UNIT 2 SUPPLY UNDER GST.pptx SUPPLY UNDER GST

SUPPLY UNDER GST

1. Person-Sec 2(84)-person includes— An individual; A Hindu Undivided Family; A company; A firm A Limited Liability Partnership; An association of persons or a body of individuals, whether incorporated or not, in India or outside India; 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; Anybody corporate incorporated by or under the laws of a country outside India; A co-operative society registered under any law relating to cooperative societies; A local authority; Central Government or a State Government; Society as defined under the Societies Registration Act, 1860; Trust; Relevant Definitions and Scope of Supply

2. Goods-Sec 2(52): 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; Address of delivery-Sec 2(2): ―address of delivery‖ means the address of the recipient of goods or services or both indicated on the tax invoice issued by a registered person for delivery of such goods or services or both. It is understood that the address of delivery would be a crucial pointer towards the location of goods at the time of delivery to the recipient. Input-Sec 2(59): Input means any goods other than capital goods used or intended to be used by a supplier in the course or furtherance of business; 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.

3. Aggregate Turnover- Sec 2(6): aggregate turnover‖ means the aggregate value of all taxable supplies (excluding the value of inward supplies on which tax is payable by a person on reverse charge basis), exempt supplies, exports of goods or services or both and inter-State supplies of persons having the same Permanent Account Number, to be computed on all India basis but excludes central tax, State tax, Union territory tax, integrated tax and cess. Outward supply-Sec 2(83): in relation to a taxable person, outward supply means supply of goods or services or both, whether by sale, transfer, barter, exchange, license, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business. Consideration: in relation to the supply of goods or services or both 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 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,

4. 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 [Section 2(105)]. Recipient: of supply of goods and/or services 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,

5. Introduction to supply A taxable event is any transaction or occurrence that results in a tax consequence. Before levying any tax, taxable event needs to be ascertained. It is the foundation stone of any taxation system; it determines the point at which tax would be levied. Under the earlier indirect tax regime, the framework of taxable event in various statutes was prone to catena of interpretations resulting in litigation since decades. The controversies largely related to issues like whether a particular process amounted to manufacture or not, whether the sale was pre-determined sale, whether a particular transaction was a sale of goods or rendering of services etc.

6. The GST laws resolve these issues by laying down one comprehensive taxable event i.e. “Supply” - Supply of goods or services or both. Various taxable events namely manufacture, sale, rendering of service, purchase, entry into a territory of State etc. that existed prior to introduction of GST have been done away with in favour of just one event i.e. Supply.

7. The GST Law, by levying tax on the ‘supply’ of goods and/or services, departs from the historically understood concepts of ‘taxable event’ under the State VAT Laws, Excise Laws and Service Tax Law i.e. sale, manufacture and provision of services respectively. Scope of Supply: (Sec 7) Generic meaning of supply includes all forms of supply of goods and /or services and includes agreeing to supply when they are for a consideration and in the course or furtherance of business (as defined under Section 7 of the Act). It specifically includes: Sale Transfer Barter Exchange License Rental Lease Disposal.

8. The meaning and scope of supply in terms of section 7 can be understood in terms of following parameters: 1. Supply should be of goods or services. 2. Supply should be made for a consideration. 3. Supply should be made in the course or furtherance of business.

9. 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.

10. Schedule I 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. 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.

11. Schedule II activities to be treated as supply of goods or supply of services: Transfer- any transfer of the title in goods is a supply of goods; any transfer of right in goods or of undivided share in goods without the transfer of title thereof, is a supply of services; any transfer of 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. 2. Land and Building- any lease, tenancy, easement, license to occupy land is a supply of services; 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.

12. 3. Treatment or process: Any treatment or process which is applied to another person's goods is a supply of services. 4. Transfer of business assets 5. Supply of services- Renting of immovable property; 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; Temporary transfer or permitting the use or enjoyment of any intellectual property right; Development, design, programming, customization, adaptation, up gradation, enhancement, implementation of information technology software; Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act; and 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.

