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OVERVIEW of GOODS AND SERVICES TAX

INDEX
Chapter Page No

1. GST in India- An Introduction 1-4


Genesis of GST in India
Concept of GST
Need for GST in India
Benefits of GST

2. Constitutional Amendments 5-14


Dual GST Model in India

3. Definitions 15-24

4. Taxable Event- SUPPLY 25-47


Supply [Sec 7 of CGST Act]
3 Schedules

5. Treatment of Composite Supply and Mixed Supply 48-50


[Sec 8 of CGST Act]

6. Levy & Collection of GST 51-53


Charging Section [Sec 9 of CGST Act]

7. Mock Test Questions 54-59


[Note: These are for practice of students.]

Note:
1. CGST = Central Goods and Services Tax
2. SGST = State Goods and Services Tax
3. UTGST = Union Territory Goods and Services Tax
4. IGST = Integrated Goods and Services Tax

5. Reference to any section in the material shall be taken as reference to Section of CGST Act, 2017, unless otherwise
mentioned.
GST in India An Introduction
Genesis, Concept, Need and Benefits of GST

1. Genesis of GST:

16-07-2004 Dr. Kelkar Task Force recommended the need of a National GST

28-02-2006 Union FM moots the idea of GST from April, 2010 in Budget Speech 2007-08

19-12-2014 Constitutional (122nd Amendment) Bill, 2014 introduced in Lok Sabha

06-05-2015 Constitutional (122nd Amendment) Bill, 2014 passed in Lok Sabha

03-08-2016 Constitutional (122nd Amendment) Bill, 2014 passed in Rajya Sabha

Subsequent to ratification of bill by more than 50% of the states, Constitutional


08-09-2016
(122nd Amendment) Bill, 2014 received the assent of President of India.

Central GST Legislations- CGST Bill, 2017, IGST Bill,2017, UTGST Bill,2017,
27-03-2016
GST (Compensation to states) Bill, 2017 introduced in Lok-Sabha

Central GST Legislations- CGST Bill, 2017, IGST Bill,2017, UTGST Bill,2017,
29-03-2016
GST (Compensation to states) Bill, 2017 passed in Lok-Sabha

Central GST Legislations- CGST Bill, 2017, IGST Bill,2017, UTGST Bill,2017,
12-04-2017 GST (Compensation to states) Bill, 2017 received assent of president and Bills
enacted

_________
Implementation of GST across India
(01-07-2017)

Note: France was the first country to implement GST in 1954. Within 62 years, about 160 countries has adopted GST.
2. Concept of GST:
GST is Value added tax
GST is the value added tax on activity of supply of goods and/or services, irrespective of such activity being
manufacture of goods, sale of goods (intra-state or inter-state sale), provisioning of services or consumption of
goods and services.

Credit availability at every stage


GST offers tax credit at every stage thereby taxing only value addition.

Ultimate burden on final consumer


Supplier at every stage set off credit against tax payable and ultimately tax paid by final consumer.

No cascading effect of taxes


Since seamless flow of credit is there, there will not be cascading effect of taxes.

3. Need of GST:
Deficiency in existing value addition taxation system necessitated needs of GST
Cascading effect due to non-integration of VAT and Service tax

Tax Liability on Output Credit Admissibility Cascading Effect


Manufacturer Manufacture: ED (CG) ED on goods ----
ST on services
Sale: VAT (SG) VAT on goods

Dealer Sale: VAT (SG) No Credit of ED on goods Cascading Effect


VAT on goods
No Credit of ST on services

Service Provider Provisioning of Sr: ST (CG) ED on goods Cascading Effect


ST on services
No Credit of VAT on goods
.
Cascading effect due to inclusion of several local levies
Under present regime, State allows credit only of VAT.
Credit of other several levies like luxury tax, entertainment tax is not allowed.
.
Cascading effect due to inclusion of ED in computation of VAT
VAT payable to SG is computed on (basic value + ED charged by manufacturer).
Cascading effect due to inclusion of non-VATable CST
Central Sales Tax is payable in case of inter-state sales.
CST is levied by CG but it is collected and retained by SG.
CST is non-VATable under present regime (as State does not give credit of CST paid to other State
Government)

Double taxation due to same subject matter being treated as goods and service
Over the years, distinction between goods and services has become haze, due to which there is overlapping of
State VAT and CST on transactions like catering services (restaurant services and outdoor catering services).
Same transaction is getting taxed both by the CG and SG which is creating double taxation and resultant
litigation.

No National market due to barriers of taxes


Presently, India does not have a national market due to invisible barriers of CST and Entry tax.

GST is expected to be cure of ills of existing indirect tax regime


No Cascading effect due to single taxable event

Tax Liability on Output Credit Admissibility Cascading Effect


Manufacturer Supply: GST GST ----

Dealer Supply: GST GST ----

Service Provider Supply: GST GST ----


.
No Cascading effect due to major taxes subsumed in GST
In the GST Regime, the major indirect taxes have been subsumed in the ambit of GST.
The present concepts of manufacture or sale of goods or rendering of services are no longer applicable since
the tax is now levied on Supply of Goods and/or services.

.
4. Benefits of GST:
GST is a win-win situation for the entire country.
Benefits to Central / State Government
Unified Common national market: GST aims to make India a common market with common tax rates and
procedures and remove the economic barriers thus paving the way for an integrated economy at the
national level.

Boost to export / make in India: GST will give a major boost to the Make in India' initiative of the
Government of India by making goods and services produced in India competitive in the national as well
as international market

Increase in revenue: GST is expected to bring buoyancy to the Government Revenue by widening the tax
base and improving the taxpayer compliance.

Benefits to Trade
Reduction in multiplicity of taxes: GST will subsume majority of existing indirect tax levies both at
Central and State level into one tax i.e., GST which will be leviable uniformly on goods and services.

Mitigation of cascading effect: By subsuming most of the Central and State taxes into a single tax and by
allowing a set-off of prior-stage taxes for the transactions across the entire value chain, it would mitigate
the ill effects of cascading, improve competitiveness and improve liquidity of the businesses.

Mitigation of double taxation: GST law makes provisions for treatment of composite/mixed supply either
as treatment of goods and/or services, thereby mitigating the situation of double taxation.

Simpler tax regime:


o Fewer rates
o Fewer exemptions

Benefits to Consumer
Simplex tax system

Reduction in prices of goods due to elimination of cascading effect:

Uniform prices throughout the country:


Constitutional Amendments
Dual GST in India

Amendment of the Constitution of India


Constitution (101st Amendment) Act, 2016 was enacted on 8th September, 2016.
st
Significant amendments made by the Constitution (101 Amendment) Act, 2016 are as follows:
(i) The GST shall be levied on all goods and services except alcoholic liquor for human consumption
Article 366
(12A) "Goods And Services Tax" means any tax on supply of goods, or services or both except taxes on the
supply of the alcoholic liquor for human consumption; (inserted)

(ii) The tax shall be levied as dual GST separately by the Union and the States.
Parliament will have power to make laws with respect to GST imposed by the Union (CGST) and the
State Legislatures will have power to make laws with respect to GST imposed by the States (SGST).
Parliament will have exclusive power to make laws with respect to GST where the supply of goods
and/or services takes place in the course of inter-State trade or commerce (IGST).
.

Article 246-A: Special provisions with respect to GST (detailed discussion later)

(iii) Petroleum & petroleum products would be subject to GST.


[However, it has been decided that five products, viz. petroleum crude, motor spirit (petrol), high
speed diesel, natural gas and aviation turbine fuel would be kept out of the purview of GST in the
initial years of implementation].
Article 279-A (5) (detailed discussion later)

(iv) In the case of tobacco and tobacco products, the Centre alone would have the power to levy
excise duty in addition to the GST.

(v) Taxes on entertainments and amusements to the extent levied and collected by a Panchayat or a
Municipality or a Regional Council or a District Council shall not be subsumed under GST.
The local bodies of States could continue to levy such taxes.

(vi) Article 279-A of the Constitution empowers the President to constitute a joint forum of the Centre
and States namely, Goods & Services Tax Council (GST Council). GST Council has been constituted
th
on 15 Sep, 2016.
GST Council Consists of following:
Union FM & Union Minister of State (Revenue)
Ministers in charge of Finance / Taxation of each State
Chairperson Union FM
Vice Chairperson - to be chosen amongst the Ministers of State Government
Council to be guided by need for
a harmonized structure of GST; and
a harmonized national market for goods & services
Council to make recommendations on
Taxes to be subsumed in GST
Exemptions & thresholds
GST rates
Model GST Law & procedures
GST Model = Dual Model
Dual Model: The Centre and States simultaneously levying it on a common tax base.

Constitutional Provisions
.
.

Article 246-A: : Special provision with respect to Goods And Services Tax. (new article inserted)
Intra-State Supply: Power to levy GST vested with Parliament as well as State Legislature
(1) Notwithstanding anything contained in articles 246 and 254,
Parliament, and, subject to clause (2), the Legislature of every State, have power to make laws with
respect to goods and services tax imposed by the Union or by such State.
.

Author :
Legislative Competence to make law w.r.t. to levy/imposition of GST:
Parliament empowered to levy GST.
Simultaneously, Legislature of State also empowered to levy GST.

With respect to GST, following articles have been overruled

Article 246 Subject matter of laws made by Parliament and by the Legislatures of States
Matters specified in List I (of VII law making power vests exclusively with
Schedule of Constitution) Parliament
Matters specified in List II (of VII law making power vests exclusively with State
Schedule of Constitution) Legislature
Matters specified in List III (of VII law making power vests with Parliament as well
Schedule of Constitution) as with State Legislature
.

Laws for Union Territories


Parliament has power to make laws with respect to any matter for any part of the territory of India
not included (in a State) notwithstanding that such matter is a matter enumerated in the State List.
.

Article 254 Inconsistency between laws made by Parliament and laws made by the Legislatures of States
(It provides that law made by Parliament shall prevail over law made by Legislature of the State)
.

Article 366: Definitions


(26-B) : "State" with reference to articles 246A, 268, 269, 269A and article 279A includes a Union territory with
Legislature; (newly inserted)

Inter-State Supply: Power to levy GST vest exclusively with Parliament


(2) Parliament has exclusive power to make laws with respect to goods and services tax where the supply of
goods, or of services, or both takes place in the course of inter-State trade or commerce.
.

Author :
GST leviable on inter-state supply = Integrated GST (IGST)
Parliament has exclusive power to make law with respect to IGST.

Explanation.- The provisions of this article, shall, in respect of goods and services tax referred to in clause (5) of
article 279A*, take effect from the date recommended by the Goods and Services Tax Council.
Author :
Article 279-A (5) covers following 5 goods:
petroleum crude,
high speed diesel, motor spirit (commonly known as petrol),
.
natural gas and aviation turbine fuel.
GST on these will be applicable from such date as will be recommended by GST Council in future.
Article 269-A: :Levy and collection of goods and services tax in course of inter-State trade or
commerce
(new article inserted)
GST on inter-state supply shall be levied & collected by GoI, but shall be apportioned
(1) Goods and services tax on supplies in the course of inter-State trade or commerce shall be levied and
collected by the Government of India and
such tax shall be apportioned between the Union and the States
in the manner
as may be provided by Parliament by law on the recommendations of the Goods and Services Tax
Council.
Explanation.-For the purposes of this clause, supply of goods, or of services, or both in the course of
import into the territory of India shall be deemed to be supply of goods, or of services, or
both in the course of inter-State trade or commerce.
Author :
GST leviable on inter-state supply = Integrated GST (IGST)
GoI will levy and collect IGST.
IGST shall be apportioned between the Union (CG) and the States.
Manner of apportionment has been laid down under IGST Act made by Parliament.

Principles for determination of nature of supply: Parliament shall formulate principles


(5) Parliament may, by law, formulate the principles for determining
the place of supply, and
when a supply of goods, or of services, or both takes place in the course of inter-State trade or
commerce.
Author :
IGST Act has been made by Parliament has these purposes.
Principles for determination of place of supply
.

POS of Goods Sec 10: POS of goods (other than import/ export supply)
Sec 11: POS of in case of import/ export supply

POS of Services Sec 12: POS of services where both supplier and recipient are located in India
Sec 13: POS of services where supplier or recipient is located outside India
.
Principles for determination nature of supply Inter-State supply or Intra-State Supply

Inter-State Supply Sec 7

Intra-State Supply Sec 8


.

Intra-State Supply
o The GST to be levied by the Centre on intra-State supply of goods and / or services would be called the
Central GST (CGST) and that to be levied by the States would be called the State GST (SGST).
The CGST and SGST would be levied at rates to be jointly decided by the Centre and States.
The rates would be notified on the recommendations of the GST Council.

o Supply within Union Territory (without legislature) is also intra-state supply. Such supply would attract
CGST and UTGST.
Inter-State Supply
o An Integrated GST (IGST) would be levied and collected by the Centre on inter- State supply of goods and
services. IGST will be a sum total of CGST and SGST / UTGST.
o Accounts would be settled periodically between the Centre and the States to ensure that the SGST portion
of IGST is transferred to the destination State where the goods or services are eventually consumed.

Legislative Framework

Intra-State Supply Central Goods and Services Tax Act, 2017 It is levying CGST.
State Goods and Services Tax Act, 2017 It is levying SGST.
[29 States and 2 Union Territories (with state legislature) will be having their
respective SGST Acts]
Though there would be multiple SGST legislations, the basic features of
law, such as chargeability, definition of taxable event and taxable
person, classification and valuation of goods and services, procedure
for collection and levy of tax and the like would be uniform in all the
SGST legislations, as far as feasible. This would be necessary to
preserve the essence of dual GST.

Union Territory Goods and Services Tax Act, 2017 It is levying UTGST.
[All 5 Union Territories (without state legislature) will governed by single
UTGST Act]
It

Inter-State Supply Integrated Goods and Services Tax Act, 2017 It is levying IGST.

Threshold Exemption & Composition Scheme


In GST regime, tax (i.e. CGST and SGST/UTGST for intra-State supplies and IGST for inter-State supplies)
shall be paid by every taxable person and in this regard provisions have been prescribed in the law.
However, for providing relief to small businesses, following provisions have been made:
Threshold Supplier having aggregate turnover upto Rs 20 lakhs This exemption is only for
Exemption (for North Eastern States and Sikkim, the limit is 10 supplier making intra-state
lakhs) supply.

Composition Optional facility to supplier having aggregate turnover This optional facility is only for
Levy in the preceding year didn't exceed Rs 50 lakhs. supplier making intra-state
supply.
Such supplier shall be liable to pay GST at notified
rates (No ITC shall be admissible to them).
o Further, composition levy cannot be collected
from recipient.

