SUPPLY UNDER GST

INTRODUCTION

In GST, Tax is levied on goods &/or services on the basis of supply of goods &/or services. To determine  the Tax liability of GST the person should determine first whether the transactions falls under the preview of Supply in GST.

So Lets’ us learn what does Supply means in GST?

DEFINITION

Under GST, Supply means sale, transfer, exchange, barter, license, rental, lease, dispose etc. of goods & services. It is made among people for some consideration. Supply in GST should be made in furtherance  of business or in connection of business.

Any exchange made for personal use is not considered under the scope of  supply in GST  & no tax is levied on such transactions.

Example:- Sale of furniture purchased earlier used for personal use in homes does not cover under the scope of GST whereas, if such furniture is purchased and used in office and sold later . Such sale is covered under the definition of Supply because such sale of business is related with business even the person deals in some other business.

CHARACTERSTICS OF SUPPLY UNDER GST

• Supply should be of goods or services.
• Supply should be taxable.
• Supply should be made by a taxable person.
• Supply should be made within taxable territory.
• Supply should be made in exchange for cash or for some other consideration.
• Supply should be made in course of business or in the interest of growing of business.

SUPPLY OF GOODS V/S SUPPLY OF SERVICES

MOVEABLE PROPERTY	Sale i.e., Ownership transfer	Supply Of Goods
	Transfer of Right	Supply Of Service
	Permanent transfer of Business Asset	Supply Of Goods
	Closure of Business	Supply Of Goods
IMMOVEABLE PROPERTY	Renting/ Leasing of Immovable Property	Supply Of Service
	Sale of Under Construction Property	Supply Of Service
	Sale of Complete/ Constructed Property	No Supply
INTANGIBLE PROPERTY	Temporary Transfer	Supply Of Service
	Permanent Transfer	Supply Of Goods
SOFTWARE	Customized	Supply Of Service
	Readymade @ Temporary Transfer	Supply Of Goods
	Readymade @ Permanent Transfer	Supply Of Service

ELEMENTS OF SUPPLY UNDER GST

• Supply is done for a consideration i.e. goods or services are exchanged in return of something . here something mainly consist of money .
• Supply is done in course of business . It can be for a business or in connection of business.

COMPONENTS OF SUPPLY IN GST

A supply under GST has three attributes that are used to calculate the tax on any transaction. These are as follows:-

 

• PLACE OF SUPPLY:- This component of Supply helps the taxpayer to determine where the goods or services are supplied  which means this helps in determining which type of transaction took place i.e. inter state, intra state, import or export. It is important to know place of supply of goods or services so as to determine which type of GST will be levied on transaction.

If goods or services are supplied between states IGST has to be levied whereas if goods or services are supplied within a state then SGST and CGST has to be levied.

This component covers the Concept of DESTINATION PRINCIPLE in GST.

DESTINATION PRINCIPLE :- This principle states that GST has to be levied and collected at the place where goods or services are actually consumed .

1. Consumed In India:- If goods or services are consumed by a person in INDIA , So tax will be levied & collected by Indian Government.
2. Consumed outside India:– If goods or services are consumed by a person OUTSIDE INDIA then tax will be levied & collected by Foreign Government.

 

• VALUE OF SUPPLY:- This component of supply decides the taxable value of supply made . To determine the GST Tax amount one should first ascertain value of supply so as to determine tax rates as well as GST tax amount arise on particular transaction.

EXAMPLE 

1. A shopkeeper sold television set  for Rs 40,000/- per television and Rate of GST levied on such sale is 18%. and shopkeeper sold 5 sets of television .

Here  Taxable Value of  Supply is  40,000*5  = Rs 2,00,000. and GST is applicable on such supply is Rs 2,00,000 *18% = Rs. 36,000. Hence total  value of invoice is Taxable value +GST Amount = Rs. 2,00,000 + Rs. 36,000 =  Rs. 2,36,000.

2. A shopkeeper raise invoice of Rs. 1,18,000 (inclusive of GST ) to Ram against sale of Television set. GST rate on such supply is 18%. So, taxable value of supply here is 118000/118 *100 = Rs. 100000.

 

• TIME OF SUPPLY :– This component of supply helps to determine the time at which GST collection and GST payables reconciled. It may  made Monthly, Quarterly or Annually. To make such reconciliation Government has introduced various GST returns which needs to be filled by taxpayer 7 by tax collection in order to Make GST reconciliation.

