The Concept of Supply- GST
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The concept of “Supply” is very important from a GST standpoint as it is a taxable event in GST i.e. if any transaction falls under the definition of Supply, then only GST would be applicable.
The provisions relating to the meaning and scope of supply are contained in Chapter III of the CGST Act read with various schedules given under said Act. To understand the concept of Supply, one is required to read Section 7 and Section 8 of the CGST Act along with Schedule I, II, and III (In this article, we have covered the provisions of Section 7)
Section 7 of the CGST Act deals with the meaning and scope of supply. Now let’s see the text of law contained in Section 7:
Section 7(1): Supply Includes-
Clause (a): All forms of supply of goods or services or both 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.
Clause (b): Importation of services for a consideration whether or not in the course or furtherance of business and
Clause (c): The activities specified in Schedule I, made or agreed to be made without consideration.
Section 7(1A): where certain activities or transactions, constitute a supply in accordance with the provisions of sub-section (1) of Section 7, they shall be treated either as supply of goods or supply of services as referred to in Schedule II
Section 7(2): Notwithstanding anything contained in sub-section (1), activities or transactions specified in Schedule III or activities, or transactions undertaken by Central Government, a State Government, or any Local Authority in which they are engaged as public authorities, as may be notified by the Government on the recommendation of the council, shall be treated neither as the supply of goods nor a supply of services.
Section 7(3): Subject to sub-section (1), (1A), and (2), the Government may, on the 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.
ANALYSIS
A. The definition of supply is inclusive as section 7 begins with “Supply Includes“. The section doesn’t define the term exhaustively. It gives certain nature of transactions such as Supply like sale, exchange, and barter. There can be any other nature of the transaction which can also be called Supply.
Certain elements of supply should be looked into to understand the concept (please read our exclusive article on elements of supply- Link)
There are certain definitions covered in the concept of supply, which should be required to be understood:
- Goods: Goods means every kind of movable property other than money and securities but include actionable claims, growing crops, and things attached to or forming part of the land which are agreed to be served before supply or under the contract of supply.
- Services: Services means anything other than goods (it means if the transaction does not fall under the definition of goods, then it will be services) money, and securities but includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination to another form, currency or denomination for which a separate consideration is charged.
- Business: Business includes-
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager, or any other similar activity, whether or not it is for a pecuniary benefit.
(b) any activity or transaction in connection with or incidental or ancillary to (a) above.
(c) any activity or transaction in the nature of(a) above, whether or not there is volume, frequency, continuity, or regularity of such transaction.
(d) supply or acquisition of goods including capital assets and services in connection with commencement or closure of business.
(e) provision by a club, association, society, or any such body (for a subscription or any other consideration) of the facilities or benefits to its members, as the case may be.
(f) admission, for consideration, of persons to any premises.
(g) services supplied by a person as the holder of an office which has been accepted by him in the course or furtherance of his trade, profession, or vocation.
(h) services provided by a race club by way of a totalisator or a license to the bookmaker in such club.
(i) any activity or transaction is undertaken by the Central Government, a State Government, or any local authority in which they are engaged as public authorities.
- Consideration: Consideration in relation to the supply of goods or services or both includes-
– any payment made or agreed to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by Central Government or State Government.
– the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both, whether by the recipient or by any other person but shall not include any subsidy given by Central Government or a State Government.
However, the Deposit given in respect of the supply of goods or services, or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply.
B. Import of services also covered in the definition of supply, however, it should be for consideration even if it is not related with any business activity. It means if any services received from outside taxable territory for a consideration even of personal purpose, would fall under the scope of supply.
We hope you like the above article and hopefully, you might have gained some insights into the concept of supply. In case you have any questions/feedback, please feel free to reach out at [email protected]
Read our article of Interstate v/s Intrastate Supply
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