether as goods or in some other form) involved in the execution of
a works contract;
·
Transfer of the right to use any goods for
any purpose (whether or not for a specified period) for cash, deferred payment
or other valuable consideration; and
·
Supply, by way of or as part of any service
or in any other manner whatsoever, of goods, being food or any other article
for human consumption or any drink (other than alcoholic liquor for human
consumption), where such supply or service is for cash, deferred payment or
other valuable consideration.
ACTIVITIES OR TRANSACTIONS WHICH SHALL BE
TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES
·
Services by an employee to the employer in
the course of or in relation to his employment.
·
Services by any Court or Tribunal established
under any law for the time being in force.
·
The functions performed by the MP/MLA/MLC/
Members of Local Bodies.
·
The duties performed by any person as a
Chairperson or a Member or a Director in a body established by the Central
Government or a State Government or local authority.
·
Services by a foreign diplomatic mission
located in India.
·
Services of funeral, burial, crematorium or
mortuary including transportation of the Deceased
·
Other Transactions notified by the Central or State Govt, upon the
recommendation of the Council.
ACTIVITIES OR TRANSACTIONS UNDERTAKEN BY
THE CENTRAL GOVERNMENT, A
STATE GOVERNMENT OR ANY LOCAL AUTHORITY
WHICH SHALL BE TREATED
NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF
SERVICES
1.
Services provided by a Government or local authority to another Government or
local
authority
excluding the following services:
(i)
services by the Department of Posts by way of
speed post, express parcel post, life insurance and agency services;
(ii)
services in relation to an aircraft or a
vessel , inside or outside the precincts of a port or an aircraft; or
(iii)
transport of goods or passengers.
2.
Services provided by a Government or local authority to individuals in
discharge of its
statutory
powers or functions such as-
(i)
issuance of passport, visa, driving licence,
birth certificate or death certificate; and
(ii)
assignment of right to use natural resources
to an individual farmer for the purpose of agriculture.
3.
Services provided by a Government or local authority or a governmental
authority by way of:
(i) any activity in relation to any function entrusted to a
municipality under article 243W of the Constitution;
(ii) any activity in relation to any function entrusted to a Panchayat
under article 243G of the Constitution;
(iii) health care; and
(iv) education.
4.
Services provided by Government towards-
(i) diplomatic or consular activities;
(ii) citizenship, naturalization and aliens;
(iii)
admission into , and emigration and expulsion
from India;
(iv)
currency, coinage and legal tender , foreign
exchange;
(v)
trade and commerce with foreign countries ,
import and export across customs frontiers, interstate trade and commerce; or
(vi)
maintenance of public order.
5.
Any services provided by a Government or a local authority in the course of
discharging any liability on account of any tax levied by such Government or
authority.
6.
Services provided by a Government or a local authority by way of –
(i) tolerating non-performance of a contract
for which consideration in the form of fines or liquidated damages is payable
to the Government or the local authority under such contract; or
(ii) assignment of right to use any natural
resource where such right to use was assigned by the Government or the local
authority before the 1st April, 2016:
PROVIDED
that the exemption shall apply only to service tax payable on one time charge
payable, in full upfront or in installments, for assignment of right to use
such natural resource.
7.
Services provided by Government by way of deputing officers after office hours
or on holidays for inspection or container stuffing or such other duties in
relation to import or export of cargo on payment of Merchant Overtime Charges
(MOT).
8.
Services provided by Government or a local authority by way of-
(i) registration required under any law for
the time being in force; or
(ii) testing, calibration, safety check or
certification relating to protection or safety of workers, consumers or public
at large, required under any law for the time being in force.
The concepts of Composite Supply and
Mixed Supply
have been introduced in the Model GST Law.
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;
Illustration : 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.
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;
Illustration: 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.
DISCLAIMER:
The contents of this article have been prepared on the basis of the relevant
provisions and as per the information existing at the time of preparation. The
views of the author are personal and cannot be relied upon before any
authority, without the written permission of the author. The article is meant
for general guidance and the author disclaims any liability for any loss
arising to any person acting or refraining from acting on the basis of any
material contained in this article. It is recommended that professional advice
be sought based on specific facts and circumstances.
(Author:
CA. Mohit Gaba, N.K.GABA & Co. Chartered Accountants. The author can be
reached at camohitgaba@gmail.com, M:
+919872473334)
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