13. Schedule III 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. 2. Services by any court or Tribunal established under any law for the time being in force. 3. (a) the functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities; (b) the duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity; or (c) the duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central Government or a State Government or local authority and who is not deemed as an employee before the commencement of this clause.

14. 4. Services of funeral, burial, crematorium or mortuary including transportation of the deceased. 5. Actionable claims, other than lottery, betting and gambling.

15. Characteristics of supply: In the GST system, a taxable event is called a Supply. For an event to be considered as a supply by the government, it should have the following characteristics 1 . Supply should be taxable: Supply of goods or services can either be taxable or tax-exempt. Taxable supplies are goods and services that attract GST. Tax-exempt supplies include supply of goods or services that belong to a specific category mentioned in the GST Act. 2. Supply should be made by a taxable person: A taxable person is defined as a person who is registered under the GST, or is a liable to register , or a person who has voluntarily registered. Supply between two non-taxable people will not be considered as supply under GST. If a person supplies goods or services in different states or has multiple business verticals, then they are required to register separately for each state or vertical. Each of these registered entities will be considered as a taxable person.

16. 3 . Supply should be made within a taxable territory: Taxable territory means any place in India 4. Supply should be made in exchange for consideration: Consideration can be defined as a barter of goods or services, or payment made for a supply in money, or in kind. A prepayment or deposit toward a supply is also as accepted as a consideration by the government . 5. Supply should be made in the course of business or in the interest of growing a business: GST is applicable only on business transactions. Hence , for a transaction to be a considered as supply under GST, it has to be made for business purposes. If supplies are made for personal purposes , it will not be considered as a supply under GST. Taxable supply refers to a supply of goods and/or services which is chargeable to tax under the GST Act, Supplies which are exempt or subject to NIL rate of tax will not be treated as taxable supplies.

17. Types of Supply I. Taxable supply- Taxable supply refers to a supply of goods and/or services which is chargeable to tax under the GST Act. Supplies which are exempt or subject to NIL rate of tax will not be treated as taxable supplies. However, exempt supplies shall be included for the purpose of computing the aggregate turnover to determine the threshold / composition Limits. II. Exempt supply- Exempt supply means supply of any goods and/or services which are not taxable under the GST Act and includes such supply of goods/or services which are specified in the Schedule to the Act or which may be exempt from payment of tax under Sec. 10 of the GST Law. A supply may be exempt generally either absolutely or subject to such conditions as may be specified in a notification issued by the appropriate government. III. Zero-rated supply- Zero rated supply is a supply of any goods and/or services on which no tax is payable but credit of the input tax related to that supply is admissible. Exports shall be treated as zero-rated supply. Zero rated supplies will be treated as taxable supply .

18. IV. Continuous supply of goods/services- Continuous supply of goods means a supply of goods which is provided or agreed to be provided , continuously or on recurrent basis , under a contract, for which the supplier invoices the recipient on a regular or periodic basis . Continuous supply of services means a supply of service notified by the Central or a State government, provided or agreed to be provided, continuously or on recurrent basis under a contract , for a period of exceeding three months, with periodic payment obligations. V. Inward/Outward supply - An inward supply [Section 2(61)] refers to receipt of goods and/or services whether by purchase, acquisition or any other means by a person registered under the Act . An outward supply [Section 2(73)] refers to supply of goods and/or services, Whether by sale, transfer, barter, exchange, license , rental, lease or disposal made or agreed to be made by such person in the course or furtherance of business except in case of such supplies where the tax is payable on reverse charge basis.

19. VI. Inter/Intra State supply- The location of the supplier and the place of supply determines whether a supply is treated as an Intra State supply or an Inter State supply. Determination of the nature of supply is essential to ascertain which type of GST is payable ( i.e. CGST/SGST or IGST ). Intra State supply of goods and/or services means supply of goods and/or services where the location of the supplier and place of supply are in the same State. Inter State supply of goods and/or services means supply of goods and/or services where the location of the supplier and place of supply are in different States . VII. Deemed supply - specific transactions made without consideration as deemed supply for GST purposes. They include permanent transfer/ disposal of business assets temporary application of business assets to a private or non-business use services put to a private or non-business use assets retained after deregistration and supply of goods / or services by a taxable person to another taxable or non-taxable person in the course or furtherance of business.

