On completion of this lesson, you will be able to understand:
· Section 7 - Meaning and Scope of Supply
· Necessary Elements for Supply
· In the Course or Furtherance of Business
· Case Studies
· Stock Transfers
Please go through the First Video of the Chapter 4.
A ‘taxable supply’ means a supply of goods and /or services which is chargeable to good and services tax under the GST Act.
Taxable event under GST
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 will be replaced.
· In GST the taxable event is known as ‘supply’.
Meaning of ‘Supply’
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 on a consideration that made or agreed to be made for a consideration in the course or furtherance of business.
Necessary elements that constitute supply
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.
In the course or Furtherance of Business
No definition or test as to whether the activity is in the course or furtherance of business has been specified under the Law. 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 recognizable continuity?
3. Is the activity conducted in a regular manner based on sound and recognized 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.
Case Study 1:- Mr. Ravi purchased a Car for personal use and after a year sells it to a car dealer. Will the transaction be a supply in terms of GST LAW?
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. There is no continuity also.
Case Study 2:- Whether provision of service or goods by a club or association or society to its members will be treated as supply or not?
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’ the GST LAW.
Importation of Goods
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.
Inter-state self-supplies such as stock transfers will be taxable as a taxable person has to take state wise registration.
Such transactions have been made taxable even if there is no consideration. However, intra-state self-supplies are not taxable.
Supply also include
a) The activities specified in Schedule I, made or agreed to be made without a consideration;
b) The activities to be treated as supply of goods or supply of services as referred to in Schedule II and
c) Import of services for a consideration whether or not in the course or furtherance of business.