A. INTRODUCTORY PROVISIONS:
• Chapter III of Central Goods and Services Tax Act, 2017 & Integrated Goods and Services Tax Act, 2017 contains the provision of levy and collection of GST.
• In terms of section 9(1) of Central Goods and Services Tax Act, 2017, Central Goods and Services Tax (CGST) shall be levied on all intra-state supplies of goods & services or both except the supply of alcoholic liquor for human consumption.
• In terms of section 5(1) of Integrated Goods and Services Tax Act, 2017, Integrated Goods and Services Tax (IGST) shall be levied on all inter-state supplies of goods & services or both except the supply of alcoholic liquor for human consumption.
• The expression 'Supply' is defined under section 7(1) of Central Goods and Services Tax Act, 2017.
• In addition to above, Section 8 of Central Goods and Services Tax Act, 2017 provides the Tax liability on 'Composite Supply' and 'Mixed Supply'. The expressions 'Composite Supply' & 'Mixed Supply' are defined under section 2(30) & 2(74) of Central Goods and Services Tax Act, 2017 respectively.
• Further, Chapter IV of Integrated Goods and Services Tax Act, 2017 contains the provision of 'Determination of Nature of Supply'. In this chapter there are two types of supplies in nature for levy of GST (i.e. Intra State Supply & Inter State Supply). Section 7 of Integrated Goods and Services Tax Act, 2017 provides the nature of Inter- state supply and Section 8 of Integrated Goods and Services Tax Act, 2017 provides the nature of Intra- state supply.
B. SCOPE OF SUPPLY IN TERM OF SECTION 7(1) OF CENTRAL GOODS AND SERVICES TAX ACT, 2017:
• 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.
• Import of services for a consideration whether or not in the course or furtherance of business.
• The activities specified in Schedule I, made or agreed to be made without a consideration.
• The activities to be treated as supply of goods or supply of services as referred to in Schedule II.
• Activities or transactions specified in Schedule III shall be treated neither as a supply of goods nor a supply of services.
C. ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITHOUT CONSIDERATION AS SPECIFIED IN SCHEDULE III.
• Permanent transfer/disposal of business assets where ITC is availed on such Assets.
• Supply of goods/services between related persons, in the course or furtherance of business.
• Supply of goods/services between distinct persons.-
o Whether transfer of goods to another branch located outside the State is taxable?- 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 clause 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).
• Provided gifts not exceeding Rs 50,000 in value in a F.Y. by an employer to an employee shall not be treated as supply.
• Supply of goods by principal to his agent where the agent undertakes to supply such goods on behalf of the principal.
• Supply of goods by agent to principal where the agent undertakes to supply such goods on behalf of the principal.
• Importation of service by a taxable person from:-
o a related person,
o or from any of his office, other establishments outside India
In course or furtherance of business.
D. SCHEDULE II & III (not covered in topic)
• Schedule II specifies the activities which shall be treated as supply of goods & 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. The reason of this schedule is to differentiate the supply of goods and supply of services so that the registered person may:
o Classify his supply under the correct chapter heading (i.e. Classification of Goods & Classification of Goods)
o Make compliance in proper way.
o Make payment as per correct tax rate specified under GST Law.
• Schedule III specifies the activities or transactions which shall be treated neither as supply of goods nor a supply of services. (i.e. negative list under GST Law).
E. THE CONCEPT OF COMPOSITE SUPPLY AND MIXED SUPPLY:
• Composite Supply is defined under section 2 (30) of CGST Act, 2017:
'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'
• As per the provision of Section 8(a) of CGST Act, 2017, Composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply as per Section 8(a) of CGST Act, 2017.
• Example of Composite Supply - 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 the principal supply. This implies that the supply will be taxed wholly as supply of goods.
• Mixed Supply is defined under section 2 (74) of CGST Act, 2017:
'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'
• As per provision of section 8(b) of CGST Act, 2017, mixed supply comprising two or more supplies shall be treated as a supply of that particular supply which attracts the highest rate of tax.
• Example of Mixed Supply- a tooth paste (say for instance it is liable to GST at 12%) is bundled along with a tooth brush (say for instance it is liable to GST at 18%) and is sold as a single unit for a single price, it would be reckoned as a mixed supply. This would therefore be liable to GST at 18% (higher of 12% or 18% applicable to each of the goods therein).
F. CONCEPT OF INTER STATE SUPPLY (Section 7 of IGST Act, 2017):
• IGST shall be levied on all inter-state supply.
• Supply of goods/ services shall be treated as inter- state supply where the location of the supplier and the place of supply are in:
(a) two different States;
(b) two different Union territories; or
(c) a State and a Union territory
• Supply of Goods shall be treated as inter-state supply where goods/ services imported into the territory of India.
• Supply of Goods shall be treated as inter-state supply where:
o The supplier is located in India and the place of supply is outside India.
o Supply made to or by a Special Economic Zone developer or a Special Economic Zone unit.
o Supply made in the taxable territory, not being an intra-State supply.
• Examples
o Taxable person (non-SEZ) located in Jaipur supplying goods to an SEZ unit located in Jodhpur is a supply in the course of inter-State trade or commerce.
o SEZ unit in Kolkata supplying services to another SEZ unit in Kolkata is a supply in the course of inter-State trade or commerce.
o Lease of premises by SEZ developer in Chennai to SEZ unit in that same zone in Chennai will be a supply in the course of inter-State trade or commerce.
o Non-SEZ Sales by SEZ unit in Kochi to a non-SEZ in Kochi will be a supply in the course of inter-State trade or commerce.
o Disposal of scrap by an SEZ developer in Mumbai to a scrap dealer in Mumbai (outside the zone) is a supply in the course of inter-State trade or commerce.
G. CONCEPT OF INTRA STATE SUPPLY (Section 8 of IGST Act, 2017):
• CGST/SGST/UTGST shall be levied on all intra-state supply.
• Supply of goods/services shall be treated as Intra state supply where the location of the supplier and the place of supply of goods are in the same State or same Union territory.
H. COMPARISON WITH EXISTING LAW
• There is no such proposition in the existing laws as the concept of supply is unique to our tax system and considered as a 'taxable event' for the first time in indirect tax regime.
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