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Participant's Note - Meaning and Scope of Supply and Time and Valuation of Supply
Participant's Note - Meaning and Scope of Supply and Time and Valuation of Supply
Participant’s note:
Taxable event:
tax under this Act. The taxable event in GST is supply of goods or services or both.
Various taxable events like manufacture, sale, rendering of service, purchase,
entry into a territory of state etc. The Central and State governments will have
simultaneous powers to levy the GST on Intra-State supply and the Central
Government to levy of GST on Inter-State supply.
The meaning and scope of supply under GST can be understood in terms of
following six parameters
In certain circumstances, there can be a supply for GST purposes even when one
or more of the requirements are not met
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 in the course or furtherance of business
‘Goods’ means
– every kind of movable property other than money and securities but
includes actionable claim, growing crops, grass and things attached
to or forming part of the land which are agreed to be severed before
supply or under a contract of supply
Services means
This includes:
– rights in rem giving the holder thereof a right of use over immovable
property
– shares or interests equivalent to shares giving the holder thereof de
jure or de facto rights of ownership or possession over immovable property or
part thereof
Activities which are neither supply of goods nor supply of services: (Schedule III)
Sale of land and sale of building where the entire consideration has been
received after completion certificate is issued or after its first occupation.
Consideration: Means
There should be
Certain transactions made for no consideration are deemed to be supplies for GST
purposes.
the territory of the Union as referred to in clauses (2) and (3) of Article 1 of
the Constitution
its territorial waters, continental shelf, exclusive economic zone or any
other maritime zone as defined in the Maritime Zones Act, 1976
the air space above its territory and territorial waters and
If the transaction is within the same legal entity (same PAN), and within the
same state. However, where an option of multiple registrations within the
same legal entity is exercised within a state, then supplies among such
registrants will be liable to GST
Where there is a specific exclusion in GST legislation (for instance, supplies
made under employer-employee relationship).
Types of supply:
Zero-rated supplies
Taxable Supply: - Supplies that are subject to GST is known as taxable supplies.
Exempt supply means supply of any goods and / or services which are not taxable
and include such supplies of goods and / or services which are specified in the
relevant Schedule of the Act or which may be exempt.
Zero-rated supply means, a supply of any goods and / or services on which not
tax is payable but credit of the input tax related to that supply is admissible
(Export shall be treated as Zero-rates supply).
Composite supply means a supply consisting of – (a) two or more goods; (b) two
or more services; or (c) a combination of goods and services provided in the
course of furtherance of business whether or not the same can be segregated.
To illustrate, when a car is given for servicing, as part of the service, engine oil
may be replaced. The supply of the oil cannot be considered as distinct or
independent in the context of the overall service required by the customer.
Inter-State Supply of Goods and services means, subject to GST Act, supply of
goods where the location of the supplier and the place of supply are in different
states.
Imports:
Exports:
Exports means supplier in India recipient out of India and place of supply is
out-side India, and payment received in foreign exchange.
Exports (Including SEZ unit) are treated as zero-rated supplies.
Where the supply does not involve movement of goods, whether by the
supplier or the recipient, the place of supply shall be the location of such
goods at the time of the delivery to the recipient.
Where the goods are delivered by the supplier to a recipient or any other
person on the direction of a third person it shall be deemed that the said
third person has received the goods and the place of supply of such goods
shall be the principal place of business of such third person.
The time of supply fixes the point when the liability has to be discharged.
the date on which the goods are removed by the supplier for supply to the
recipient, where the goods are required to be removed; or
the date on which the goods are made available to the recipient, where the
goods are not required to be removed; or
the date on which the supplier issues the invoice.
the date on which the recipient shows the receipt of the goods in his books
of account
In case of supplies in respect of which tax is paid on reverse charge basis, the time
of supply shall be the earliest of the following dates:
where the due date of payment is ascertainable from the contract, the date
on which the payment is liable to be made by the recipient of service,
whether or not any invoice has been issued or any payment has been
received by the supplier of service.
Where the due date of payment is not ascertainable from the contract,
each such time when the supplier of service receives the payment, or issues
an invoice, whichever is earlier
where the payment is linked to the completion of an event, the time of
completion of that event
Reverse Charge:
Where the tax is payable on reverse charge basis, the time of supply shall be the
earliest of the following dates, namely -
Change in rates:
where change in rate of tax in respect of services, the time of supply shall
be as under:
Where taxable service has been provided before the changes:
Where the invoice is issued and payment also received after the
change in effective rate of tax, the time of supply shall be the date of
receipt of payment or the date of issue of invoice whichever is earlier
Where the invoice has been issued and payment is received before
the change in effective rate of tax, the time of supply shall be the
date of receipt of payment or date of issue of invoice whichever is
earlier.
Where the invoice has been issued after the change in effective rate
of tax, but the payment is received before the change in effective
rate of tax, the time of supply shall be the date of issue of invoice.
Valuation of Supply:
any taxes, duties, fees and charges levied under any statute
other than CGST/SGST/IGST Act
Discounts like trade discount, quantity discount etc. are part of the normal
trade and commerce.
Pre-supply discounts i.e. discounts recorded in the invoice have been
allowed to be excluded while determining the taxable value.
Discounts provided after the supply can also be excluded while determining
the taxable value, provided two conditions are met, namely: (a)discount is
established in terms of a pre supply agreement between the supplier & the
recipient and such discount is linked to relevant invoices (b) input tax credit
attributable to the discounts is reversed by the recipient.
Pure Agent:
Transfer
Treatment or process
Treatment or process applied to another person’s goods is a supply
of services
Transfer of business assets
Goods forming part of the assets of a business transferred/disposed
of by the person carrying on the business no longer forming part of
those assets, whether or not for a consideration, is a supply of goods
Goods held or used for the purposes of the business put to any
private use, or put to use other than for business purposes, whether
or not for a consideration, the usage or making available of such
goods is a supply of services
Goods, forming part of the business assets of a taxable person, sold
by any other person who has the power to do so to recover any debt
owed by the taxable person, the goods shall be deemed to be
supplied by the taxable person in the course or furtherance of his
business
Where any person ceases to be a taxable person, any goods forming
part of the assets of any business carried on by him shall be deemed
to be supplied by him in the course or furtherance of his business
immediately before he ceases to be a taxable person, unless—
the business is transferred as a going concern to another person; or
the business is carried on by a personal representative who is
deemed to be a taxable person
Following shall be treated as supply of service
Renting of immovable property
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