1. Supply of Goods or Services or Both for a Consideration in the Course or Furtherance Of Business [Section 7(1)(a)]
The term ‘supply’ is very wide and it includes all forms of supply of goods, or services or both. Illustrative list specifies forms of supply 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.
Since none of the aforesaid eight terms namely Sale, Transfer etc. have been defined in the Central Goods and Services Tax Act, 2017 or Integrated Goods and Services Tax Act, 2017; reliance has been placed on leading online dictionaries for the purpose of ascertaining the meanings of the said terms in the following table:
|Sale||The act of selling; specifically: the transfer of ownership of and title to property from one person to another for a price|
The exchange of a commodity for money; the action of selling something
The exchange of goods or services for an amount of money or its equivalent; the act of selling
|Transfer||To move someone or something from one place, vehicle, person, or group to another|
To make something the legal property of another person
|Barter||To exchange goods for other things rather than for money|
To trade by exchanging one commodity for another: to trade goods or services in exchange for other goods or services
Exchange (goods or services) for other goods or services without using money
|Exchange||The act of giving something to someone and them giving you something else|
To give up, part with, or transfer (one thing) for an equivalent
|License||To give someone official permission to do or have something|
A permit from an authority to own or use something, do a particular thing, or cariy on a trade
A contract allowing someone to use a proprietary product or service
|Rental||An arrangement to rent something, or the amount of money that you pay to rent something|
A sum paid to someone for the use of (something, typically property, land, or a car)
|Lease||A contract by which one conveys real estate, equipment, or facilities for a specified term and for a specified rent|
A contract granting use or occupation of property during a specified period in exchange for a specified rent or other form of payment.
|Disposal||The act of getting rid of something, especially by throwing it away|
Final placement or riddance of wastes, excess, scrap, etc., under proper process and authority with (unlike in storage) no intention to retrieve. Disposal may be accomplished by abandonment, destruction, internment, incineration, donation, sale, etc.
(2) Import of Service for a Consideration whether or not in Course or Furtherance of Business [Section 7(1)(b)]
The import of services shall also be treated as supply if such import is for a consideration, although such import of service may be in the course or furtherance of business or not.
(It may be noted that in the above case, only those import of services shall be treated as supply which are for a consideration even though such import of services may be in the course or furtherance of business or not. )
Example 1 :
Mr.Dust is a supplier of goods located in New Delhi. In July 2018, he has imported ‘Business Consultancy Services’ from China for a stipulated consideration of $50,000. The importation of service in the given case shall fall within the ambit of term ‘supply’ as it is for a consideration and in the course or furtherance of business and shall be liable to IGST.
Example 2 :
Mr. Dirty is a supplier of goods located in New Delhi. In July 2018, he has imported ‘Architecture Services’ from a relative consultant located in China, without any consideration (monetary or non-monetary) for construction of his personal house. Since there is no consideration and it is for personal use, importation of service in the given case shall not fall within the ambit of term ‘supply’ and not liable to IGST.
However, in the above example if the import of Architecture Service is for a consideration, it shall fall within the scope of term ‘supply’ although services have been imported for personal purposes.
(3) Activities specified in Schedule I, made or agreed to be made without a Consideration to be treated as Supply under GST [Section 7(1)(c)]
As per Schedule I of the CGST Act, the following activities are to be treated as supply even if made without consideration:
(A) Permanent transfer or disposal of business assets where input tax credit has been availed on such assets:
Any kind of disposal or transfer of business assets made by an entity on permanent basis even though without consideration shall be treated as supply. This clause is wide enough to cover all transfer of business assets for nil consideration whether such transfer is from
— holding to subsidiary company,
— business use to personal use or for the use of any other person.
However, it is important to note that this provision would apply if input tax credit
has been availed on such assets.
- The above provision shall not apply if the asset is not permanently transferred.
- Where a business asset, on which ITC is availed, is completely destroyed by fire; it shall also be treated as supply and liable to GST.
(B) Supply between Related persons or Distinct Persons
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.
However, gifts not exceeding Rs. 50,000 in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.
(C) Supply of goods—
(i) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or
(ii by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.
1. “Principal” means a person on whose behalf an agent carries on the business of supply or receipt of goods or services or both.
2. “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.
(D) 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.
As a general principle, import of services without consideration will not be considered as supply under GST in terms of section 7(1)(b).
However, 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, even without consideration will be treated as supply of Goods or Services or Both.