Utilization of ITC (input tax credit)


Tax payers shall be allowed to take credit of taxes paid on inputs, capital goods and input services (to be referred as =
ITC -input tax credit) and utilize the same for payment of output tax.
However, no input tax credit on account of CGST shall be utilized towards payment of SGST and vice versa.
The credit of IGST would be permitted to be utilized for payment of IGST, CGST and SGST/UTGST in that
order.
CGST is permitted to be utilized for payment of CGST and IGST in that order.
SGST/UTGST is permitted to be utilized for payment of SGST/UTGST and IGST in that order.
IGST: Settlement mechanism
.

STATE A

CGST (CG) Supplier-1 IGST (CG) Set off of SGST against IGST
SGST (SG) State A shall be liable to pay this to CG.

IGST (CG) Supplier-1 CGST (CG) Set off of IGST against SGST
SGST (SG) State A shall be entitled to claim this from CG.
ILLUSTRATION
Illustration 1 (ICAI Material)
.

INTRA-STATE SUPPLY
STATE-1

Supplier A Value 10,000 Supplier B Value 12,000


0 GST CGST@9% 900 CGST@9% 1,080
SGST@9% 900 SGST@9% 1,080

CGST SGST
Output 1,080 1,080
liability
ITC (900) (900)
Cash 180 180

STATEMENT OF REVENUE EARNED BY CENTRAL AND STATE GOVERNMENT

Transaction Revenue to Central Revenue to State


Government Government
Supply of goods/services by A to B 900 900
Supply of goods/services by B to C 180 180
Total 1080 1080

INTER-STATE SUPPLY
STATE-1

Supplier X Value 10,000 Supplier A Value 12,000


0 GST CGST@9% 900 IGST@18% 2,160
SGST@9% 900

CGST SGST IGST


Output --- ---- 2,160
liability
ITC --- --- (900)
(900)
Cash --- --- 360

Note: ITC (SGST) set off against IGST (CG)


State-1 shall be liable to pay Rs 900 (ITC-SGST utilized) to the
account of CG.
STATE-1 STATE-2

Supplier A Value 12,000 Supplier B Value 14,000


IGST@18% 2,160 CGST@9% 1,296
SGST@9% 1,296

CGST SGST IGST


Output 1,296 1,296 ---
liability
ITC (1,296) (864) ---
Cash --- 432 ---

Note: ITC (IGST) set off against SGST (SG)


CG will transfer IGST credit of Rs 864 utilized in the payment of
SGST to State 2 (Importing State).

STATEMENT OF REVENUE EARNED BY CENTRAL AND STATE GOVERNMENTS

Transaction Revenue to Central Revenue to Government Revenue to


Government of State 1 Government of State 2
Supply of goods/services by X to A 900 900
Supply of goods/services by A to B 360
Transfer by State 1 to Centre 900 (900)
Supply of goods/services by B to C 432
Transfer by Centre to State 2 (864) 864
Total 1,296 Nil 1,296

Illustration for practice


Value of supply of goods and services in inter-state Rs 1,200. IGST rate on supply of goods and services is 20%.
Value of receipt of goods and services within State - Rs 1,000. SGST and CGST rate on receipts is 10% each.

Details CGST SGST IGST


Tax payable on inter-state supply of goods and services of ` 1,200 Nil Nil 240
Les: ITC (as available in Electronic Credit Ledger) (100) CGST
(100) SGST
Net tax payable by cash (through Electronic Cash Ledger) 40
.

Note: ITC (SGST) set off against IGST (CG)


State shall be liable to pay Rs 100 (ITC-SGST utilized) to the account of CG.
Annexure-1
Nature of Supply: Intra-State vs Inter-State

Inter-State Supply Intra-State Supply


Sec 7 of IGST Act, 2017 Sec 8 of IGST Act, 2017
Supply of goods/services shall be treated as inter-state Supply of goods/services shall be treated as intra-state
supply supply
where the location of the supplier and the place of where the location of the supplier and the place of
supply are in supply are in
(a) two different States; (a) same State;
(b) two different Union territories; or (b) same Union territory; or
(c) a State and a Union territory,

CRUX
Inter-State Supply = LoS + PoS in different states/UT Intra-State Supply = LoS + PoS in same state/UT
India, State & Union Territory
.

INDIA [Sec 2(56) of CGST Act]


India means
the territory of India as referred to in article 1 of the Constitution,
its territorial waters, seabed and sub-soil underlying such waters,
continental shelf, exclusive economic zone or any other maritime zone as referred to in the
Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act,
1976, and
the air space above its territory and territorial waters;
Author
.

INDIA cover following


Territory of India as referred in Article 1 of Article 1 of Constitution of India:
Constitution The territory of India shall consist of:
(a) The territories of the states; [29 States]
(b) The Union territories as specified in the First
Schedule; [7 UT] and
(c) Such other territories as may be acquired. [territories which
may be acquired in future]

Territorial Waters of India, TWI = 12 Nautical Miles


Seabed and sub-soil underlying such waters [* Nautical mile = Unit of measurement of distance in sea area
* 1 nautical Mile = 1.85 km (approx.)]

Continent Shelf EEZ = 200 Nautical Miles


Exclusive Economic Zone (EEZ)

Air space above territory of India (as specified in


Constitution) and TWI
.

STATE [Sec 2(103) of CGST Act]


State includes a Union territory with Legislature.
.

Author
1. State includes Union Territories with Legislature.
2. Delhi and Pondicherry are two such states. These shall
have SGST rather than UTGST.
UNION TERRITORY [Sec 2(114) of CGST Act]
Union territory means the territory of
(a) the Andaman and Nicobar Islands;
(b) Lakshadweep;
(c) Dadra and Nagar Haveli;
(d) Daman and Diu
(e) Chandigarh; and
(f) other territory*.
Explanation.For the purposes of this Act, each of the territories specified in sub-clauses (a) to (f) shall be
considered to be a separate Union territory;
Author
1. Union Territory with legislature are treated as State [Sec 2(103) of CGST Act]
SGST is applicable to such Union Territories.
Delhi and Pondicherry are two such Union Territories,
.

2. UT without legislature shall only be treated as Union Territory.


UTGST is applicable to such Union Territories.
5 such union territories are: Andaman & Nicobar Islands, Lakshadweep, Dadra and Nagar Haveli, Daman and
Diu & Chandigarh.
.

3. UT shall also include other territory as defined in Sec 2(81) of CGST Act.
1. Other Territory = Territory which is neither comprised in State nor comprised in Union Territories as defined
in Sec 114 (a) to (e).
.

2. Such other territory shall be treated as Union Territory under CGST Act [Sec 2(114) of CSGT Act, 2017]
UTGST Act, 2017 also provides similar definition of UT [Sec 2(8) of UTGST Act, 2017]. Thus, supply in such
other territory shall also attract UTGST.
.
DEFINTIONS
Sec 2 of CGST Act, 2017
.
.

Relevant Definitions
.

Sec 2 of CGST Act, 2017

2(52): Goods 2(31): Consideration 2(84): Person 2(108): Taxable Supply

2(102): Services 2(17): Business 2(105): Supplier 2(78): Non-Taxable Supply

2(93): Recipient 2(47): Exempt Supply

2(107): Taxable Person

2(98): Reverse Charge

2(45): E-Commerce Operator


.

Goods & Services


.

GOODS [Sec 2(52) of CGST Act]


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;

Author
1. GST is leviable on supply of goods.
2. Something which is not goods, supply thereof will not attract GST (ofcourse, such supply shall also not qualify as supply
of service also)

3. In general, Goods = Every Kind of Movable Property


.

Movable property = Not defined in GST Act.

Immovable Property Sec 3(26) of General Clauses Act, 1893


Immovable property shall include land, benefits to arise out of land, and
things attached to earth or permanently fastened to anything attached to the
earth
.
Movable Property Sec 3(36) of General Clauses Act, 1893
Movable property shall mean Property of any kind other than immovable property.
.

Thus, any property, if not immovable, then is movable property by default.


Electricity is movable property (though intangible)
Copyrights, trademarks, patents (commonly referred as Intellectual property rights IPR) are also movable
property (though intangible)
.

4. Supply of Money or Securities


Money or securities are excluded from scope of goods. Thus, supply of money or securities shall not constitute supply of
goods. Further, in terms of Sec 2(102) of CGST Act, money and securities are not services and thus, transaction of
supply of money or securities shall not attract any GST.
5. Supply of ACTIONABLE CLAIM
Actionable claim included in supply of goods. [*This has been done for the first time in India]
However, Sec 7 read with Schedule III provides that actionable claim other than lottery, betting or gambling shall
neither constitute supply of goods nor supply of services.
Thus, supply of actionable claim in general will not attract GST. However, supply of actionable claim being
lottery, betting or gambling will attract GST.
.

SERVICES [Sec 2(102) of CGST Act]


Services means anything other than goods, 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;
Author
1. Service has been defined in very broad manner. Service means anything other than goods, money and securities.

2. Though money is not service, but activities relating to use of money (e.g., lending) and activities relating to conversion of
money (e.g., DD making, money changing) will constitute service. Thus, such transactions will attract GST.

Consideration & Business


.

CONSIDERATION [Sec 2(31) of CGST Act]


Consideration in relation to the supply of goods or services or both includes
(a) any payment made or 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 the Central Government or a State Government;
(b) 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 the Central Government or a State Government:
.

Provided that a 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;

Author
1. GST is leviable on supply of goods or services or both.
2. In general, the definition of supply for GST purposes covers all forms of supply where goods and services are supplied in
return for a consideration. Any supply of goods and services without consideration is not a supply unless it is deemed
to be a supply.

Sec 2(31)(a): Consideration includes any payment made or 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, whether by the person or by any other person.
1. The phrase in respect of, in response to, or for the inducement of means there must be a direct link between the
supply and the consideration, i.e. for the supply of goods or services made under an invoice, a contract or an agreement,
there is a consideration received or to be received for such supply.
.

Inducement means to gives something to a person so that he will do something else in return.

Illustration 1: A football player is offered a branded car as an inducement for him to join the club. In this case, the car
offered is the consideration that induces the player to join the club to provide his football skills. There is a direct link
between the act of joining the club and the provision of the car.
Illustration 2: A restaurateur offered free meals to drivers of buses carrying passengers as an inducement to bring
potential customers to his business premise. Since the meals were not given to drivers of empty buses, there is a direct
link between the act of bringing passengers to the food outlet and the provision of the free meals. The consideration here
is the free meals provided.

2. Consideration may flow from recipient of supply or from any other person.
.

Normally, when a supplier makes a supply of goods or services to a recipient, he receives a consideration directly from
the recipient. However, in some cases consideration may have been received from a third party. This is known as a
supply made under a tripartite arrangement. As long as there is a direct link between the supply made and the
consideration given, there is a supply for GST purposes.

Illustration 1: A Ltd. contracts with a Big Bazaar (B Ltd) to provide bedsheets worth Rs 10,000 to its business clients
during Diwali. The consideration for the supply of bed sheets is paid by A Ltd. as stipulated in the contract.
B Ltd. is having binding contract with A Ltd. to supply bedsheets to business clients of A Ltd.
This transaction will qualify as supply as there is supply of goods for consideration.

However, Governments Subsidy shall not be treated, as consideration and thus, amount of subsidy shall not be
considered for the purpose of charge of GST.

3. Consideration may be monetary or non-monetary:


Consideration can be in monetary or non-monetary form or partly in monetary form and partly in non-monetary form.
(a) Monetary consideration includes payment by cash, cheque or credit card, bank transfer and deduction from bank account.
(b) Non-monetary consideration is goods or services provided as payment e.g. in a barter or part-exchange transaction.

Payments Which May Not Be Consideration


Payment received is not a consideration when
there is no direct link between the payment and the supply or
there is no supply of goods or services in return for the payment.
.

However, if there is a direct link between the payment and the supply or if there is a supply of goods or services in return for the
payment, then such payment is a consideration for the supply and subject to GST.

Illustration 1: A rich man donates a large sum of money to an orphanage without receiving any benefit in return. The donation
(payment) is not a consideration because there is no supply of goods or services by the orphanage to the donor in return.

4. Treatment of Deposits
Deposit shall not be treated as consideration unless it is appropriated by the supplier towards supply of goods and /
or services.
.

Illustration 1: MTNL, telecom service provider, receives security deposits from subscriber in connection with supply of
telecom services. This security deposit is refundable. This security deposit is not consideration for supply of service and
hence, shall not be taxable. However, if in future, if it is adjusted towards value of services supplied, then this security deposit
shall be treated as consideration.
.
Illustration 2: Any Deposit made which is intended by the parties to the contract to be offset against the purchase price once
the supply has been made. Such deposit (better to call them as advance) will represent consideration and thus, fall within
the scope of GST. [These become liable for the tax the day it is received]

Sec 2(31)(b): Consideration includes any act or forbearance in respect of, in response to, or for the inducement of,
the supply of goods or services, whether by the person or by any other person.

Illustration 1: Mr A, top level management personnel of A ltd., retires from X Ltd. X Ltd. enters into non-competence
agreement with Mr A. In lieu, it agrees to allow possession of companys bunglow for another 10 years.
In this case,
Renting of bunglow/building = Supply of service
Act/ forbearance on part of Mr A (i.e., not to carry on competitive business) = Consideration Mr A is supplier of services
to A ltd.
Thus, such transaction becomes transaction in taxable supply and thus, liable to GST.
BUSINSESS [Sec 2(17) of CGST Act]
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 sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume, frequency,
continuity or regularity of such transaction;
(d) supply or acquisition of goods including capital goods 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;
(f) admission, for a 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 totalisator or a licence to book maker in such club; and
(i) any activity or transaction undertaken by the Central Government, a State Government or any local
authority in which they are engaged as public authorities;
.

Author:
1. Wider definition: Business has been defined in inclusive manner.
.

It can be summarized as follows:


General activity
(a) (b)
Trade, Commerce, Manufacture Incidental / Ancillary transactions
Profession, Vocation (e.g., education)
Adventure E.g.

Wager (* Wager has been included as GST is also there on betting 1. Sale of used car, sale of scrap, sale of old machineries,
transactions) sale of old furniture etc. is subject to GST, though the
taxable person may not be in business of selling cars,
Other Similar Activity furniture or machinery.
2. Sale of unserviceable parts by transport undertaking;
3. Sale of old machinery and scrap by manufacturer;
Whether or not for a pecuniary benefit:
4. Sale in stores for employees;
This means that financial profitability is not a criterion in
5. Sale of hypothecated/ pledged goods by Bank;
determining the status of business.
6. Sale of repossessed goods by Insurance Company.

(c)
Volume of activity is irrelevant.
Frequency, continuity or regularity is irrelevant.
(Thus, even occasional transaction are subject to GST)
.

Specific activity
(d) Acquisition of Goods in connection with commencement or closure of business
[Transactions effected for commencement of business, though actual commencement of business takes place later on,
shall also be treated as business.
Similarly, the transaction of sale of goods such as stock or fixed assets after the closure of business shall also be
considered within the scope of business.]
(e) Facilities provided by club, association, society, or any such body to its members
[Club/ association / society / other such body operates on principles of mutuality they provide facilities / benefits to its
own members. Such transactions shall still be regarded as business.
- some of the facilities / benefits provided by club etc. are --- 1) Sports facilities like swimming pool, table tennis, cricket
etc. 2) Restaurant facility; 3) Banquet Hall or open ground; 4) Accommodation facility (rooms); 5) Library; 6) Conference
room etc.

