Schedule I and Schedule II

SECTION : Meaning and Scope of Supply

DESCRIPTION
  • Lesson Objectives

    On completion of this lesson, you will be able to understand:

     

    ·        Section 7(1)(c) - SCHEDULE I – Activities to be treated as supply even if made without consideration.

    ·        Section 7(1)(d) - SCHEDULE II – Activities To Be treated as Supply of Goods or Supply of Services

     

    Please go through the Second Video of the Chapter 4.

    Consideration is an important aspect of Taxable Supply. In the absence of consideration, the supply of goods and services or both shall not be subject to GST. However Central Government vide Schedule I has prescribed certain activities which shall be treated as taxable supplies even when the supply is made without consideration. The list of such activities include…

     

    SCHEDULE I – Activities to be treated as supply even if made without consideration –Section 7(1)(c)

     

    a)     Permanent Transfer or Disposal of Business Assets where Input Tax Credit has been availed on such assets.

     

    Where the assets of a Business have been transferred or disposed without any consideration, then such transfer / disposal will be treated as taxable supply and shall be subject to GST.

     

    ·        Only condition is that the tax we paid when the asset was purchased would have been availed as input tax credit. If the input tax credit was not availed then the transaction will not be taxable.

    ·        Asset was disposed of / transferred without any consideration.

    ·        If the Asset was disposed of / transferred for consideration it will be taxable as normal supply under Section 7(1).

    ·        Please remember that Schedule I is only when the transaction was done without consideration.

     

    b)    Supply of goods or services or both between related persons or between distinct persons as specified in Sec. 25, when made in the course or furtherance of business.

    For example: M/s Indus Enterprises Pvt. Ltd. having head office in Mumbai has transferred goods without any consideration to its branch in Goa. Both the offices are registered under GST. These will be treated as distinct persons. The said transaction will be considered as taxable supply.

     

    ·        If the goods or services transferred are not in the course or furtherance of business, then it will not be taxable.

    ·        Gifts not exceeding Fifty Thousand Rupees in a Financial Year by an employer to an employee should not be treated as supply of goods or services or both.

    ·        Please remember that Schedule I is only when the transaction was done without consideration.

    ·        If the above transaction was done for consideration it will be taxable as normal supply under Section 7(1).

     

    c)     Supply of Goods by a Principal to his Agent OR by an Agent to his Principal.

    This provision states that the supply of goods between agent and principal shall be considered as supply provided that the agent acts on behalf of the Principal.

     

    For example Mr. Mohan who is an agent of Mr. Jayaram has received goods without consideration from Mr. Jayaram to sell on his behalf. The said transaction shall be considered to be supply though it is without consideration.

    o   This provision covers only supply of goods and not services.

     

    d)    Import of Services by a Taxable Person from a related Person / Other Establishments outside India, in the course or furtherance of business.

     

                The following points can be noted.

    o   Import of services with consideration by any person including taxable person in the course or furtherance of business or otherwise will be a Taxable Supply under Section 7(1).

    o   Import of services without consideration by a taxable person in the course or furtherance of business will be a Taxable Supply under Schedule I. If it is not in the course or furtherance of business, then it is not taxable.

    o   Import of services without consideration by any other person is not taxable.

     

     

     

     

     

    SCHEDULE II – activities to be treated as supply of goods or supply of services

     

    Before GST service tax was levied on services and VAT was levied on goods. Schedule II as per Section 7(1) deals with the activities that are to be treated as ‘supply of goods or supply of services’. I deals with whether a particular transaction is to be treated as supply of goods or supply of services.

     

    For example: Transfer of title and/or possession is necessary for a transaction to constitute supply of goods. Title as well as possession both has 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).

     

    Works contracts and Catering services

    Works contract and catering services shall be treated as supply of service as specified in Schedule-II of GST LAW.

     

    Transfer of Title at a Future Date

    In some cases, possession may be transferred immediately but title 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.

     

    So in the case of Goods supplied on hire purchase basis, it will be treated as supply of goods as there is transfer of title, albeit at a future date.

     

    Transfer of right to use goods

    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 GST LAW.

     

     

    SCHEDULE II

     

    S. No.

    Activities

    Nature of Supply

    1(a)

    Any transfer of the title in goods

     

    Supply of goods

    1(b)

    Any transfer of right in goods or of undivided share in goods without the transfer of title thereof.

     

    Supply of services

    1(c)

    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

     

    Supply of goods

    2(a)

    Any lease, tenancy, easement, license to occupy land

     

    Supply of services

    2(b)

    Any lease  or letting out of the building including a commercial, industrial or residential complex for business or commerce, either wholly or partly

     

    Supply of services

    3

    Any treatment or process which is applied to another person’s goods

     

    Supply of services

    4(a)

    Where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for a consideration

     

    Supply of goods

    4 (b)

    Where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, whether or not for a consideration. 

    Supply of services

    4 (c)

    Where any person ceases to be a taxable person, any goods forming part of the assets of any business carried on by him shall be deemed to be supplied by him in the course or furtherance of business immediately before he ceases to be taxable person, unless –

            i.            The business is transferred as a going concern to another person; or

          ii.            The business is carried on by a personal representative who is deemed to be taxable person.

    Supply of goods

    5 (a)

    Renting of immovable property

    Supply of services

    5(b)

    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.

    (Construction includes additions,   alterations, replacements or remodeling of any existing civil structure)

    Supply of services

    5(c)

    Temporary transfer or permitting the use or enjoyment of any intellectual property right

    Supply of services

    5(d)

    Development, Design, Programming, Customization, Adaptation, up-gradation, enhancement, implementation of information technology software

    Supply of services

    5(d)

    Agreeing to the obligation to refrain from an act, or to tolerate an act or situation, or to do an act.

    Supply of services

    5(e)

    Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act.

    Supply of services

    5(f)

    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.

    Supply of services

    6 (a)

    Works Contract as per Sec. 2(119)

    Supply of services

    6 (b)

    Supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration.

    Supply of services

    7

    Supply of goods by any unincorporated association or body of persons to a member thereof for cash, deferred payment or other valuable consideration.

    Supply of goods

     


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