Scope of Supply under GST: A Comprehensive Guide

The taxable event in GST is the scope of supply under GST (Goods and Services Tax) and sometimes both. Different taxable events like manufacturing, selling, providing services, entering into a territory of state, etc. have been done. In favour of one thing which is the supply. The constitution provides ‘goods and services tax’ as tax on supply of goods, services or both. Except the tax on the supply of alcoholic liquor for consumption.

The state and central government have the authority to place GST on intra state supply. Although, the parliament has the exclusive power for making laws regarding the goods and service tax on inter state supply.

This term ‘Supply’ has been defined in the Act. Meaning and Scope of Supply under the GST could be understood in terms of Six parameters which are:-

1. Supply of goods or services.
2. Supply of anything other than goods or services does not attract GST.
3. Supply should be made for a consideration
4. Supply should be made in the course or furtherance of business
5. Supply should be made by a taxable person
6. Supply should be a taxable supply

While all these parameters which describe the concept of supply there are few exceptions to this as supply being made for consideration and in course or in the business. Any of the transaction which involves the supply of goods and services without any consideration is not a supply, barring some exceptions for which a transaction is deemed to be supply without even consideration. Also, import of service for consideration, be it or not in the course or continuation of business is to be treated as supply.

Supply of any goods or service or of both goods as well as service have been given in the GST law. Securities are excluded from definition of goods as well as of services. Money is also excluded from this, howsoever activities which relate to the use of money or its conversion by cash or any other method, from one form currency or denomination to any other form. This currency or denomination for this a separate consideration is charged which is included in the services.

Schedule II of CGST Act,2017 provides a few activities which need to be treated as supply of goods or supply of services. For an instance a transfer of title in goods will be supply of goods, whereas any transfer of rights in good without the transfer of title will be considered as services. Further the schedule III to CGST Act, 2017 provides activities which are to be treated neither as supply of goods nor any supply of service- which makes it outside the scope of GST. A few important ones are:-

1. Services of an employee in course of or in relation to employment.
2. Services of funeral, burial, crematorium or mortuary including transportation of deceased
3. Sale of land and sale of building where the entire consideration is received after the completion certificate has been issued or after the first occupation.
4. Actionable claims are included in the definition of goods. However, schedule III provides that actionable claims other than lottery, betting and gambling shall neither be goods nor services.

Consideration has been defined in CGST Act, 2017. Where it can be in money or in kind. Any type of subsidy which is given by the central government or state government is not considered as consideration. Its immaterial whether this payment is made by recipient or through any other person. Any deposit which is given for supply of goods or services or both should not be considered as a payment made for supply unless the supplier applies such deposit as a consideration for the supply.

Also, when there is an exchange or barter of goods and services, the same activity includes supply as well as consideration. However, there are few exceptions to the requirement of ‘Consideration’ as ‘pre-condition’ for supply to be called a supply according to GST. According to CGST Act,2017 activities which are mentioned below should be treated as supply even if made without any consideration:-

1. Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.
2. Supply of goods or services or both between related persons or between distinct persons as provided in section 25, when made in the course or continuance of business. Whereas 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 principal to his agent where the agent undertakes to supply such goods on behalf of the principal.

(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. From any of his other establishments outside India, in course or continuation of business.

Supply in the Course or Furtherance of Business

GST is included in commercial transactions. So, only those supplies which are in the course or furtherance of the business come as supply under the GST. So, any supplies which are made by any individual in personal capacity do not fall under the ambit of GST until they come in the definition of business defined in the Act.

Central Board of Excise and Customs(CBEC) by press release 12.07.2017 has provided that selling old jewellery by an individual to a jeweller will not be considered as supply as the same cannot be said to be in course or conducting the business of the individual. Sale of goods or services even as vocation is supply under the GST. So, if a painter paints painting for charity and sells paintings even as one time happening, sale is constituted as supply.

Although there is an exception to this ‘course or Furtherance of Business’ rule which means import of services for consideration.

Supply by any Taxable Person:-

A supply for attracting the scope of supply under GST shall be made by a taxable person. So, any supply between two non taxable individuals do not include supply under GST. A ‘Taxable person’ is a person who is not registered or liable for being registered under section 22, 24. So, even an unregistered person will be liable for registration is taxable person. Also, any person should not be liable for registration but has taken voluntary registration.

It shall be seen that scope of supply under gst in Bharat is State Centric. So, a person who is making supply to a different state needs to take separate registration. Also, an individual can take more than a registration in a state if it has multiple businesses. Any person who has acquired or requires to obtain more than a registration, be it one state or union territory or more than a state or a union territory should cause of such registration shall be treated as different person for GST. SO, any supply between any entity includes supply under the GST.

Taxable supply:-

For any supply to attract GST the supply for the same shall be taxable. Taxable supply has been defined and means any supply of goods or services. Exemptions could be provided to the specified goods or services or to any specified category of person/entitites which make supply.

Supply in the taxable territory:-

For any supply to attract GST the place of the supply shall be in India. The place of supply of any goods and service determined based upon section 10,11,12 and 13 of IGST Act, 2017.

Inter/Intra state supply:-

The Location of the supplier and the place of supply which determines whether a supply is to be treated as an Intra State supply or an Inter State Supply. Identify the nature of supply is essential for ascertaining whether integrated tax is to be paid or central plus state tax are to be paid. Inter state supply of goods means a supply of goods where the location of supplier and place of supply are in same state or union territories. Imports, supplies from and to Special Economic Zone are treated as deemed inter state supplies.

Composite / Mixed supply:-

A composite supply means any supply which is made by a taxable person to a recipient. This compromises two or more supplies of goods and services or any combination. So, this is naturally bundled and supplied in concurrence with each other. In general course of business, one of this is principal supply. For e.g. any travel ticket from Mumbai to Delhi can include service of food being serve on board. So, transport of passenger constitutes pre dominance element of composite supply. Its treated as principal supply and other supplies are ancillary. GST lays down the tax liability on composite or mixed supply in the following manner:-

• Composite Supply comprises two or more supplies one of which is principal supply, be treated as supply.
• Mixed Supply comprising two or more supplies, shall be treated as supply of which attracts the highest rate of tax.