(f) Admission to any premise (for consideration)


[e.g., Admission into premise is normally granted to the person who generally purchases ticket or receives donor passes.
Sale of ticket for providing admission to any premise (like cinema hall, exhibition etc) will be considered as business]

(g) Services provided by person as holder of officer- such office accepted by him is in furtherance of his trade,
profession or vocation
[e.g., if a CA in practice provides CFO or independent director services, he would be covered]

(h) Services by RACE-CLUB

(i) Activities / Transaction by CG, SG or LA in which they are engaged as public authorities
[*Activities of CG, SG or LA undertaken as public authorities don't constitute business. GST cannot be imposed on
sovereign activities of CG, SG or LA as such activities don't constitute business.]
.

Person, Supplier, Recipient


.

PERSON [Sec 2(84) of CGST Act]


Person includes
(a) an individual;
(b) a Hindu Undivided Family;
(c) a company;
(d) a firm [*Firm = Partnership Firm] ;
(e) a Limited Liability Partnership;
(f) an association of persons or a body of individuals, whether incorporated or not, in India or outside
India;
(g) any corporation established by or under any Central Act, State Act or Provincial Act or a Government
company as defined in clause (45) of section 2 of the Companies Act, 2013;
(h) any body corporate incorporated by or under the laws of a country outside India;
(i) a co-operative society registered under any law relating to co-operative societies;
(j) a local authority;
(k) Central Government or a State Government;
(l) society as defined under the Societies Registration Act, 1860;
(m) trust; and
(n) every artificial juridical person, not falling within any of the above;
Author: Person includes both natural as well as artificial person.

Deemed Distinct Persons : Fiction of Sec 25 of CGST Act (Procedure for Registration)
.

One person carrying more than one GST registration = Each registrant is deemed distinct persons
25 (4) A person who has obtained or is required to obtain more than one registration, whether in one State or
Union territory or more than one State or Union territory shall, in respect of each such registration, be treated
as distinct persons for the purposes of this Act.
Illustration
Suppli State-A State B Requirement of separate registration Deemed Distinct
er of
goods Place of Place of Place of u/Sec 25 Persons or not
Business Business Business
Mr A Yes ---- Yes Separate registration (mandatory) Deemed Distinct
- Sec 25(1) persons
Mr B Yes Yes --- If these 2 places of business Deemed Distinct
constitutes different business persons
verticals
- Separate registration can be taken
optionally
- Sec 25(2)
If these 2 places of business does Not Deemed Distinct
not constitute different business persons
verticals
- Separate registration cannot be
taken
- Sec 25(2)

Person carrying registration in one State/UT, but having establishments in other State/UT also: Such establishments
are deemed distinct persons (even if such other establishment is not registered)
25 (5) Where a person who has obtained or is required to obtain registration in a State or Union territory in
respect of an establishment, has an establishment in another State or Union territory, then such
establishments shall be treated as establishments of distinct persons for the purposes of this Act.
Illustration:
A Ltd., manufacturer and service provider, having HO in Mumbai (engaged in supply of goods) and BO in Gujarat
(engaged in supply of services)
HO- supplying goods [GST registered in Maharashtra]
BO- supplying service [Not registered under GST as Y service is under reverse charge mechanism]
.

- Though BO is not GST registered, still it shall be treated as distinct person being it is an establishment in other State Sec
25(5)]
.

.
.

SUPPLIER [Sec 2(105) of CGST Act]


Supplier in relation to any goods or services or both, shall mean the person supplying the said goods or services
or both and shall include an agent acting as such on behalf of such supplier in relation to the goods
or services or both supplied;
.

Author
Supplier = Person supplying goods and/or services + Agent acting on behalf of such supplier
RECIPIENT [Sec 2(93) of CGST Act]
Recipient of supply of goods or services or both, means
(a) where a consideration is payable for the supply of goods or services or both, the person who is liable to
pay that consideration;
(b) where no consideration is payable for the supply of GOODS, the person to whom the goods are
delivered or made available, or to whom possession or use of the goods is given or made available; and
(c) where no consideration is payable for the supply of A SERVICE, the person to whom the service is
rendered,
and any reference to a person to whom a supply is made shall be construed as a reference to the recipient of
the supply
and shall include AN AGENT acting as such on behalf of the recipient in relation to the goods or services
or both supplied;
..

Author :
In general, Recipient of Supply = Person to whom supply is made
Situation Goods and/or services Recipient of supply
Supply for consideration Goods and/ or services Recipient = Person liable to pay consideration

Supply without consideration Goods Recipient = Person to whom goods are delivered or made
[Section 7 read with Schedule I available
(4 Activities)] Services Recipient = Person to whom services are rendered

Recipient of Supply shall include agent acting on behalf of recipient.

Illustration:
.

Situation Recipient Remarks


Supplier making sale of TV to Mr A. Consideration is paid by Mr Mr A Mr A being liable to pay consideration.
A.
Supplier making sale of medicines to Mr B. Consideration is Mr B Mr B being liable to pay consideration.
paid by Mr B. Mr B requests supplier to deliver medicines to his
ailing father who lives in a separate house/address.
A Ltd. is engaged in manufacture of garments. It has Charitable Permanent disposal of business assets (on
undertaken upgradation of computers. It discarded old organizatio which ITC has been availed) amounts to
computers and donated them to a charitable organization. n. supply even if affected without
consideration. Recipient of such supply of
goods shall be the person to whom goods
are made available.
.
.

Taxable Supply, Non-Taxable Supply, Exempt Supply


.

TAXABLE SUPPLY [Sec 2(108) of CGST Act]


.

Taxable Supply means a supply of goods or services or both which is leviable to tax under this Act.

Author
Taxable Supply = Supply which is leviable to CGST under CGST Act, 2017 (Intra-State supply falling within scope of Sec 9)
.

IGST Act, 2017 CGST Act, 2017


Inter-State Taxable Supply under ----
Supply IGST Act
Intra-State ----- Taxable Supply under CGST Act
Supply [Simultaneously, such supply shall be taxable under a particular SGST Act or
UTGST Act]
Illustration: Whether following intra-state supply shall attract taxable supply in terms of Sec 2(108) of CGST Act
Situation Taxable supply or not Reasons
Supply of A/L for human Not taxable supply GST not leviable.
consumption (Constitution excluded it from GST coverage)
Supply of crude petrol, Not taxable supply GST not leviable on these.
high speed diesel, petrol, (Presently excluded from charging section, Sec 9, of CGST Act)
natural gas and Aviation
Turbine fuel (ATF)
Supply specified under Not taxable supply GST not leviable on these
Schedule III of GST Act (as such supply being treated as neither supply of goods nor
supply of services)

Supply falling under Taxable supply GST leviable on these


reverse charge (Recipient is liable to pay CGST)
Supply chargeable to Nil Taxable supply GST leviable (though rate is Nil)
rate (Charging section, section 9, is applicable)
Supply wholly exempt Taxable supply GST leviable (though exempted)
u/Sec 11 (Charging section, section 9, is applicable)
.

NON-TAXABLE SUPPLY [Sec 2(78) of CGST Act]


Non-Taxable Supply means a supply of goods or services or both which is not leviable to tax under this Act or
under the Integrated Goods and Services Tax Act;

Author :
Non-taxable supply = Supply not leviable to tax under CGST Act, 2017 or under IGST Act, 2017

Situation Levy of IGST Levy of CGST Taxable Supply


(inter-state (intra-state Vs
supply) supply) Non-taxable supply
Supply of A/L for human No No Non-taxable supply
consumption (No GST -Constitution excluded it from GST
coverage)
Supply of crude petrol, No No Non-taxable supply
high speed diesel, petrol, (No GST - Presently excluded from charging sections
natural gas and Aviation - Sec 9 of CGST Act & Sec 5 of IGST Act)
Turbine fuel (ATF)
Supply specified under No No Non-taxable supply
Schedule III of GST Act (No GST - as such supply being treated as neither
supply of goods nor supply of services)
.

EXEMPT SUPPLY [Sec 2(47) of CGST Act]


.

Exempt Supply means supply of any goods or services or both


which attracts nil rate of tax or
which may be wholly exempt from tax under section 11, or under section 6
of the Integrated Goods and Services Tax Act,
and includes non-taxable supply;
.
Author
1. EXEMPT SUPPLY meaning thereof
.

EXEMPT SUPPLY
means Supply attracting NIL rate of tax [Nil levy attracted]
Supply wholly exempt u/Sec 11 of CGST Act [Levy attracted, but exempted]
Supply wholly exempt u/Sec 6 of ICGST Act [Levy attracted, but exempted]

Includes Non-taxable supply [No levy attracted]


= Supply not leviable to tax under CGST Act, 2017 or under IGST Act,
2017 [Sec 2(78) of CGST Act]

2. Significance of concept of EXEMPT SUPPLY


No ITC (input tax credit ) is admissible in respect of exempt supply. [Sec 16 of CGST Act (applicable to IGST also)]
.

Taxable Person, Reverse Charge, Electronic Commerce Operator


.

TAXABLE PERSON [Sec 2(107) of CGST Act]


Taxable Person means a person who is registered or liable to be registered under section 22 or section 24;

Author
1. Taxable Person = Person registered or person liable to be registered u/Sec 22 or 24
.

Sec 22 Person liable for registration


[Registration subject to threshold limit of 20 Lakhs / 10 lakhs]

Sec 24 Compulsory registration in certain cases


[Registration irrespective threshold limit of 20 Lakhs / 10 lakhs]

3. Significance of concept of Taxable Person


Only a taxable person shall be liable to pay GST [Sec 9 of CGST Act / Sec 5 of IGST Act]

REVERSE CHARGE [Sec 2(98) of CGST Act]


.

Reverse Charge means the liability to pay tax by the recipient of supply of goods or services or both instead of
the supplier of such goods or services or both
under sub-section (3) or sub-section (4) of section 9, or
Under sub-section (3) or sub-section (4) of section 5 of the Integrated Goods and Services Tax Act;

Author:
1. Reverse Charge means the liability to pay tax on the recipient instead of supplier.

2. REVERSE CHARGE
.

REVERSE CHARGE: Notified supplies (goods / services / both): Recipient Sec 9(3) of Sec 5(3) of
shall be liable to pay CGST Act IGST Act
Automatic REVERSE CHARGE: (Unregistered supplier supplying to Sec 9(4) of Sec 5(4) of
Registered recipient): Recipient liable to pay CGST Act IGST Act
.
.
ELECTRONIC COMMERCE OPERATOR [Sec 2(45) of CGST Act]
.

Electronic Commerce Operator means any person who owns, operates or manages digital or electronic facility
or platform for electronic commerce;

ELECTRONIC COMMERCE [Sec 2(44) of CGST Act]


Electronic Commerce means the supply of goods or services or both, including digital products over
digital or electronic network;
.
Author :
E-Commerce constitutes 2 components:
1. Supply of goods and/or services, including digital products*
.
2. Supply affected over digital or electronic network

Digital Goods/products is a general phrase used to describe any goods that are stored, delivered and used in its
electronic format. Digital goods are shipped electronically to the consumer through email or download from the Internet.
Physical stores that supply goods and/or services with the help of digital network facilitated by third party will also fall
within scope of this definition.
e.g., Sale of perfumes over Flipkart,
.

.
Author:
1. ECO = Person owning, operating or managing digital or electronic facility/platform for e-commerce
e.g., Flipkart, Amazon, OLA cab, Uber Cab.

2. ECO will include an AGGREGATOR.

3. ECO (electronic commerce operator): significance of this concept


.

Situation ECO related provisions Applicable Sections


Supply of notified services ECO shall be liable to pay GST (not Sec 9(5) of Sec 5(5) of
through ECO supplier or recipient of such goods) CGST Act IGST Act
ECO shall be required to take
registration also.

Supply of other services Supplier shall be liable to pay GST Sec 52 of CGST Sec 20 of IGST
through ECO Supplier shall be required to take Act Act makes Sec
Supply of any goods through registration. 52 applicable to
ECO [But ECO shall be liable to comply IGST Also.
with TCS provisions under which ECO
shall deposit TCS (at notified rates)
with Government. For this purpose,
ECO shall still be required to take
registration]
.
TAXABLE EVENT: SUPPLY
Sec 7 of CGST Act, 2017
.

GST is levied on activity of supply of goods and/or services. In other words, taxable event under GST law is supply.
o Under the current tax laws, Central Excise is levied on manufacture of goods, VAT / CST is levied on sale of goods and service tax is
charged on service provided or agreed to be provided. Unlike such different incidences, under the GST law, it is supply which would
be the taxable event.
Why we need to understand SUPPLY under GST?
Transaction / Current Treatment Treatment under GST
Activity
Taxable Liability Taxable Liability Remarks
Event Event
Sale of Manufacture ED leviable Supply GST leviable
manufactured
Sale VAT/CST leviable
goods

Stock transfer to Manufacture ED leviable Supply?? ?? It would be taxable as a supply if


Depot of such supplies are between distinct
No Sale VAT/CST not
manufactured persons as specified u/Sec 25.
leviable
goods

Distribution of Manufacture ED leviable Supply ?? ?? It would be taxable as a supply if


manufactured such supplies are between distinct
No Sale VAT/CST not
goods as free persons (as specified u/Sec 25) or
leviable
samples between related persons (as
specified u/Sec 15)

Captive Manufacture ED leviable Supply ?? ?? It would not be taxable as supply


Consumption of
No Sale VAT/CST not
manufactured
leviable
goods (within same
factory)

Supply of goods by Import Customs duty Supply ?? ?? It would be taxable as a supply


overseas supplier leviable (inter-state supply). GST shall be
to Indian buyer collected at the time of collection of
(including
customs duties.
(i.e, import of counterveiling
goods) duties like CVD
and Spl CVD)

Supply of services Provisioning ST leviable Supply ?? ?? It would be taxable as a supply


by overseas of Service (in (inter-state supply). GST shall be
(Reverse charge
supplier to Indian taxable territory)
applicable) collected under reverse charge
buyer mechanism.
(i.e, import of
services)

Sec 7 defines supply.

7(1) Inclusions in supply (4 categories) 4 categories


In general, supply for consideration in course or furtherance of
business
7(2) Exclusions from supply (2 categories) 2 categories
Schedule III Activities
Notified activities of Govt / Local Authority
7(3) Notified Supplies: To be treated as Still to be notified
supply of goods or supply of
services as notified
.
Section 7: : Scope of SUPPLY.
Taxable Event = SUPPLY, scope thereof
(1) For the purposes of this Act, the expression SUPPLY includes*
(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;
(b) import of services for a consideration whether or not in the course or furtherance of business;
(c) the activities specified in Schedule I, made or agreed to be made without a consideration; and
(d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II.

