Supply under GST

Table of Content: 

1. What is Supply - CA Intermediate
2. CONCEPT OF SUPPLY [SECTION 7 OF THE CGST ACT]
3. ANALYSIS
4. SUPPLY OF GOODS OR SERVICES FOR CONSIDERATION IN COURSE OR FURTHERANCE OF BUSINESS
5. CONSIDERATION
6. COMPOSITE AND MIXED SUPPLIES [SECTION 8]
7. FORMS OF SUPPLY
8. NON-SUPPLIES UNDER GST

What is Supply - CA Intermediate (GST)

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.

The taxable event under GST is supply. The scope of supply under GST can be understood in terms of following parameters: 

CONCEPT OF SUPPLY [SECTION 7 OF THE CGST ACT]

The concept of ‘supply’ is the key stone of the GST architecture. The provisions relating to the meaning and scope of supply are contained in Chapter III of the CGST Act read with various Schedules given under the said Act. Following sections and schedules shall be discussed in this chapter to understand the concept of supply: 

ANALYSIS

The definition of ‘supply’ as contained in section 7 is an inclusive definition and does not define the term exhaustively. It defines the scope of supply in an inclusive 
manner. Clause (a) of sub-section (1) illustrates the forms of supply, but the list is not exhaustive. This is further substantiated by the use of words ‘such as’ in the definition.

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. 

SUPPLY OF GOODS OR SERVICES FOR CONSIDERATION IN COURSE OR FURTHERANCE OF BUSINESS

The definition of supply begins with the term ‘Supply includes’, thus making it clear that CGST Act intends to give an extensive meaning to the term 
‘supply’. 
Supply includes all forms of supply of goods or services or both. Supply of anything other than goods or services like money, securities etc. does not attract GST. 

FORMS OF SUPPLY

Various forms of supply contemplated in section 7(1)(a) are sale, transfer, barter, exchange, licence, rental, lease or disposal. These forms of supply are only 
illustrative and not exhaustive. However, none of these terms have been defined under the Act. In order to understand their meaning, we have taken recourse to their dictionary meaning or otherwise and have explained them as follows:

• Sale and Transfer
• Barter and Exchange
• Licence, lease, rental and disposal

CONSIDERATION

The dictionary meaning of word ‘consideration’ is payment. Consideration need not always be in the form of money. It can be in money or in kind. It covers anything which might be possibly done, given or made in exchange for something else.
Further, a consideration need not always flow from the recipient of the supply. It can also be made by a third person. However, any subsidy given by the Central Government or a State Government is not considered as consideration. 

• Donations received by charitable institutions from individual donors, without quid pro quo
• Art works sent by artists to galleries for exhibition is not a supply as no consideration flows from the gallery to the artists
• No supply of service by the insured to the insurance company in lieu of ‘No Claim Bonus’ offered by said insurance company to him

NON-SUPPLIES UNDER GST

Activities/transactions specified under Schedule III: Section 7(2)(a) provides activities or transactions specified in Schedule III shall be treated neither as a supply of goods nor a supply of services. Schedule III specifies transactions/ activities which shall be neither treated as supply of goods nor as supply of services. Thus, the activities/transactions specified under this schedule can be termed as Non-Supplies under the GST regime. In a way, it is a “Negative list” for the purposes of taxation in GST. It is important to note that apart from the activities specified in Schedule III, some activities have been notified by the Government vide different notifications, which are also to be considered as non-supplies. Further, some circulars have been issued clarifying that certain transactions are to be 
considered as non-supplies. 
Hence, our discussion under this heading will revolve around the following:
A. Non-supplies listed in Schedule III
B. Non-supplies notified vide notification
C. Non-supplies clarified by way of circular

COMPOSITE AND MIXED SUPPLIES [SECTION 8]

COMPOSITE SUPPLIES

Composite supply means a supply made by a taxable person to a recipient and:
• comprises 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 [Section 2(30)].
This means that in a composite supply, goods or services or both are bundled owing to natural necessities. The elements in a composite supply are dependent on the ‘principal supply’. 

MIXED SUPPLIES

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 [Section 2(74)].
The individual supplies are independent of each other and are not naturally bundled.