Supply in GST | Supply of Goods| Supply of Services | Supply in India

Supply in GST

Supply of Goods and Supply of Services in GST in India will dominate the entire factum of GST.

Supply is the heart of GST and levy, collection, ITC etc shall hover around the same.Hence, it is important to undestand as to what is supply and what is taxable supply as below :

Section 2(95) “supply’’ shall have the meaning as assigned to it in section 3;

And

Section 2 (99) defines taxable supply as below :

 “taxable supply’’ means a supply of goods and/or services which is chargeable to tax under this Act;

The supply of goods or supply of services will attract GST only if the supply is of  taxable goods or services.

Concept of Supply 

Concept of supply need to be understood as per Section 3 in the revised draft GST Act,2016 as released by GST Secretariat has introduced certain amendment in the concept of Supply in GST.

Section 3 ; Meaning and scope of supply

(1) Supply includes-

(a) 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,

(b) importation of services, for a consideration whether or not in the course or furtherance of business, and

(c) a supply specified in Schedule I, made or agreed to be made without a consideration.

(2) Schedule II, in respect of matters mentioned therein, shall apply for determining what is, or is to be treated as a supply of goods or a supply of services.

(3) Notwithstanding anything contained in sub-section (1),

(a) activities or transactions specified in schedule III; or

(b) activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities as specified in Schedule IV,

shall be treated neither as a supply of goods nor a supply of services.

(4) Subject to sub-section (2) and sub-section (3), the Central or a State Government may, upon recommendation of the Council, specify, by notification, the transactions that are to be treated as-

(a) a supply of goods and not as a supply of services; or

(b) a supply of services and not as a supply of goods; or

(c) neither a supply of goods nor a supply of services.

(5) The tax liability on a composite or a mixed supply shall be determined in the following manner –

(a) 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;

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

Significant Change in GST

The significant change as proposed in supply in GST by the revised draft GSt Act,2016 is as below :

a. Importation of service with consideration will be a taxable supply 

b. revised composite supply

c. revised mixed supply 

d. Introduction of Principal supply 

The major supply will be considered as taxable only if there is a consideration . In otherwords, the supply for a consideration shall account almost 95% of supply.

The exceptions, under supply in GST, have been carved out for specified transcations in Schedule I to IV of Section 3 of revised draft GST Act,2016. 

Types of Supply in GST

There are different types of supply of goods or supply of service in GST in India

Principal supply versus Composite Supply Versus Mixed Supply

i). Principal supply is defined under Section 2(78) 

Section 2(78) “principal supply” means the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary and does not constitute, for the recipient an aim in itself, but a means for better enjoyment of the principal supply;

Whereas, the principal is defined under Section 2(76) 

Section 2(76) “principal” means a person on whose behalf an agent carries on the business of supply or receipt of goods and/or services;

ii)Section 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 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.

iii) Section 2(66)“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.

Deemed Exports Versus Zero Rated Supply

i) Section 2(37) “deemed exports”, as notified by the Central Government/State Government on the recommendation of the Council, refer to those transactions in which the goods supplied do not leave India, and payment for such supplies is received either in Indian Rupees or in convertible foreign exchange;

ii) Section 2(111) – Zero rated supply is not exempted supply of goods or supply of services . But , supplies to SEZ, export etc are considered as zero rates upply .It is defined under Section 2(111) 

“zero-rated supply” means supply of any goods and/or services in terms of section 15 of the IGST Act 2016; and

Outward Supply Versus Inward Supply

i) Section 2(60) “inward supply” in relation to a person, shall mean receipt of goods and/or services whether by purchase, acquisition or any other means and whether or not for any consideration;

ii) Section 2 (72)“outward supply” in relation to a person, shall mean supply of goods or services, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other means made or agreed to be made by such person in the course or furtherance of business;

Intra State Supply of Goods Versus Intra State Supply of Services

(57) “intra–State supply of goods” means the supply of goods in the course of intra-State trade or commerce in terms of sub-section (1) of section 4 of IGST Act, 2016;

(58) “intra-State supply of services ” means the supply of services in the course of intra-State trade or commerce in terms of sub-section (2) of section 4 of IGST Act, 2016;

Continous Supply of Goods versus Continous Supply of Services

i)Section 2(30) “continuous supply of goods” means a supply of goods which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract, whether or not by means of a wire, cable, pipeline or other conduit, and for which the supplier invoices the recipient on a regular or periodic basis;

ii)Section 2(31) “continuous supply of services” means a supply of services which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract, for a period exceeding three months with periodic payment obligations and includes supply of such service as the Central or a State Government may, whether or not subject to any condition, by notification, specify;

Exempt Supply Versus Job Work 

i) Section 2 (44) “exempt supply” means supply of any goods and/or services which are not taxable under this Act and includes such supply of goods and/or services which attract nil rate of tax or which may be exempt from tax under section 11 ;

ii) Section 2 (61) “job work” means undertaking any treatment or process by a person on goods belonging to another registered taxable person and the expression “job worker” shall be construed accordingly;