CBEC’s FAQs on Meaning and Scope of Supply under GST
The FAQs related to Meaning and Scope of Supply under the Goods and Services Tax (GST) as per compilation made by the NACEN of CBEC to acquaint stakeholders with the Model GST Law and its nuances, are as under:
Q 1. What is the taxable event under GST?
Ans. The taxable event under GST shall be the supply of goods and / or services made for consideration in the course or furtherance of business. The taxable events under the existing indirect tax laws such as manufacture, sale, or provision of services shall stand subsumed in the taxable event known as ‘supply’.
Q 2. What is the meaning of ‘Supply’?
Ans. The term ‘supply’ is wide in its import and includes all forms of supply of goods and / or services 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. It also includes import of service. The model GST law also provides for including certain transactions made without consideration within the scope of supply.
Q 3. What is a taxable supply?
Ans. A ‘taxable supply’ means a supply of goods and / or services which is chargeable to good and services tax under the GST Act.
Q 4. What are the necessary elements that constitute supply under MGL?
Ans. In order to constitute a ‘supply’, the following elements are required to be satisfied, i.e.-
(i) supply of goods and/ or services;
(ii) supply is for a consideration;
(iii) supply is made in the course or furtherance of business;
(iv) supply is made in the taxable territory;
(v) supply is a taxable supply; and
(vi) Supply is made by a taxable person.
Q 5. Can a transaction in which any one or more of the above criteria is not fulfilled, be still considered as supply under GST?
Ans. Yes. Under certain circumstances such as importation of service (Section 3(1) (b)) or supplies made without consideration, specified under Schedule-I of MGL, where one or more ingredients specified in answer to question no. 4 are not satisfied, it shall still be treated as supply under GST Law.
Q 6. Importation of Goods is conspicuous by its absence in Section 3. Why?
Ans. Importation of goods is dealt separately under the Customs Act, 1962, wherein IGST shall be levied as additional duty of customs in addition to basic customs duty.
Q 7. Are self-supplies taxable under GST?
Ans. Inter-state self-supplies such as stock transfers will be taxable as a taxable person has to take state wise registration in terms of Schedule 1(5). Such transactions have been made taxable even if there is no consideration. However, intra-state self-supplies are not taxable.
Q 8. Whether transfer of title and/or possession is necessary for a transaction to constitute supply of goods?
Ans. Title as well as possession both have to be transferred for a transaction to be considered as a supply of goods. In case title is not transferred, the transaction would be treated as supply of service in terms of Schedule II (1). In some cases, possession may be transferred immediately but titled may be transferred at a future date like in case of sale on approval basis or hire purchase arrangement. Such transactions will also be termed as supply of goods.
Q 9. What do you mean by “supply made in the course or furtherance of business”?
Ans. No definition or test as to whether the activity is in the course or furtherance of business has been specified under the MGL. However, the following business test is normally applied to arrive at a conclusion whether a supply has been made in the course or furtherance of business:
1. Is the activity, a serious undertaking earnestly pursued?
2. Is the activity is pursued with reasonable or recognisable continuity?
3. Is the activity conducted in a regular manner based on sound and recognised business principles?
4. Is the activity predominantly concerned with the making of taxable supply for consideration/ profit motive?
The test may ensure that occasional supplies, even if made for consideration, will not be subjected to GST.
Q 10. An individual buys a car for personal use and after a year sells it to a car dealer. Will the transaction be a supply in terms of MGL? Give reasons for the answer.
Ans. No, because supply is not made by the individual in the course or furtherance of business. Further, no input tax credit was admissible on such car at the time of its acquisition as it was meant for non-business use.
Q 11. A dealer of air-conditioners transfers an air conditioner from his stock in trade, for personal use at his residence. Will the transaction constitute a supply?
Ans Yes. As per Schedule-I (1) business assets put to a private or non-business use without consideration will be treated as supply.
Q 12. Whether provision of service or goods by a club or association or society to its members will be treated as supply or not?
Ans. Yes. Provision of facilities by a club, association, society or any such body to its members shall be treated as supply. This is included in the definition of ‘business’ in section 2(17) of MGL.
Q 13. What are inter-state supplies and intra-state supplies?
Ans. Inter-state and intra-state supplies have specifically been defined in Section 3 & 3A of IGST Act respectively. Broadly, where the location of the supplier and the place of supply are in same state it will be intra-state and where it is in different states it will be inter-state supplies.
Q 14. Whether transfer of right to use goods will be treated as supply of goods or supply of service? Why?
Ans. Transfer of right to use goods shall be treated as supply of service because there is no transfer of title in such supplies. Such transactions are specifically treated as supply of service in Schedule-II of MGL
Q 15. Whether Works contracts and Catering services will be treated as supply of goods or supply of services? Why?
Ans. Works contract and catering services shall be treated as supply of service as specified in Schedule-II of MGL.
Q 16. Whether goods supplied on hire purchase basis will be treated as supply of goods or supply of services? Why?
Ans. Supply of goods on hire purchase shall be treated as supply of goods as there is transfer of title, albeit at a future date.