Author :
1. Taxable Event under GST = Supply (as defined in Sec 7)
2. Sec 7 defines supply in an inclusive manner. The law has provided an inclusive meaning to the word supply which implies
that the specific transactions which are listed in the said section are only illustrative.

3. Supply includes following:


Supply of Existence of consideration In course or furtherance of business
7(1)(a) Goods and/or Services Yes Yes
7(1)(b) Services Yes May or may not be
7(1)(c) Schedule I Activities No consideration ----
7(1)(d) Schedule II Activities ---- ----

Detailed Analysis
1. Supply under Section 7(1)(a)
Supply (goods and/or services) for consideration in the course or furtherance of business
.
.

Activity of supply is very wide to cover following:-


Sale and Transfer: Sale as normally understood is transfer of property for consideration.
Expression sale and transfer have not been defined under GST law.
Barter and Exchange: While barter may deal with a transaction which only includes an exchange of goods/services,
.
exchange may cover a situation where the goods are partly paid for in goods and partly in money.
By making a specific inclusion in the definition of supply, all barters and exchanges would be
leviable to GST.
License, Lease, Rental Licenses, leases and rentals of goods are presently treated as services where the goods are
etc. : transferred without effective possession and control and treated as sales where the goods are
.
transferred with effective possession and control.
- Under the GST regime, such licenses, leases and rentals of goods with or without transfer of
right to use would be covered under the supply of service as per Schedule II to the CGST Act.
[Schedule II (Para 5(f)]
.

Applicability of 7(1)(a): twin conditions


1. Supply shall be for consideration (whether monetary of otherwise)
Situation Value of Supply
Supply for monetary consideration Value = Transaction value (price actually paid or payable for such
e.g., A customer purchases a printer and pays supply) Sec 15 (1) of CGST Act
Rs 12,000 for it.
.
Supply for non-monetary consideration Value = Value determined as per rules (basically, open market value
e.g., A customer purchases a printer and pays of such supply) Sec 15 (4) of CGST Act read with Valuation Rules
the supplier by exchanging his used computer
for the printer. The market value of the used
computer is Rs 12,000.
.
Supply for partly monetary consideration Value = Value determined as per rules (basically, open market value
and partly non-monetary consideration of such supply) Sec 15 (4) of CGST Act read with Valuation Rules
e.g., A trader exchanged a new car for Rs
2,00,000 cash and a used car (of market value
of 10,00,000).
.

Activity without consideration: Whether can be treated as supply?


The law provides that in certain cases, even though there is no consideration, the same would be treated as supply.
Such cases are listed in Schedule I.
In all such cases, value of such supplies shall be determined as per Sec 15 (4) of CGST Act read with Valuation
Rules.

Activity without consideration Treatment under GST


Getting covered by Schedule I Such supply will attract GST liability (presuming other conditions of
e.g., Gift to relatives taxability are also satisfied)
Value = Value determined as per rules Sec 15 (4) of CGST Act
read with Valuation Rules
Related ITC shall be admissible.
Not Getting covered by Schedule I Such supply will not attract GST liability
e.g., Gift to non-relatives dealer or However, related ITC shall not be admissible.
distributor
.
Activity for consideration: Whether will always constitute supply?
Besides for consideration, such activity must be in course or furtherance of business. Only then it will constitutes
supply
e.g., Mr A is a salaried employee in A Ltd. It sells his second hand cycle for consideration of Rs 2,000. This supply transaction is
not in course or furtherance of business.

Exception to above:
In view of specific inclusion provided by Sec 7(1)(b), activity of import of service shall constitute supply even if it is not in course or
furtherance of business.
e.g., Mr A is a salaried employee in A Ltd. it has availed services of an foreign architect for construction of his house. Such supply
of service is not in course or furtherance of any business in hands of Mr A. But it will constitute supply in terms of Sec 7(1)(b).
.

2. Supply shall be in course or furtherance of business


For a transaction to qualify as supply, it is essential that the same is in the course or furtherance of business. This
implies that any supply of goods and / or services by a business entity would be liable to tax, so long as it is in the
course or furtherance of business. Supplies which are not in the course of business (or in furtherance of business) will
not qualify as supply for the levy of tax, except in case of import of service for consideration, where the service is a
supply whether or not it is made in the course or furtherance of business.
.

Related provisions
Business Sec 2(17) of CGST Act

2. Supply under Section 7(1)(b)


Import of Services for consideration, whether or not in the course or furtherance of business
Related provisions
Import of service Sec 2(31) of IGST Act
.

The word supply includes import of a service, made for a consideration (as defined in Section 2(31)) and
whether or not in the course or furtherance of business. This implies that import of services even for
personal consumption would qualify as supply and therefore would be liable to tax.
.

e.g., Mr A is a salaried employee in A Ltd. it has availed services of an foreign architect for construction of his house. Such supply of service
is not in course or furtherance of any business in hands of Mr A. But it will constitute supply in terms of Sec 7(1)(b).
.

Special Points relating of taxable supply of import of service:


o Such supply shall be inter-state supply [Sec 7(4) of IGST Act]: IGST Act has adopted the
meaning of supply from CGST Act (Sec 2(21) of IGST Act). Further, in terms of Sec 7(4) of IGST
Act, import of services shall constitute inter-state supply and thus, would be liable to IGST.
o Collection of GST on reverse charge basis [Sec 5(3) of IGST Act]: Recipient of service (importer
of service) shall be liable to pay GST on reverse charge basis.
.

o Compulsory registration, no threshold limit [Sec 20 of IGST Act read with Sec 24(iii) of CGST
Act]: Threshold limits of registration (20 lakhs / 10 lakhs) do not apply in case of supplies attracting
tax on reverse charge basis. Thus, importer of service shall be liable to get himself compulsorily
registered under GST and make payment of GST liability.

3. Supply under Section 7(1)(c)


Schedule I Activities: Activities Without consideration
.

1. The law provides that in certain cases, even though there is no consideration, the same would be treated as supply. Such
cases are listed in Schedule I as stated below:
1. Sale of business assets (goods) on which ITC has been availed
2. Supplies of goods and/or services between related persons, except gift upto Rs 50,000 to employees
Supplies of goods and/or services between deemed distinct persons
3. Agent to principal or vice-versa, if agent supplies / receives goods on behalf of principal
4. Import of services from related parties

2. In all such cases, value of such supplies shall be determined as per Sec 15 (4) of CGST Act read with Valuation Rules.
Activity without consideration Treatment under GST
Getting covered by Schedule I Such supply will attract GST liability (presuming other conditions of taxability are
e.g., Gift to relatives satisfied)
Value = Value determined as per rules Sec 15 (4) of CGST Act read with
Valuation Rules
Related ITC shall be admissible.
Not Getting covered by Schedule I Such supply will not attract GST liability.
e.g., Gift to non-relatives dealer or However, related ITC shall not be admissible (i.e., it shall be reversible).
distributor
.

4. Supply under Section 7(1)(d)


Schedule II Activities: Deemed supply of goods or deemed supply of services
.

1. In many cases, demarcation line between goods and services is very thin. Historically, also there have been disputes
as to treatment of certain transaction as transaction of goods or transaction of service. Few disputes settled by
Courts and many are still under litigation. To avoid this situation, GST law provided for following mechanism:
Steps to be followed
1. Check Schedule II Activities shall be provided the treatment which has been specified in Schedule II.
.

Schedule II provides specific treatment of following:


Activity deemed to be SUPPLY OF GOODS
1. Transfer of title in goods
2. Permanent Transfer of business assets
3. Supply of Goods by 'unincorporated Aop/ BOI to its members
Activity deemed to be SUPPLY OF SERVICES
4. Transfer of right without transfer of title
5. Land and Building (lease, tenancy, etc thereof)
6. Treatment or process to another persons goods [Job-work, repair,
maintenance, etc.]
7. Personal / Non-business use of business assets is 'service'
8. Supply of services [Declared Services]
9. Composite supply
(a) Works contract in relation to immovable property
(b) Restaurant or catering transactions
.

2. Check Notification Notified activities shall be provided the same treatment which been notified for them.
u/Sec 7(3) of CGST Act No notification has been issued presently.
3. Apply Sec 8 of CGST, Sec 8 makes provisions for handling of composite supply and mixed supply.
Act -- For details refer Sec 8 (discussed later)
.
Out of Scope Supply = [Schedule III Activities + Notified activities of Govt / Local Authorities as public authorities]
(2) Notwithstanding anything contained in sub-section (1),
(a) activities or transactions specified in Schedule III; or
(b) such activities or transactions undertaken by the 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
recommendations of the Council,
shall be treated neither as a supply of goods nor a supply of services.

Author :
Out of Scope supply = Schedule III Activities/transactions
.

+ Notified activities/transactions undertaken by CG / SG / Local Authority in capacity of


Public Authorities

Schedule III Activities/ Transactions


1. Schedule III of CGST Act = NEGATIVE LIST in GST
2. Schedule III Activities will neither be considered as supply of goods nor supply of services and thus, will not attract GST liability.
Schedule III: (6 Entries)

Notified activities/transactions undertaken by CG / SG / Local Authority


1. Only such activities/transactions will be excludible from supply which are undertaken when CG / CG / Local Authority is
engaged as public authorities. (meaning thereby that the activities / transactions which are taxable in hands of other persons
would be taxable in hands of CG/ SG/ Local Authority).
2. Even when CG / SG / Local Authority is engaged as public authority, only notified activities / transactions will be excludible.
.

Notified Activities: Nothing notified at present


.

Supply Transaction: Govt empowered to deemed any supply as supply of goods or supply of service
(3) Subject to the provisions of sub-sections (1) and (2),
the Government* may, on the recommendations 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.
.

Author :
1. Differential treatment of goods and services under GST
Applicable rates: GST applicable to supply of goods as well as supply of services. But rates applicable on supply of goods
are different from rates applicable on supply of services. Thus, even under GST regime, it is important to identify supply
transaction and classify them into either of the category.
Principle governing determination of place of supply: Principles governing determination of place of supply of goods
and services are different. [Place of supply is required to determine the nature of supply, viz, inter-state supply or intra-
state supply]
Principle governing determination of time of supply: Principles governing determination of time of supply of goods
and services are different. [Time of supply is required to determine timing of payment of GST laibility]
.

2. Schedule II of CGST Act specifies which activities will be considered as supply of goods and which activities will be
considered as supply of service.
Schedule II: (7 Paras)
.
3. Additionally, Sec 7(3) empowers Government to declare certain activity/transaction as supply of goods or supply of
services. But Government can use this power only with the approval of GST Council.
SCHEDULE I [See section 7]
ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION
1. Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.

Author :
1. Permanent transfer or disposal of business assets on which ITC has been availed:

Permanent Transfer or disposal: It implies that the goods should be transferred without any intention or requirement of
having to receive the goods back.
E.g.,
Goods sent on job-work for carrying out certain job-work (like testing or some processing): Entry 1 is not applicable
Donation of business assets to some charitable organization: Entry 1 is applicable

Supply of goods must of those on which ITC has been availed: It implies that the goods should be transferred without any
intention or requirement of having to receive the goods back.
E.g.,
Motor car purchased by a manufacturing company for use of its director. ITC not admissible on such motor car and
hence, not availed. Subsequently, such car is donated to some charitable organization: Entry 1 is not applicable.

ILLUSTRATIONS
Activity Supply GST applicability
Inputs purchased (ITC availed) Yes GST applicable
Subsequent, sold for consideration [Sec 7(1)(a)] Value of such supply= Transaction
Value (determined as per Sec 15 of
CGST Act)
.

Inputs purchased (ITC availed) Yes GST applicable


Subsequent, disposed off without [Sec 7(1)(c) + Schedule I (Entry 1)] Value of such supply= as determined as
consideration per Valuation Rules
.,

Laptop (ITC availed) Yes GST applicable


Subsequent, these were given to charitable [Sec 7(1)(c) + Schedule I (Entry 1)] Value of such supply= as determined as
schools (as business entity purchased new per Valuation Rules
laptops) .,

Motor Car purchased (ITC not availed being Not a supply GST not applicable
not admissible) [Sec 7(1)(c) + Schedule I (Entry 1)]
Subsequent, disposed off without
consideration

2. Supply of GOODS or SERVICES or both


between related persons or
between distinct persons as specified in section 25,
when made in the course or furtherance of business:
Provided that
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.

Author :
1. Supply of goods and/or services to related persons / deemed distinct persons:

Supply to related persons (made in the course or furtherance of business):


Related Person Explanation to Sec 15 of CGST Act (Value of Taxable Supply)
.
Explanation.For the purposes of this Act,
(a) persons shall be deemed to be RELATED PERSONS if
(i) such persons are officers or directors of one anothers businesses;
(ii) such persons are legally recognized partners in business;
(iii) such persons are employer and employee;
(iv) any person directly or indirectly owns, controls or holds 25% or more of the
outstanding voting stock or shares of both of them;
(v) one of them directly or indirectly controls the other;
(vi) both of them are directly or indirectly controlled by a third person;
(vii) together they directly or indirectly control a third person; or
(viii) they are members of the same family*;
(b) the term person also includes legal persons;
(c) persons who are associated in the business of one another in that one is the
sole agent or sole distributor or sole concessionaire, howsoever described,
of the other, shall be deemed to be related.
.

Related provisions
Family Sec 2(49) of CGST Act
Family means,
(i) the spouse and children of the person, and
(ii) the parents, grand-parents, brothers and sisters of the person if they are wholly or mainly dependent on
.
the said person;
.

E.g.,
Gifts to relatives:
o Gift to employee: Gifts upto value of Rs 50,000 in a year to an employee shall not be treated as supply. Gifts in
value in excess of Rs 50,000 shall be taxable as supply. [Note: Gifts may be in terms of supply of good and/or
services]
o Gift to all other relatives: Gifts of any value shall be taxable as supply. [Note: Gifts may be in terms of supply of
good and/or services]

ILLUSTRATIONS
Activity Supply GST Levy
Free air travel tickets provided to Yes (presuming such supply is in over GST Leviable
employees by Airline and above of gifts of value of Rs 50,000) Value of such supply= as determined as per Sec
[Note: Employer & Employee = Related [Sec 7(1)(c) read with Schedule I 15 read with Valuation Rules
.

person] (Entry 2)] .


Cloth retailers giving some clothes Yes (value of goods is immaterial) GST Leviable
(of value Rs 20,000) in gift to his [Sec 7(1)(c) read with Schedule I Value of such supply= as determined as per Sec
sister (Entry 2)] 15 read with Valuation Rules
.

[Note: Sister, being member of same .


family = Related person]

Supply to distinct persons as specified u/Sec 25 (made in the course or furtherance of business):
Distinct Person Sec 25 of CGST Act (Procedure for Registration)
.

