The Goods and Services Tax is almost here, and all businesses are eager to make out its implications on their trade and potential profits/loss. The term GST has now become ubiquitous, and all related professionals are focusing on the same to come up with as many sensible speculations and forecasts as they practically could, for arriving at commercial and economic foresight. We have here enlisted a few practical aspects derived from the Schedules I, II and III of the Central Goods and Service Tax Act which received the assent of the President and was published in the Gazette of India on 12th April 2017. Since the levy of tax is subject to whether the said activity falls within the meaning assigned to the term “supply” under S.7 of the Act, it becomes essential to comprehend what exactly the term connotes. In this Article, the legal jargons entwined in the Act have been brought out to the common man in simple and straight language.
Supply has been widely defined under the Act (Indian Kanoon), including within its purview sale, transfer, barter, exchange, license, rental, lease; import of services for consideration irrespective of whether it was done in furtherance of business; and in addition, the activities listed in Schedules I and II. Furthermore, activities carried out by the Central Government, a State Government or any local authority in their capacity as public authorities, are exempted from the purview. In addition to that, activities enlisted in Schedule III are considered neither as supply of goods nor as supply of services.
Activities to be treated as Supply even when made without consideration
- The permanent transfer or disposal of business assets where input tax credit has been availed on these assets. Input Tax Credit is the credit of input tax that a seller may avail, while the product moves from one level to the other in the chain. (Manufacturer à Wholesaler à Retailer à Consumer)
- Supply of goods, services or both made in the furtherance of business, when done between related or distinct persons. However, gifts of up to Rs. 50000/- in value in a financial year by an employer to an employee are exempted from this purview.
- Where a Principal supplies goods to his agent where the agent undertakes to supply such goods on behalf of the principal; or where an agent supplies goods to his principal where the agent undertakes to receive such goods on behalf of the principal.
- 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.
- Transfer of the title in goods is a supply of goods
- Any transfer of right in goods or of undivided share in goods without the transfer of title, is a supply of services.
- Transfer of title in goods under an agreement that property in goods would pass at a later date upon the payment of full consideration, is a supply of goods.
- Any lease, tenancy, easement, license to occupy land is a supply of services; similarly, lease or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly, is a supply of services.
- Any treatment or process which is applied to another person’s goods is a supply of services.
- If goods forming part of the assets of a business are transferred or disposed of at the directions of the person carrying on the business, it is to be treated as a supply of goods, irrespective of whether the transfer is made for a consideration.
- If goods held or used for the purposes of the business are put to any private use or are used for any other purpose not incidental to the business, under the direction of a person carrying on a business, making available of such goods is a supply of service.
- Renting of immovable property, construction of a complex, building, civil structure, etc. is to be regarded as supply of services.
- Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration is regarded as a supply of goods.
Activities treated neither as Supply of Goods nor as 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.
- Functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities.
- Duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity.
- Services of funeral, burial, crematorium or mortuary including transportation of the deceased
- Actionable claims, other than lottery, betting and gambling.
Reference to the provisions of the Schedules help to interpret the Section defining and elaborating what is regarded as Supply under the Act.