20. VIII. Composite supply- It involves supply of more than one goods and /or services which are naturally bundled together: These are referred to as composite supply of goods and/or services. It shall be deemed to be a supply of those goods or services, which constitutes the principal supply therein. Example: Where air conditioner supplied along with the remotes, GST rate applicable for remote is 5% and for AC is 28%, here entire supply will be taxed at 28%. In composite supply GST rate applicable for principal goods will also applied for supplemented goods. IX. Mixed supply- It involves supply of more than one goods and/or services which are not naturally bundled together, these referred to as mixed supplies of goods and/or services. Which are liable to tax at the highest rate of GST Example: A supply of a package consisting of canned foods, sweets, chocolates, cake, 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. This implies that the supply will be taxed wholly as supply of those goods which are liable to the highest rate of GST.

21. Reverse Charge under GST Normally, GST is to be collected by the person who is selling good and services. But in some cases GST is to be collected by the purchaser of goods/service and not by seller. This is called Reverse Charge Mechanism, RCM in short . The person who is required to pay tax under reverse charge has to compulsorily register under GST irrespective of the aggregate limit.

22. Reverse Charge on Goods under Section 9 (3) Sr No Description of Goods Supplier of Goods Recipient of Supply 1 Cashew Nuts, not shelled or peeled Agriculturist Any Registered Person 2 Bidi Wrapper Leaves ( Tendu ) Agriculturist Any Registered Person 3 Tobacco Leaves Agriculturist Any Registered Person 4 Silk Yarn any person who manufactures Silk Yarn from Silk Cocoons for Supply of Silk Yarn Any Registered Person 5 Supply of Lottery State Govt, Local Authority Lottery Distributer or Selling Agent

23. GST Exemptions GST exemptions are specific goods or services that are exempt from the application of GST. In other words, there are certain goods and services that are not covered under the ambit of GST Act. These exemptions change from time to time. The government can grant exemptions for various reasons like alleviating the tax burden on essential goods and services or supporting specific sectors.

24. Types of GST Exemptions Absolute:   Absolute exemptions are those exemptions that are provided on the full amount and do not come with any conditions or restrictions, whatsoever. A good example is the exemption on the services of RBI . Conditional:  Conditional exemptions are those exemptions that have a certain limit, condition, or restriction on the nature and extent of the exemption. For example, hotel services are exempt up to a certain extent and not exempt fully . Partial:  Unregistered people who supply goods within the state to a registered person are exempt from GST under reverse charge only if the aggregate value of supply is not more than Rs.5000 per day.

25. List of GST Exemption on Goods Types of goods Examples Natural products Honey, fresh and pasteurized milk, cheese, eggs, etc. Vegetables Tomatoes, potatoes, onions, etc. Fruits Bananas, grapes, apples, etc. Dry fruits Cashew nuts, walnuts, etc. Tea, coffee and spices Coffee beans, tea leaves, turmeric, ginger, etc. Grains Wheat, rice, oats, barley, etc. Seeds Flower seeds, oil seeds, cereal husks, etc. Sugar Sugar, jaggery , etc. Water Mineral water, tender coconut water, etc. Baked goods Bread, pizza base, puffed rice, etc. Fertilizers Goods and organic manure

26. List of GST Exemption on Services Types of services Examples Agricultural services Cultivation, supplying farm labor, harvesting, warehouse-related activities, renting or leading agricultural machinery, services provided by a commission agent or the Agricultural Produce Marketing Committee or Board for buying or selling agriculture produce, etc. Government services Postal service, transportation of people or goods, services by a foreign diplomat in India, services offered by the Reserve Bank of India, services offered to diplomats, etc. Judicial services Services offered by the arbitral tribunal, partnership firm of advocates, senior advocates to an individual or business entity whose aggregate turnover is up to INR 40 lakhs Educational services Transportation of faculty or students, mid-day meal scheme, examination services, services offered by IIMs, etc. Medical services Services offered by ambulances, charities, veterinary doctors, medical professionals, etc. does not include hair transplant or cosmetic or plastic surgery.