One person carrying more than one GST registration = Each registrant is deemed distinct
persons
25 (4) A person who has obtained or is required to obtain more than one registration,
whether in one State or Union territory or more than one State or Union territory shall, in
respect of each such registration, be treated as distinct persons for the purposes
of this Act.
Person carrying registration in one State/UT, but having establishments in other State/UT
also: Such establishments are deemed distinct persons (even if such other establishment is not
registered)
25 (5) Where a person who has obtained or is required to obtain registration in a State
or Union territory in respect of an establishment, has an establishment in another
State or Union territory, then such establishments shall be treated as
establishments of distinct persons for the purposes of this Act.
.
Supplier State-A State B Requirement of separate Deemed Whether stock-
of registration Distinct transfer
goods Place of Place of Place of
u/Sec 25 Persons or taxable as
Business Business Business
not supply?
Mr A Yes ---- Yes Separate registration Deemed Yes
(mandatory) Distinct [Stock transfer =
persons Supply (Schedule I-
- Sec 25(1) Entry 2)]

Mr B Yes Yes --- If these 2 places of Deemed Yes


business constitutes Distinct [Stock transfer =
different business persons Supply (Schedule I-
Entry 2)]
verticals
- Separate registration
can be taken optionally
- Sec 25(2)
If these 2 places of Not Deemed No
business do not Distinct [Stock transfer =
constitute different persons Not Supply]
business verticals
- Separate registration
cannot be taken- Sec
25(2)

Related provisions
Business Vertical Sec 2(18) of CGST Act
Business Vertical means a distinguishable component of an enterprise that is engaged in the supply of
individual goods or services or a group of related goods or services which is subject to risks and returns that are
different from those of the other business verticals.
.

Explanation.For the purposes of this clause, factors that should be considered in determining whether goods or
services are related include
(a) the nature of the goods or services; (d) the methods used to distribute the goods or supply of
(b) the nature of the production processes; services; and
(c) the type or class of customers for the goods or (e) the nature of regulatory environment (wherever applicable),
services; including banking, insurance, or public utilities;
.

ILLUSTRATIONS
Activity Supply GST Levy
Stock transfer/ branch transfer from Yes GST Leviable
Mumbai Head Office to Gujarat [Sec 7(1)(c) read with Schedule I Value of such supply= as determined as per Sec
Branch Office (Entry 2)] 15 read with Valuation Rules
..

[HO GST registered in Maharashtra HO shall be liable to pay GST on such stock-
transfer.
BO GST Registered in Gujarat]
.
Stock transfer/ branch transfer from Yes GST Leviable
Mumbai Head Office to Pune [Sec 7(1)(c) read with Schedule I Value of such supply= as determined as per Sec
Branch Office (Entry 2)] 15 read with Valuation Rules
..

[HO GST registered in Maharashtra HO shall be liable to pay GST on such stock-
transfer.
BO GST Registered in Maharashtra ]
.
Stock transfer/ branch transfer from NO GST not leviable
Mumbai Head Office to Pune [Schedule I (Entry 2)- not applicable] .
Branch Office
[HO GST registered in Maharashtra
BO not separately Registered (rather
shown as additional place of business in
registration certificate) ]

A Ltd., manufacturer and service Yes GST leviable


provider, having HO in Mumbai [Sec 7(1)(c) + Schedule I (Entry 2)] Value of such supply= as determined as per Sec
(engaged in supply of goods) and 15 read with Valuation Rules
.

BO in Gujarat (engaged in supply of


.

HO shall be liable to pay GST on such stock-


services) transfer.
-- Stock transfer of goods from HO .,

to BO
HO- supplying goods [GST
registered in Maharashtra]
BO- supplying service [Not
registered under GST as Y
service is under reverse charge
mechanism]
[Note: Though BO is not GST registered,
still it shall be treated as distinct person
being it is an establishment in other State
Sec 25(5)]
.

3. Supply of GOODS
(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or
(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.

Author :
1. Supply of goods between principal and agent:
.
.

Related provisions
Principal Sec 2(88) of CGST Act
Principal means a person on whose behalf an agent carries on the business of supply or
receipt of goods or services or both;

Agent Sec 2(5) of CGST Act


Agent means a person, including a factor, broker, commission agent, arhatia, del credere agent, an
auctioneer or any other mercantile agent, by whatever name called, who carries on the business of
supply or receipt of goods or services or both on behalf of another;
.

Supply by principal to his agent:


Supply of goods by a principal to his agent, where the agent undertakes to supply such goods on behalf of the principal:
E.g.
A company is located in the suburbs and employs an agent in the city to undertake sales on behalf of the company.
Goods transferred by the company to the premises of the agent in the city would be qualify as a supply.
.

Supply by agent to his principal:


Supply of goods by an agent to his principal, where the agent undertakes to receive such goods on behalf of the principal:
E.g.
A company is located in the suburbs and employs an agent in the small town nearby to undertake purchases on behalf of
the company. Goods procured and transferred by the agent to the company would qualify as a supply .
.
ILLUSTRATIONS
Activity Supply GST Levy
A Ltd. (GST Registered) engaging B Yes GST Leviable
Ltd. as its agent to sell car on its [Sec 7(1)(c) read with Schedule I Value of such supply = Transaction Value
behalf (Entry 3)] (determined as per Sec 15 of CGST Act)
.

- A ltd. has supplied 20 goods to B A Ltd. shall be liable to pay GST on such supply of
Ltd. goods
.

4. 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.

Author :
1. Import of services (without consideration) by a taxable person under following 2 situations shall be considered as
supply:
.
- Import of service from a related person (made in the course or furtherance of business):

- Import of service from his other establishment outside India (made in the course or furtherance of business):

E.g.,
ABC Associates received legal consultancy services from its head office located in Malaysia. The head office has rendered
such services free of cost to its branch office. Since ABC Associates and the branch office are related persons, services
received by ABC Associates will qualify as supply even though the head office has not charged anything from it.

Import of Service with or without consideration


.

Import of Whether in course or furtherance of Supply in terms of Whether taxable as


Service business supply?

For In course or furtherance of business Sec 7(1)(b) Yes


consideration
Not in course or furtherance of business Sec 7(1)(b) Yes

Without In course or furtherance of business


consideration
(a) transaction between related persons / Sec 7(1)(c) read with Yes
distinct persons Schedule I (Entry 4)
(b) other cases Sec 7(1)(c) read with No
Schedule I (Entry 4)
Not in course or furtherance of business Sec 7(1)(c) read with No
Schedule I (Entry 4)
.

.
SCHEDULE II [See section 7]
ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES
1. TRANSFER
(a) any transfer of the title in goods is a supply of GOODS;

(b) any transfer of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of
SERVICES;

(c) any transfer of the title in goods under an agreement which stipulates that property in goods shall pass at a
future date upon payment of full consideration as agreed, is a supply of GOODS.

Author :
Activity Treatment under GST
(a) Transfer of title in GOODS Supply of Goods
.

Illustration Activity GST Treatment


Mr A, a manufacturer of TV, sells TV to Transfer of title in goods Sec 7
Mr B, distributor. (for consideration) - Supply
Sec 7 read with Schedule II (Para 1)
Supply of Goods.

Mr B, a distributor of TV, sells TV to Mr Transfer of title in goods Sec 7


C, retailer. (for consideration) - Supply
Sec 7 read with Schedule II (Para 1)
Supply of Goods.

Mr A, a manufacturer of TV, donates TV Transfer of title in goods Sec 7 read with Schedule I (Entry 1 / 2)
to charitable organization (without consideration) - Not supply at all.
(Note: TV being output of Mr A, no question [Entry 1 not applicable as it is not a
of availment of any ITC by Mr A) business asset (input/ CG)]
[Entry 2 is not applicable as supply is not
between related person or deemed distinct
person]

Sec 7 read with Schedule II (Para 1)


Supply of Goods.
.

[Note: However, ITC shall be reversed-Sec


17(5)(h)]

Mr A, a manufacturer of TV, distributes Transfer of title in goods Sec 7 read with Schedule I (Entry 1 / 2)
samples of new model of TV (without consideration) - Not supply at all.
[Entry 1 not applicable as it is not a
business asset (input/ CG)]
[Entry 2 is not applicable as supply is not
between related person or deemed distinct
person]

Sec 7 read with Schedule II (Para 1)


Supply of Goods.

[Note: However, ITC shall be reversed-Sec


17(5)(h)]
Mr A, a manufacturer of TV, distributes Transfer of title in goods Sec 7 read with Schedule I (Entry 2)
new model of TV as gifts to his (without consideration) - Supply
employees (these are in excess of value of Rs
50,000) Sec 7 read with Schedule II (Para 1)
(Note: Employer and employee are treated Supply of Goods.
as related persons under GST Sec 15)
Mr A, a manufacturer of TV, distributes Transfer of title in goods Sec 7 read with Schedule I (Entry 2)
new model of TV as gifts to related (without consideration) - Supply
persons (other than his employees) .

Sec 7 read with Schedule II (Para 1)


Supply of Goods.
.
(b) Transfer of Supply of Services
right in GOODS or
undivided share in Goods
.

Illustration Activity GST Treatment


Mr X and Mr Y are joint-owner / co-owner of a Transfer of undivided share Supply of service
movable property. in goods
Mr X sells his share in movable property (for consideration)
(goods) to another person.
.

Note: Undivided share in goods refers to goods that are owned by more than one person.
When one owner of the goods decides to sell his share in goods, it is a supply of services.
When all owners of the goods sell the property, it is a supply of goods.

(c) Transfer of title in GOODS in FUTURE Supply of Goods


.

Illustration Activity GST Treatment


Mr X provides goods to Mr B and permits him Transfer of title in goods in Supply of goods
to use the goods, provided Mr B pays for the future
goods at the end of one month, when the (for consideration)
property in goods will be transferred to Mr B.
Basically, it will cover hire purchase transactions and installment purchase transaction.
Entire consideration for such transaction shall constitute supply of goods.
.

2. LAND AND BUILDING


(a) any lease, tenancy, easement, licence to occupy land is a supply of SERVICES;
(b) any 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.

Author :
Activity Treatment under GST
(a) Land: Lease, tenancy, easement, license to occupy Supply of Service

(b) Building: Lease, Letting out Supply of Service

3. TREATMENT or PROCESS
Any treatment or process which is applied to another persons goods is a supply of SERVICES.
Author :
Any treatment or process which is being applied to another persons goods is a supply of services.
e.g.
1) XYZ Ltd. sent their tools to M Ltd. for heat treatment to harden them. The heat treatment done by M Ltd. is a supply of
service. (Note: GST shall be chargeable on job-charges)
2) New Glass Ltd. sent their glass to B Ltd. for heat treatment to produce tempered glass. The heat treatment done by B Ltd. is a
supply of service.
3) D ltd. sent their wrought iron gates to C Ltd. for chemical treatment to produce rust- resistant gates. The chemical treatment
done by C ltd. is a supply of service.
4) MR Furniture Ltd. sent their semi-finished dining sets to D Ltd. for the process of varnishing. The varnishing work done by D
ltd. is a supply of service.
.

Activity Treatment under GST


1. Job-Work on other persons goods Supply of Services
-- whether amounting to manufacture or not;
-- whether involving use of own goods by Job-worker whose property getting transferred in
course of job-work

2. Maintenance / Repair etc of other persons goods Supply of Services


-- whether involving use of own goods by Job-worker whose property getting transferred in
course of job-work

Illustration Activity GST Treatment


Mr X, job-worker, doing job-work for Mr Y Activity GST Treatment
(a) such process amounts to manufacture Supply Supply of Service

(b) such process does not amount to manufacture Supply Supply of Service

(c) Contract is of pure labour contract Supply Supply of Service

(d) Contract is composite contract- labour cum material Supply Supply of Service

Mr X, job-worker, doing job-work (amounting to Activity GST Treatment


manufacture) for Mr Z
(a) Output = Readymade Garments Supply Supply of Service

(b) Output = Alcoholic Liqour Supply Supply of Service but not taxable supply

(c) Output = Petroleum Products Supply Supply of Service

(d) Output = Tobacco Supply Supply of Service


.

4. TRANSFER of BUSINESS ASSETS


(a) where goods forming part of the assets of a business
are transferred or disposed of by or under the directions of the person carrying on the business
so as no longer to form part of those assets,
whether or not for a consideration,
such transfer or disposal is a supply of GOODS by the person;

(b) where, by or under the direction of a person carrying on a business,


goods held or used for the purposes of the business are put to any private use or
are used, or made available to any person for use, for any purpose other than a purpose of the
business,
whether or not for a consideration,
the usage or making available of such goods is a supply of SERVICES;
(c) 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
(i) the business is transferred as a going concern to another person; or
(ii) the business is carried on by a personal representative who is deemed to be a taxable person.

Author :

Activity Treatment under GST


4(a) Goods forming part of business assets transferred/ disposed off thus, Supply of Goods
ceasing to be part of business assets

Illustration Activity GST Treatment


AC installed in factory (ITC availed) Transfer of goods forming Sec 7 read with Schedule II (Para 4(a))
- Sale for Rs 5,000 part of business assets - Supply of Goods.
(for consideration)
Motor Vehicles used in factory (ITC not Transfer of goods forming Sec 7 read with Schedule II (Para 4(a))
availed availed being blocked as per part of business assets - Supply of Goods.
Sec 17) (for consideration)
- Sale for Rs 80,000
Disposal of AC installed (ITC availed) Transfer of goods forming Sec 7 read with Schedule I (Entry 1)
- Disposal to some charitable organization part of business assets - Supply
for free (without consideration)
Sec 7 read with Schedule II (Para 4(a))
- Supply of Goods.
.

Motor Vehicles used in factory (ITC not Transfer of goods forming Sec 7 read with Schedule I
availed being blocked as per Sec 17) part of business assets - Not supply at all.
- Disposal to some charitable organization (without consideration)
Sec 7 read with Schedule II (Para 1)
for free
Supply of Goods.
.

.
4(b) Goods held/used as business assets: Now put to private use Supply of Services

Goods made available to ANY PERSON for Non-Business purposes

Generally, there is no supply when goods acquired by a person are used for his own business purposes.
However, if the goods are:
(i) put to private or personal use; or
(ii) used for the purpose other than business; or
(iii) made available for another persons use but not done in the course or furtherance of the business of the
owner of the goods.
it is a supply of services.
Illustration Activity GST Treatment
Mr A = Shamiana Contractor Goods (chairs) held/use for Sec 7 read with Schedule I
In birthday function of his son, he used business purposes, now put - Not supply at all.
200 chairs to private use
(without consideration) Sec 7 read with Schedule II (Para 4(b))
Supply of Goods.
.

[Note:
1. ITC shall not be admissible in
respect of goods/services used for
personal consumption (i.e., private
use) Sec 17(5)(g)
2. Apportionment of credit shall be
done Sec 17(1)

Mr A = Shamiana Contractor Goods (chairs) used for non- Sec 7 read with Schedule I (Entry 2)
In birthday function of managers son, he business purposes - Supply.
supplied 200 chairs for use without any (without consideration)
Sec 7 read with Schedule II (Para 4(b)
charges.
Supply of Services (GST leviable)

A manufacturing company allows one of Goods (lorry) made available Sec 7 read with Schedule I (Entry 2)
his employees to use the companys lorry to any person (here, - Supply
without any charge when the employee employee) for non-business
wants to transport his household goods to purposes Sec 7 read with Schedule II (Para 4(b))
his new house. (without consideration) Supply of Services (GST leviable)
E Ltd. bought a bulldozer to be used in its Goods (bulldozer) made Sec 7
own construction business. However, it available to any person - Supply
made the bulldozer available to be used (here, related party) for non-
in the construction business of its sister business purposes (for Sec 7 read with Schedule II (Para 4(b))
company, F ltd. purposes other than its own Supply of Services (GST leviable)
business purpose)
(for consideration)
.
4(c) Taxable person ceases to be taxable person: Goods forming part of business Supply of Goods
asset shall be deemed to be supplied

When a person ceases to be registered under GST, the person may be holding goods such as raw materials, products,
trading stocks, land, plant and machinery at the time of deregistration where input tax on these goods has been claimed.
As a result, the deregistered person is holding goods which are free from GST. In line with the GST principles, the
person is deemed to be making a supply of goods which formed part of his business asset at the time of deregistration.
The person is required to account and pay for the GST on such supply.
Illustration: Mr D is a GST registered sundry store owner. As his business has substantially reduced over the last year,
he has decided to close the business and retire. At the time of deregistration he has goods on hand valued at Rs 5,000.
Mr. Ds final GST return will therefore show his supplies made during the last taxable period plus the Rs 5,000 value of
the goods on hand during the deregistration.

Exception to cessation
1) Transfer of Going Concern
A transfer of business as a going concern (TOGC) means a transfer or sale of a business either wholly or partly,
together with the assets of the business, from one taxable person (transferor) to another person (transferee) who
is a taxable person or becomes a taxable person as a result of that transfer.
In case of TOGC, no GST charged and payable on such transfer.

2) Continuity of business by personal representative who is deemed as taxable person

.
5. SUPPLY OF SERVICES
The following shall be treated as supply of SERVICES, namely:
(a) renting of immovable property;

Author :
1. There is some overlapping between Para 2(a)/(b) and Para 5(a).
.

Activity Treatment under GST Treatment under GST


(a) Renting of Land: Supply of Service Supply of Service
[Sec 7(1)(d) read with Schedule [Sec 7(1)(d) read with Schedule
II (Para 2(a)] II (Para 5(a)]

(b) Renting of Building Supply of Service Supply of Service


[Sec 7(1)(d) read with Schedule [Sec 7(1)(d) read with Schedule
II (Para 2(b)] II (Para 5(a)]

(c) Renting of others immovable structure --------- Supply of Service


(say, telecom towers) [Sec 7(1)(d) read with Schedule
II (Para 5(a)]

(b) construction of a complex, building, civil structure or a part thereof,


including a complex or building intended for sale to a buyer, wholly or partly, except where the entire
consideration has been received after issuance of completion certificate, where required, by the
competent authority or after its first occupation, whichever is earlier.
Explanation.For the purposes of this clause
(1) the expression competent authority means the Government or any authority authorised to issue completion
certificate under any law for the time being in force and in case of non-requirement of such certificate from such
authority, from any of the following, namely:
(i) an architect registered with the Council of Architecture constituted under the Architects Act, 1972; or
(ii) a chartered engineer registered with the Institution of Engineers (India); or
(iii) a licensed surveyor of the respective local body of the city or town or village or development or planning
authority;
(2) the expression construction includes additions, alterations, replacements or remodelling of any existing civil
structure;

Author :
ABC Builders (P) Ltd. entered into contract for construction of Commercial Complex for M Ltd.
Taxability of transactions
Situation Whether supply Supply of Goods vs Supply of
Services
Construction contract is pure labour contract Supply Supply of Service
(i.e., all materials will be provided by M Ltd.) [Sec 7(1)(d) read with Schedule
II (Para 5(b)]
Construction contract is labour-cum- material contract Supply Supply of Service
(i.e., both labour as well as material will be provided by (Such supply is [Sec 7(1)(d) read with Schedule
M Ltd.) composite supply II (Para 6(a)]
[Note: Such Contract = Works Contract (as defined in Sec of goods and/or
services)
2(119) of CGST Act]
XYZ Builders (P) Ltd. is undertaking construction of Commercial Complex. He intends to sells units of this
complex.
Taxability of transactions
Situation Whether supply Supply of Goods vs Supply of
Services
Entire consideration is received after Not a supply at all Such supply shall be considered
-- issuance of completion certificate, where require by as neither as supply of goods nor
competent authority, as supply of services
-- after its first occupation, [Sec 7(2) read with Schedule III
whichever is earlier (Entry 5)]
Entire consideration or any part of consideration is Supply Supply of Service
received before [Sec 7(1)(d) read with Schedule
-- issuance of completion certificate, where require by II (Para 5(b))]
competent authority,
-- after its first occupation,
whichever is earlier
..

(c) temporary transfer or permitting the use or enjoyment of any Intellectual Property Right (IPR);

Author :
IPR Not The phrase has to be understood as in normal trade parlance. The phrase has to be
defined understood as in normal trade parlance as per which intellectual property right includes the
following:-
Copyright Patents Trademarks
Designs
Any other similar right to an intangible property
Note: Intellectual Property (IP) is a term referring to a number of distinct types of LEGAL
MONOPOLIES over creations of the mind (both artistic and commercial).
.

Notes:
1. IPR = Property (valuable thing)
2. IPR= Movable Property (as it is not immovable property as per General Clauses Act)
3. IPR = property = movable property = Goods as per Sec 2(52) of CGST Act, 2017

IPR = Intangible goods (as these are not capable of delivery)


.

Activity Treatment under GST


(a) Sale / permanent transfer of IPR Supply of Goods
[Sec 7(1)(d) read with Schedule II (Para 1(a))]

(b) Temporary transfer of IPR Supply of Services


Permitting use/enjoyment of IPR [Sec 7(1)(d) read with Schedule II (Para 5(c))]
(whether it is exclusive licensing or non-exclusive licensing)

(d) development, design, programming, customization, adaptation, upgradation, enhancement, implementation


of Information Technology Software;

Author :
1. This para covers following aspects:
DEVELOPMENT, DESIGN, PROGRAMMING
Development Researching, designing, implementing and testing software [Comprehensive covers all
aspects]
Design Process of creating specification of a software artifact, e.g., thinking as to whether
intended to accomplish goals, using a set of primitive software shall be automated or
components and subject to constraints interactive etc.
Programming Writing software in machine languages JAVA, C++ etc.
CUSTOMIZATION, ADAPTATION
Customization Standard software customized to suit needs of client Basic accounting software
customized to take care of client
customized needs
Adaptation Providing techniques to make arrangements on already Facebook (Computer) to Facebook
developed pieces of software, in order to reuse them in new (Mobile) / Facebook (I-Pad/Tablet)
systems.
UPGRADATION, ENHANCEMENT
Upgradation Increasing software capabilities beyond original clients specific iOS6 (Apple I Phone software) upgraded
Enhancement to iOS7

IMPLEMENTATION
Implementation Effectively integrating a software based service or
component into the workflow of an organizational structure
or an individual end-user.

E.g.,
Supply of GST related software to businesses for smooth processing of returns and accounts = Supply of Services

(e) agreeing
to the obligation to refrain from an act, or
to tolerate an act or a situation, or
to do an act; and

Author :
[A] Agreeing to the obligation to REFRAIN FROM AN ACT (i.e., a promise not to do a particular act)
R, an architect, has prepared building plan of a new hotel for Oberoi Activity of agreeing not to supply
Hotels Ltd. He has charged Rs 10,00,000 (GST extra) for his supply similar design to others = Supply of Service
of architect service. Further, R agrees not to provide similar drawings [Sec 7(1)(d) read with Schedule II (Para 5(e))]
to any other company in hospitability industry in India or abroad. On
Thus, receipt of Rs 3,00,000 is also subject to
this promise, Oberoi Hotels Ltd pays Rs 3,00,000 additionally to R.
GST.
Non-competence agreement entered into by a businessman/ Activity of agreeing not to carry
professional with other businessman / professional Competitive business = Supply of Service
[Sec 7(1)(d) read with Schedule II (Para 5(e))]

[B] Agreeing to the obligation to TOLERATE AN ACT / SITUATION


Telecom Company charged late fee from subscribers, instead of Late Fee = Consideration for agreeing to the
disconnecting services. obligation of tolerating an act/situation =
Supply of Service
[Sec 7(1)(d) read with Schedule II (Para 5(e))]
Bank charges amount/charges for not maintaining minimum Bank charges = Consideration for agreeing to
balance in the account the obligation of tolerating an act/situation =
Supply of Service
[Sec 7(1)(d) read with Schedule II (Para 5(e))]
Liquidated damages charged under contract for non-performance / Liquidated damages = Consideration for
delayed performance of obligation under a contract agreeing to the obligation of tolerating an
act/situation = Supply of Service
[Sec 7(1)(d) read with Schedule II (Para 5(e))]
Cancellation charges charged by Hotels, airlines, builders, contractors Cancellation charges = Consideration for
agreeing to the obligation of tolerating an
act/situation = Supply of Service
[Sec 7(1)(d) read with Schedule II (Para 5(e))]
Demurrages charges charged for not clearing goods within prescribed Demurrage charges = Consideration for
period agreeing to the obligation of tolerating an
act/situation = Supply of Service
[Sec 7(1)(d) read with Schedule II (Para 5(e))]
[C] Agreeing to the obligation TO DO AN ACT
AXIS bank sanctioned loan of Rs 100 crores to ABC Ltd. The loan Commitment charges = Consideration for
amount can be withdrawn by ABC time to time as per need. To the agreeing to the obligation to do an act =
extent of amount of money actually borrowed, ABC ltd will be liable to Supply of Service
pay interest thereon. Upon unused limit of sanctioned loan, ABC Ltd
[Sec 7(1)(d) read with Schedule II (Para 5(e))]
will pay commitment charges to the bank.

(f) 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.

Author :
Activity Treatment under GST
(a) Transfer of right to use any goods Supply of Services
[Sec 7(1)(d) read with Schedule II (Para 5(f))]

(b) Transfer of goods without transfer of right to use any Supply of Services
goods (as normally understood presently also)

CRUX: Under the GST regime, such licenses/ leases/ rentals of goods with or without transfer of right to use would be
covered under the supply of SERVICE.

6. COMPOSITE SUPPLY
The following composite supplies shall be treated as a supply of SERVICES, namely:
(a) works contract as defined in clause (119) of section 2; and
(b) 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.

Author :

WORKS CONTRACT [as defined in Sec 2(119)] = Supply of Service

Sec 2(119) :Works Contract


Works Contract means a contract for building, construction, fabrication, completion, erection, installation, fitting out,
improvement, modification, repair, maintenance, renovation, alteration or commissioning of
any immovable property wherein transfer of property in goods (whether as goods or in
some other form) is involved in the execution of such contract;
.

Sec 2(119) defines works contract only in relation to immovable property. Thus, under GST Law, works contract concept
exists only for immovable property. No concept of works contract exists in relation to goods.

CRUX
.

Qualifying works Treatment under GST


contract under
CGST law
Contract relating to immovable Yes Sec 2(119) It shall be treated as supply of service
property - Sec 7 read with Schedule II [para 6(a)]
(e.g. contract for repair of building)
Contract relating to movable property No (a) Contract is for treatment/ processing of another
(e.g. contract for repair of TV) persons goods (like, job-work processing of others
goods, repair or maintenance of other goods)
- It shall be treated as supply of service
- Sec 7 read with Schedule II [para 3]
(b) Other cases
- It shall be treated as per provisions of Sec 8 (Treatment
of composite supply and mixed supply)
.

SUPPLY OF FOOD/DRINK AS PART OF SERVICE = Supply of Service

Supply of food/drinks by way of, or as a part of any service = Composite Supply of goods and services (as goods and services
are naturally bundled in ordinary course of business).
However, Para 6(b) of Schedule II to the CGST Act specifically provides that such composite supply shall be treated as
supply of service. Hence, the entire value of invoice shall be treated as value of service and leviable to GST.
.

What if restaurant is also serving "alcoholic liquor"?


Alcoholic liquor for human consumption is not covered under GST. [Constitution of India -Article 366(12-A)]

Restaurant shall ensure that alcoholic liquor is charged/billed separately. Appropriate VAT/CST shall be payable on such
supply of alcoholic liquor.
.

7. SUPPLY OF GOODS
The following shall be treated as supply of GOODS, namely:
Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred
payment or other valuable consideration.

Author :
1. An AOP/ BOI, whether incorporated or note, in India or outside India is a person under GST- [Sec 2(84)f) of CGST Act]

2. Also, provision by club, association, society or any such body (for a subscription or any other consideration) of the facilities or
benefits to its members have been specifically covered in the definition of business in Sec 2(17)(e) of CGST Act.

Activity Treatment under GST


(a) Supply of goods Supply of Goods
by unincorporated AOP/ BOI [Sec 7(1)(d) read with Schedule II (Para 7)]
to its members

(b) Supply of Services Para 7 is not applicable.


by unincorporated AOP/ BOI However, it shall still be applicable as supply of services
to its members Definition of supply is wide to cover supply of services also.
This activity has been specifically included in the definition of
business.
.

.
SCHEDULE III [See section 7]
ACTIVITIES OR TRANSACTIONS WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF
GOODS NOR A SUPPLY OF SERVICES
1. Services by an employee to the employer in the course of or in relation to his employment.

Author :
Taxability of transactions between EMPLOYER AND EMPLOYEE
.

A) Employee providing services to Employer (in It shall be not treated as supply No GST
courser of employment)
* Employees may be daily wage employee or monthly salaried employee:

Note:
1. Supply of service out of course of employment: Taxable supply GST leviable
e.g., Employee providing coaching to employers son for consideration

2. Employee agreeing not to carry on competitive business subject to receipt of consideration: Taxable
supply GST leviable
Amount received is not in the course of employment.
Agreeing not to do an act is supply of service [Sec 7(1)(d) read with Schedule II (para 5(e)) ].

3. Contract Labour / Casual labour hired from outside, who are employed with labour contractor but working
for client companies:
Services supplied by the workers (referred as contract labour) to contractor (referred as labour contractor) are
in the course of employment Not taxable supply No GST
Services supplied by Contractor (labour contractor) to client --- Taxable supply GST leviable

B) Employer supplying services to Employees Services (and goods) upto an aggregate value of Rs
50,000 per employee in a year shall only be not taxable.
-- Refer Schedule I (Entry 2)
.

2. Services by any court or Tribunal established under any law for the time being in force.

Explanation:For the purposes of paragraph 2, the term court includes District Court, High Court and
Supreme Court.
Author :
1. Fees paid to Court or Tribunal shall not constitute supply and thus, shall not attract GST.

3.

(a) the functions performed by the


Members of Parliament, Members of State
Legislative,
Members of Panchayats, Members of
Municipalities and Members of other local
authorities
(b) the duties performed by any person who holds any in that capacity;
post in pursuance of the provisions of the
Constitution
(c) the duties performed by any person as a Chairperson and who is not deemed as an employee
or a Member or a Director in a body established by
the CG or State Governments or local authority

Author :
1. Officials Functions performed by MP/ MLA: No GST

2. Officials Functions performed by members of Panchayat / Municipality/ Other Local Authority for that: No GST

3. Duties performed by person holding constitutional posts and receipt of consideration for that: No GST
E.g.,
- C&AG of India is a constitutional post. Individual holding post of C&AG of India shall not be liable to pay any GST on remuneration
received by him.
- Attorney General of India (AGI), Attorney General of State (AGS) is also constitutional posts. Thus, remuneration received by
them shall be out of GST.
- Similarly, persons holding posts in UPSC, Staff Selection Commission, Finance Commission, Planning Commission,
Central Vigilance Commission (CVC), National Human Rights Commission (NHRC) etc will also not be liable to pay GST in
respect of remunerations received by them for holding these constitutional posts.

4. Duties performed by Chairman/ Member / Director (who are not employees) in a Body Established by Govt (CG/SG) or Local
Authority** and receipt of consideration for that: No GST
E.g.,
- Finance Commission is a body established by President of India (under Article 280 of Constitution of India). Chairman/Member/
Directors (who are not employees) of these bodies shall be out of GST.
- Telecom Regulatory Authority of India (TRAI) is also a body established by CG. Chairman/Member/ Directors (who are not
employees) of these bodies shall be out of GST.

4. Services of
Funeral (vafre laLdkj @ vaR;sf"B lsok,),
Burial (nQukus dh lsok,),
Crematorium ('ke'kku ?kkV dh lsok,)
Mortuary (eqnkZ ?kj dh lsok,)
o .

including transportation of the DECEASED ('ko @ e`r okgu lsok);

5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.

Author :
1. Supply of Immovable property = Supply of Service
Treatment of supply of immovable property
Immovable property = Not goods as defined in Sec 2(52)
Immovable property = Service as defined in Sec 2 (102)

Thus, Supply of Immovable property = Supply of Service


This may lead to GST liability even on immovable property transactions. But that is not the intention as stamp-
duty has not been subsumed into GST.
To take care of this situation, para 5 provides that sale of land and building shall neither be treated as supply of
goods nor as supply of service and thus, shall remain out of purview of GST.
CRUX
.

Supply of goods and / or Treatment under GST


service
Sale of land Neither goods nor service No GST liability
[Sec 7 + Sch III (Entry 5)
Sale of building
Where total or part of the consideration has been Deemed supply of Service GST liability
received before issuance of completion certificate, [Sec 7 + Sch II (Para 5 (b)) (treated as supply of
where required, by the competent authority or before its service)
first occupation
Where entire consideration has been received after Neither goods nor service No GST liability
issuance of completion certificate, where required, by [Sec 7 + Sch III (Entry 5)]
the competent authority or after its first occupation
.

6. Actionable claims, other than lottery, betting and gambling

Author :
1. Actionable Claim has been defined under Transfer of Property Act, 1882 (refer definition chapter)

2. Actionable Claim = Movable property (as it is not immovable property)


3. Actionable Claim = Goods for purposes of CGST Act, 2017 [Sec 2(52) of CGST Act]

4. Supply of Actionable Claim = Supply of goods for purposes of GST:


.

CGST liability on actionable claim


Supply of actionable claim being lottery, betting or gambling: GST liability will arise
.

Supply of other actionable claims: No GST liability


.
Treatment of COMPOSITE SUPPLY & MIXED SUPPLY
Sec 8 of CGST Act, 2017
.

Supply of goods vs Supply of Services


Though supply of goods as well as services attracts GST, but still there exist difference in treatment of goods and services.
The broad differential treatment is as stated below:
GOODS SERVICES
[Sec 2(52) of CGST Act] [Sec 2(102) of CGST Act]
GST GST
Intra-State Supply = CGST + Intra-State Supply = CGST +
SGST/UTGST SGST/UTGST
Inter-State Supply = IGST Inter-State Supply = IGST
LEVY
Nature of Supply - Place of PoS is determined by applying following 2 PoS is determined by applying following 2
Supply sections: sections:
Sec 10 of IGST Act Sec 12 of IGST Act
Sec 11 of IGST Act Sec 13 of IGST Act
Applicable Rates Different rates for different goods Different rates for different services
Classification codes HSN Code SAC (Service Accounting Code)
[HSN =Harmonized System of Nomenclature]

COLLECTION
Time of supply ToS is determined by applying following PoS is determined by applying following
section: section:
Sec 12 of CGST Act Sec 13 of CGST Act
Supply through third party E- ECO shall not be liable to pay GST on In respect of notified services, ECO
Commerce Operator (ECO) any supply of goods made through it. shall be liable to pay GST.
liability of ECO to pay GST

Bundled Supplies- Treatment under GST


In many cases, the transactions that fall within the scope of GST may consist of more than one element. These elements may be
a mix of goods, or services, or both.
Sometimes these elements, if supplied separately, may have different GST liabilities depending upon
the rates,
applicability of time of supply and place of supply provisions.
To avoid disputes about whether the supplier is making a single supply with one liability, or multiple supplies with different
liabilities, it has to be determined whether the supply is one of goods, or of services, or it is a supply constituted of both goods
and services (composite supplies/ mixed supplies).
Sec 8 of CGST Act provides for treatment of bundled supply :
Bundled Supply Basic Feature Treatment under GST Sec 8
Composite Supply Naturally bundled Shall be treated as supply of principal supply
[Sec 2(30) of CGST Act]
Mixed Supply Unnaturally bundled Shall be treated as supply which attracts highest rate of tax
[Sec 2(74) of CGST Act]
.

* Sec 8 shall not be applicable if GST Act makes other specific provisions for treatment of a bundle into a particular manner (like
Schedule II).
Section 8 : TAX LIABILITY ON COMPOSITE AND MIXED SUPPLIES.
The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:
(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;
and
(b) a MIXED SUPPLY comprising two or more supplies shall be treated as a supply of that particular supply
which attracts the highest rate of tax.

Summary Chart

Relevant Definitions
.

COMPOSITE SUPPLY [Sec 2(30) of CGST Act]


Composite Supply means a supply made by a taxable person to a recipient consisting of two or more taxable
supplies of goods or services or both, 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 a principal supply;
Principal Supply [Sec 2(90) of CGST Act]
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;

MIXED SUPPLY [Sec 2(74) of CGST Act]


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
drinks 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* (the definition does not suggest this). It shall not be a mixed supply if these
items are supplied separately;

Author :
COMPOSITE SUPPLY Sec 2(30)
Combination of supplies Nature of combination Categorization of supplies
Goods + Goods Naturally Bundled One supply if PRINCIPAL SUPPLY [as
Services + Services (*these are supplied together in defined in Sec 2(90)]
Goods + Services ordinary course of Business) Other supply is ancillary supply
ILLUSTRATION
Supply of laptop with Naturally bundled Supply of laptop is PRINCIPAL SUPPLY [as
carry-bag (laptop branded) defined in Sec 2(90)]
Other supply (i.e., supply of carry bag) is
ancillary supply
Supply of healthcare Naturally bundled Supply of healthcare services is
service alongwith PRINCIPAL SUPPLY [as defined in Sec 2(90)]
consumable medicaments Other supply (i.e., supply of consumable
medicaments) is ancillary supply

MIXED SUPPLY Sec 2(74)


Combination of supplies Nature of combination Disqualification
Goods + Goods Bundled price for a single price It shall not be a composite supply [as
Services + Services defined in Sec 2(30)]
Goods + Services
ILLUSTRATION
Supply of hamper (different Bundled price for a single price Supply is not composite supply (as there is
goods packaged together) no natural bundling and not any principal
consisting of wheat flour, supply)
canned foods, sweets, [The components can be made available
branded chocolates, separately and are not interdependent of each
crackers, cakes, non- other. The components are capable of being
alcoholic drinks and fruit separate supplies in themselves.]
juices
Supply of laptop and Bundled price for a single price Supply is not composite supply (as there is
printer no natural bundling and not any principal
supply)
Levy & Collection of CGST, SGST / UTGST, IGST
Different Charging Sections, But covering same aspects in similar manner
.

Levy of GST
Supply CGST SGST UTGST IGST
Intra-State Supply CGST SGST (supply within State) UTGST (supply within UT) -----
Sec 9 of CGST Act Corresponding section may Sec 7 of UTGST Act
vary in different SGST Act
Inter-State Supply --- ----- ---- IGST
(Including imports) Sec 5 o IGST Act
.

Comparative Charging Sections


CGST SGST UTGST IGST
LEVY
Levy on Intra-state supply Intra-state supply Intra-state supply Inter-state supply
(excluding supply of (excluding supply of A/L for (excluding supply of (excluding supply of
A/L for H/C) H/C) A/L for H/C) A/L for H/C)
Sec 9 (1) of CGST Act Corresponding section may Sec 7(1) of UTGST Act Sec 5 (1) o IGST Act
vary in different SGST Act
Rate Max 20% Max 20% Max 20% Max 40%
Sec 9 (1) of CGST Act Corresponding section may Sec 7(1) of UTGST Act Sec 5 (1) o IGST Act
vary in different SGST Act
Value Sec 15 of CGST Act Sec 15 of CGST Act Sec 15 of CGST Act Sec 15 of CGST Act
Sec 9 (1) of CGST Act Corresponding section may Sec 7(1) of UTGST Act Sec 5 (1) o IGST Act
vary in different SGST Act
GST on GST will be levied GST will be levied from GST will be levied GST will be levied
specified petro from notified date notified date from notified date from notified date
products Sec 9 (2) of CGST Act Corresponding section may Sec 7(2) of UTGST Act Sec 5 (2) o IGST Act
vary in different SGST Act
COLLECTION
FORWARD CHARGE (Supplier, being taxable person, liable to pay)
Generally Supplier (taxable Supplier (taxable person) Supplier (taxable Supplier (taxable
person) liable to pay liable to pay person) liable to pay person) liable to pay
Sec 9 (1) of CGST Act Corresponding section may Sec 7(1) of UTGST Act Sec 5 (3) o IGST Act
vary in different SGST Act
REVERSE CHARGE (Recipient liable to pay GST)
RCM on Recipient liable to Recipient liable to pay Recipient liable to pay Recipient liable to
notified supply pay Corresponding section may Sec 7(3) of UTGST Act pay
of goods and/or Sec 9 (3) of CGST Act vary in different SGST Act Sec 5 (3) o IGST Act
services
RCM in case of Registered Recipient Registered Recipient liable Registered Recipient Registered Recipient
supply of liable to pay to pay liable to pay liable to pay
goods and/or Sec 9 (4) of CGST Act Corresponding section may Sec 7(4) of UTGST Act Sec 5 (4) o IGST Act
services by vary in different SGST Act
Unregistered
supplier to
registered
recipient
E-COMMERCE OPERATOR-ECO (ECO= Digital platform owner liable to pay)
Liability of pay ECO liable to pay ECO liable to pay ECO liable to pay ECO liable to pay
GST on notified [In certain cases, his [In certain cases, his [In certain cases, his [In certain cases, his
services* put representative or representative or appointed representative or appointed representative or
on ECO appointed person in the person in the taxable territory] person in the taxable appointed person in the
taxable territory] Corresponding section may territory] taxable territory]
Sec 9 (5) of CGST Act vary in different SGST Act Sec 7(5) of UTGST Act Sec 5 (5) o IGST Act
Bare Act language of Sec 9 of CGST Act
(* just for Yours reading)
Section 9 : LEVY AND COLLECTION.
Intra-State Supply: CGST = [Notified Rate * Value], Collection from taxable manner in prescribed manner
(1) Subject to the provisions of sub-section (2),
there shall be LEVIED a tax called the Central Goods And Services Tax
on all intra-State supplies of goods or services or both, except on the supply of alcoholic liquor for
human consumption,
on the value determined under section 15 and
at such rates, not exceeding 20%, as may be notified by the Government on the recommendations of the
Council
.

and COLLECTED in such manner as may be prescribed


.

and shall be paid by the taxable person*.

Author :
1. Sec 9 = CHARGING SECTION of CGST
LEVY OF IGST
Taxable (i) Supply [as defined in Sec 7 of CGST, 2017]
Event [ISS is defined in Sec 7 of IGST Act, 2017]
(ii) Supply shall be in nature of Inter-State Supply

Taxable (i) Goods [as defined in Sec 2(52) of CGST, 2017]


item (ii) Services [as defined in Sec 2(102) of CGST, 2017]
.

Excluded Items
Constitutional Exclusions Alcoholic Liquor for Human Consumption [Article 366 (12-A) of
Constitution of India]
Statutory Exclusion Petroleum crude, high speed diesel, motor spirit (commonly known
as petrol), natural gas and aviation turbine fuel [refer Sec 9(2) of
CGST Act (below)]
.

Rate Notified Rate (Max. Rate 20%)


Value Value [Determined as per Sec 15 of CGST, 2017]
In general, Transaction Value

COLLECTION OF IGST
Person Taxable Person [as defined in Sec 2(107) of CGST, 2017]
Manner Prescribed Manner [refer PAYMENT OF TAX Rules]

2. PERSON LIABLE TO PAY CGST= TAXABLE PERSON


Taxable person [Sec 2(107)] = Person who is registered or liable to be registered u/sec 22 or Sec 24
Sec 22 Persons liable for registration
(it makes every supplier liable for registration if his aggregate turnover in a FY exceeds threshold
exemption limit of 20 Lakhs / 10 Lakhs)
Sec 24 Compulsory registration in certain cases
(it provides for compulsory registration of certain suppliers notwithstanding that their aggregate turnover
is below the exempted threshold limit provided in Sec 22 (like, person supplying goods through E-
commerce operator)
.

CGST on petrol, diesel, etc. from notified date


(2) The central tax on the supply of petroleum crude, high speed diesel, motor spirit (commonly known as
petrol), natural gas and aviation turbine fuel shall be levied with effect from such date as may be notified
by the Government on the recommendations of the Council.
Author : Levy on certain products [Petroleum Products (Crude, HSD and Petrol), Natural Gas and ATF] will be made effective
from later date.
Petroleum crude, high speed diesel, motor spirit (commonly known as petrol), natural gas and aviation turbine fuel
Future These will be made subject to GST in future.
Present Manufacturer Central Excise Duty + VAT (intra-state sales)
Taxation VAT (intra-state sales)
Trader

Reverse Charge Mechanism (RCM)


REVERSE CHARGE: COLLECTION from Recipient:
Sec 9(3) RCM: Notified supplies (goods / services / both): Recipient shall be liable to pay CGST
Sec 9(4) Automatic RCM: (Unregistered supplier supplying to Registered recipient): Recipient liable to pay CGST
.

(3) The Government may, on the recommendations of the Council, by notification, specify categories of supply
of goods or services or both,
the tax on which shall be paid on REVERSE CHARGE basis by the recipient of such goods or
services or both
and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying the
tax in relation to the supply of such goods or services or both.
.

(4) The central tax in respect of the supply of taxable goods or services or both
by a supplier, who is not registered,
to a registered person*
shall be paid by such person on REVERSE CHARGE basis as the recipient
and all the provisions of this Act shall apply to such recipient as if he is the person liable for paying
the tax in relation to the supply of such goods or services or both.
.

Notified Services* through E-commerce: ECO (E-commerce operator) to pay CGST


(5) The Government may, on the recommendations of the Council, by notification, specify categories of
SERVICES the tax on intra-State supplies of which shall be paid by the Electronic Commerce
Operator* if such services are supplied through it,
and all the provisions of this Act shall apply to such electronic commerce operator as if he is the supplier
liable for paying the tax in relation to the supply of such services:
.

Provided that where an electronic commerce operator does not have a physical presence in the taxable
territory*, any person representing such electronic commerce operator for any purpose in the taxable
territory shall be liable to pay tax:
Provided further that where an electronic commerce operator does not have a physical presence in the
taxable territory and also he does not have a representative in the said territory, such electronic commerce
operator shall appoint a person in the taxable territory for the purpose of paying tax and such person shall
be liable to pay tax.
Author :
E-Commerce [Sec 2(44)] = Supply of goods and/or services, including digital products, over digital or electronic network
.

ECO [Sec 2(45) ] = ANY PERSON who owns, operates or manages digital or electronic facility or platform for e-commerce
..

ECO though which goods are ECO shall not be liable to pay GST.
supplied (like, Flipkart, Amazon) (However, TCS provisions applicable)
ECO though which services are In respect of notified services, ECO shall be liable to pay GST.
supplied (like, OLA cabs) In respect of other services, ECO shall not be liable to pay GST. (However,
TCS provisions applicable)
.

.
MOCK TEST QUESTIONS
[Source: These have been taken from FAQs and MCQs on GST issued by ICAI (June, 2017)]

Meaning and scope of supply (Section 7)


Q.1 What is the scope of the term supply as defined in CGST Act, 2017?
Ans. As per Section 7(1), Supply includes:
1. all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or
disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
2. import of services for a consideration whether or not in the course or furtherance of business;
3. the activities specified in Schedule I, made or agreed to be made without a consideration; and
4. the activities to be treated as supply of goods or supply of services as referred to in Schedule II.

Q.2 Is it required to distinguish whether a particular supply involves supply of goods or services or both?
Ans. Yes.
The CGST Act, 2017 specifies separate provisions for ascertaining time of supply of goods and time of supply
of services respectively;
similarly separate provisions have been specified for ascertaining place of supply of goods and place of supply
of services.
Further, the rate of tax applicable to supply of goods and supply of services may be different.
Accordingly, it is important to distinguish whether a particular transaction involves supply of goods or supply of
services.

Q.3 How to distinguish whether a particular supply involves supply of goods or services or both?
Ans. The Schedule II appended to CGST Act, 2017 enlists the activities which are to be treated as supply of goods or
supply of services. One may refer Schedule II with reference to Section 7 to classify whether the transaction involves
supply of goods or supply of services.

Q.4 Whether supply of goods or services without consideration is liable to tax?


Ans. The activities enumerated in Schedule I will qualify as supply even if made without consideration. Accordingly, such
supplies in the absence of consideration are liable to tax.
Following are the activities which will qualify as supply in the absence of consideration and eventually would be liable
to tax:
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 specified in section
25, when made in the course or furtherance of business:
Provided that 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 a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or
(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 or from any of his other establishments outside India,
in the course or furtherance of business.

Q.5 Whether transfer of goods to another branch located outside the State is taxable?
Ans. In terms of Section 25(4) of the CGST Act, 2017, every person is required to obtain separate registration for every
branch located in different state or union territory and shall be treated as distinct persons. Accordingly, the supply of
goods (stock transfers) to a branch located outside the State would qualify as supply liable to tax in terms of Entry 2
to Schedule I of the CGST Act, 2017.
Further, it is important to note that, supply of goods to a branch / unit located within the same State having
separate registration would also be liable to tax since both such units (supplying unit and recipient unit) would
qualify as distinct person in terms of Section 25(4).
Q.6 Whether gifts given by employer to employee will also qualify as supply?
Ans. In terms of Explanation appended to Section 15 it is clarified that employer and employee will be deemed to be
related persons. Accordingly, in terms of proviso to entry 2 of Schedule I, gift by an employer to employee will be a
supply and will be liable to tax. However, any gifts for a value not exceeding fifty thousand rupees in a financial year
will not qualify as supply and as such will not be liable to tax.

Q.7 Whether supply of goods by principal to his agent or by agent to his principal is taxable in the absence of
consideration?
Ans. In terms of Section 7 read with Schedule I, following would qualify as supply:
1. Supply of goods by a principal to his agent where the agent undertakes to supply such goods on behalf of the
principal; or
2. Supply of goods by an agent to his principal where the agent undertakes to receive such goods on behalf of the
principal.

Q.8 Whether import of services will be liable to tax under GST regime?
Ans. The following import of service will qualify as supply under CGST Act, 2017:
1. import of service for a consideration whether or not in the course or furtherance of business is a supply;
2. import of service (without consideration) by a taxable person from a related person or from any of his other
establishments outside India, in the course or furtherance of business.

Tax liability on composite and mixed supplies (Section 8)


Q.9 What is composite supply?
Ans. In terms of Section 2(30) of CGST Act, 2017 composite supply means supply consisting of two or more taxable
supplies of goods or services or both, or any combination thereof, which are naturally bundled and supplied in
conjuction with each other in the ordinary course of business, one of which is a principal supply.
For example, 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 a composite supply.

Q.10 How would the tax liability be determined in case of Composite supply?
Ans. In terms of Section 8 of the CGST Act, 2017 tax liability in case of composite supply should be determined with
reference to the principal supply forming part of such composite supply.

Q.11 What is Mixed Supply?


Ans. In terms of Section 2(74), mixed supply means two or more individual supplies of goods or services or any
combination thereof, made in conjuction with each other by a taxable person for a single price where such supply
does not constitute a composite supply.
For example, 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.

Q.12 How would the tax liability be determined in case of Mixed supply ?
Ans. In terms of Section 8 of the CGST Act, 2017, the tax liability in case of a mixed supply shall be ascertained with
reference to that particular supply which attracts highest rate of tax.

Levy and Collection (Section 9)


Q.13 What are the taxes that are levied on an intra-State supply?
Ans. In terms of Section 9 of the CGST Act, 2017 read with charging section under the concerned SGST Act, 2017,
intra-State supplies are liable to CGST & SGST.
Similarly, In terms of Section 9 of the CGST Act, 2017 read with Section 7 of UTGST Act, 2017, intra-State
supplies effected by a taxable person located in Union Territory (within the Union Territory) will be liable to CGST &
UTGST.
Q.14 How to ascertain the taxable value for levy of CGST & SGST/UTGST?
Ans. Section 15 of the CGST Act, 2017 specifies that the value of supply of goods or services or both shall be the
transaction value, which is the price actually paid or payable for the said supply of goods or services or both where
the supplier and the recipient of the supply are not related and the price is the sole consideration for the supply.
In cases where the supplier and recipient are related persons or where the price is not the sole consideration, the
provisions and method for ascertaining the value of taxable supply as prescribed in valuation rules shall apply.

Q.15 What is the rate of tax that is applicable on intra-State supplies?


Ans. Intra-state supplies shall be subject to following rates of GST:
1) CGST 20% Maximum (different goods, different notified rates)
2) SGST 20% Maximum (different goods, different notified rates)
3) UTGST 20% Maximum (different goods, different notified rates)

Q.16 Who is responsible to pay taxes?


Ans. Generally, the person effecting taxable supplies is liable to pay taxes.
However, following are certain exceptions:
(a) Reverse charge (applicable to supply of goods and/or services): under following 2 situations, reciepint shall be
liable to pay GST under reverse charge:
1) Supply of notified goods and/or services; and
2) Supply of any goods and/or services by unregistered supplier to register recipient;
(b) Third party liability (applicable to services supplied through E-Commerce Operator): In respect of notified
services, when supplied through E-commerce operator, GST shall be payable by electronic commerce operator.

Q.17 What does the payment of tax under reverse charge mean?
Ans. In terms of Section 2(98), the terms reverse charge is defined to mean liability to pay tax by the recipient of
supply* of goods or services or both instead of the supplier of such goods or services or both.

Note: Liability of E-Commerce operator to pay GST u/Sec 9(5) of CGST Act / Sec 5(5) of IGST Act is not reverse
charge liability as ECO is not recipients of supply.

Q.18 What are the different types of supplies which are liable to tax under reverse charge mechanism?
Ans. As per Section 9 of the CGST Act, 2017 there are two types of supplies which are liable to tax under reverse charge
mechanism which are:-.
1. Specified categories of supply of goods or services or both as notified by government on recommendation of the
council
2. Supply of taxable goods or services or both by an unregistered supplier to a registered person

Note: Parallel provisions are there under SGST Act / UTGST Act / IGST Act.

Q.19 Whether the tax on intra-State supplies is applicable to every supplies?


Ans. No.
Section 9(1) which is the charging provision for levy and collection of tax on intra- State supplies excludes supply of
alcoholic liquor for human consumption.
Further, in terms of Section 9(2), tax on supply of petroleum crude, high speed diesel, motor spirit, natural gas and
aviation turbine fuel shall be levied with effect from such date as may be notified by the Government on the
recommendations of the Council.
Accordingly, presently, supply of alcoholic liquor for human consumption and specified petro products shall not be
liable to tax under GST.

Q.20 Whether CGST & SGST/UTGST is applicable on import of goods or service or both?
Ans. In terms of Section 7 of the IGST Act, 2017, import of goods or services or both is shall be treated to be a supply in
the course of inter-State trade or commerce. Accordingly, tax under the provisions of IGST Act, 2017 (IGST) shall
apply on import of goods or services or both.
Composition levy (Section 10) [These are for additional knowledge purposes]
Q.21 Can every taxable person opt to pay tax under composition scheme?
Ans. No. The registered taxable person whose aggregate turnover in the preceding financial year does not exceed
fifty lakhs rupees may opt to pay tax subject to satisfaction of certain other conditions like:
1. He is not making inter-state supplies;
2. He is not supplying through ECO;

Q.22 A taxable person having same PAN can opt to pay tax under composition scheme by seeking separate
registration for branches?
Ans. No. A registered person shall not be eligible to opt for the composition scheme unless all such registered persons
(branches having separate registration under a single PAN) opt to pay tax under composition scheme.

Q.23 Whether a taxable person under composition Scheme eligible to claim input tax credit?
Ans. No, a taxable person under composition scheme is not eligible to claim input tax credit.

Q.24 Can a customer who buys from a taxable person who is under composition scheme claim composition
tax as input credit?
Ans. No. The recipient is not eligible to take input tax credit of composition tax paid. Moreover, a taxable person
paying taxes under composition scheme is not entitled to collect taxes from the recipient in terms of Section
10(4) of the CGST Act, 2017. Accordingly, there does not arise a question for the recipient to claim input tax credit.

Q.25 A taxable person can still pay tax under composition scheme even after the turnover in the current financial
year exceeds fifty lakh rupees?
Ans. In terms of Section 10(3), the option availed for paying tax under composition scheme shall lapse with effect from the
day on which his aggregate turnover during a financial year exceeds fifty lakh rupees.
MCQ'S
Meaning and scope of supply (Section 7)
Q.1 What are different types of supplies covered Q.2 What are the factors differentiating Composite
under the scope of Supply? Supply & Mixed Supply?
(a) Supplies made with consideration (a) Nature of bundling i.e. artificial or natural
(b) Supplies made without consideration (b) Existence of Principal Supply
(c) Both of the above (c) Both of the above
(d) None of the above (d) None of the above

Ans. (c) Both of the above Ans. (c) Both of the above

Levy & collection (Section 9)


Q.3 What are the taxes levied on an intra-State Q.4 What is the maximum rate prescribed under
Supply? CGST?
(a) CGST (a) 12%
(b) SGST * (b) 28%
(c) CGST and SGST (c) 20%
(d) IGST (d) 18%

Ans. (c) CGST and SGST Ans. (c) 20%


Q.5 Who will notify the rate of tax to be levied under Q.6 What are the supplies on which reverse charge
CGST? mechanism would apply?
(a) Central Government suo moto (a) Notified categories of goods or services or
(b) State Government suo moto both
(c) GST Council suo moto (b) Inward supply of goods or services or both
(d) CG as per the recommendations of GST from an unregistered dealer
Council (c) Both of the above
(d) None of the above

Ans. (d) CG as per the recommendations of GST Council Ans. (c) Both of the above

Q.7 Which of the following taxes will be levied on Q.8 Which of the following taxes would be levied
Imports? on an intra-State supply of goods or services
(a) CGST or both
(b) SGST (a) CGST
(c) IGST (b) Union territory tax
(d) Exempt (c) Both of the above
(d) IGST

Ans. (c) IGST Ans. (c) Both of the above

Q.9 Is there any maximum rate prescribed under


UTGST?
(a) 14%
(b) 28%
(c) 20%
(d) 30%

Ans. (c) 20%


Composition levy (Sections 10)
Q.10 Which of the following persons can opt for Q.11 What is the threshold limit of turnover in the
composition scheme? preceding financial year for opting to pay tax
(a) Person whose aggregate value of supply under composition scheme?
exceeds 50 lakhs in PY; (a) Rs.20 lacs
(b) Person making any inter-State supplies of (b) Rs.10 lacs
goods; (c) Rs.50 lacs
(c) Person effecting supply of goods through (d) None of the above
an e-commerce operator
(d) None of the above

Ans. (d) None of the above Ans. (c) Rs.50 lacs

Q.12 Can a registered person opt for composition Q.13 Can Composition scheme be availed if the
scheme only for one out of his 3 business registered person effects interstate supplies?
verticals having same Permanent Account (a) Yes
Number? (b) No
(a) Yes (c) Yes, subject to prior approval of the Central
(b) No Government
(c) Yes, subject to prior approval of the Central (d) Yes, subject to prior approval of the concerned
Government State Government
(d) Yes, subject to prior approval of the
concerned State Government

Ans. (b) No Ans. (b) No

Q.16 Can a registered person under Composition Q.17 Can a registered person opting for
Scheme claim input tax credit? composition scheme collect tax on his outward
(a) Yes supplies?
(b) No (a) Yes
(c) Input tax credit on inward supply of goods (b) No
only can be claimed (c) Yes, if the amount of tax is prominently
(d) Input tax credit on inward supply of services indicated in the invoice issued by him
only can be claimed (d) Yes, only on such goods as may be notified by
the Central Government
Ans. (b) No Ans. (b) No