EXAMPLE 

1. GSTR-1 needs to be filled by 11^th of next month to determine value of supplies made during the period.
2. GSTR-3B needs to be filled by 23^rd of next month to reconcile GST on sales and purchases during the period.
3. GSTR-2A has been filled to determine ITC on Purchases.
4. Annual returns are filed in GSTR -9 to reconcile annual sales & purchases.

TYPES OF SUPPLY

• TAXABLE SUPPLY :- It is the supply of goods &/or services  that are taxable under GST which means it covers all such transaction on which tax is levied either it has been collected or not. Registered Taxpayer can get refund of tax paid during purchases made i.e. they are eligible for ITC in consideration of tax collected on sales made.

Taxable supplies are further divided into :-

A. Regular Taxable Supply :-  Whenever a person supply any goods or services which attract a GST rate greater than 0% within India, it becomes regular Taxable supply. It covers both Inward & outward Supplies.   Imports of goods or services are also part of taxable supplies.

Here, inward supply in relation to a person shall mean receipt of goods or services or both whether by purchase, acquisition, or any other means with or without consideration and outward supply means supply of goods or services given by supplier by any mode as sale / transfer/ barter etc. with consideration and without consideration made during the course / furtherance of business.

Example:- Purchase & Sale of Furniture, Shoes, Clothes etc.

B .Nil- Rated Supply :- Whenever a person supply goods or services which attract 0% GST by default such supplies are known as Nil rated Supplies. These supplies mainly covers essential commodities required by person in their daily life.

Example :-  Salt, grains etc.

C. Zero-rated Supply :- Whenever a person makes export, supplies to a SEZ unit or deemed exports, the GST associated with the items or services involved GST but becomes 0 even though the same would attract GST rate greater than % when sold within India. Such supplies are deemed as Zero Rated Supplies. The main aim is to encourage more  exports hence GST is not levied on same.

Example :- If a person sold any machinery within India the same will attract GST but if same are exported to outside India it covers under Zero Rated Supply.

 

• NON TAXABLE SUPPLY :- It means supply of those goods or services or both which is not leviable to ta under the GST. but, a transaction needs to be covered under the definition of supply to qualify as non taxable supply.

Non Taxable supplies are further divided into:-

A. Exempt Supply :– The supply of exempt goods or services do not attract GST even though they are within the purview of GST. That said, the registered taxpayer cannot claim ITC on inputs used for making such supplies.

Example:- Medical services, sale of Bread, milk etc.

B. Non GST Supplies:- This refers to supply of goods items which are outside the preview of the GST law. This supplies covers mainly dealing in Money & securities i.e. conversion of currency into one form to another or from one currency to another. This supplies also covers goods such as alcohol liquor for human consumption , 5 Petroleum products such as  Petrol, Aviation Turbine Fuel , Diesel,  Natural Gas and motor spirit.

 

• COMPOSITE SUPPLY :- Supply which comprising of two or more supplies , among  which one is principal (main ) supply shall be treated as supply of composite supply . In order to determine whether the supplies are composite supplies are not , one needs to determine whether supplies are naturally bundled or not in ordinary course of business.

Example :- When a consumer buys a TV set and he also gets warranty on such TV sets , in such supply purchase of TV is a principle supply , warranty service is ancillary. But they are given together  and naturally bundled. Hence they covered under Mixed Supply.

 

• MIXED SUPPLY :-  Supply which comprise  of two or more supplies shall be treated as supply of that particular supply which attracts the highest tax rate. They are mainly not naturally bundled but they are made in bundles to encourage more sales.

Example:-  A shopkeeper sold water bottles along with refrigerator . Bottles and Refrigerator can easily be priced and sold separately . here Sale of refrigerator is the main supply which attracts higher tax rate. Hence this transaction is considered as mixed supply.

ACTIVITES OR TRANSACTIONS WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES

Transactions entered of  supplies of goods or services are as follows :-

1. Government services
2. Non taxable Territory to another Non Taxable territory
3. Employee to Employer (including Whole tome Director)
4. Warehoused Goods
5. Mortuary Services
6. Government People such as MP’s MLA’s
7. Immoveable Property
8. Court etc.

CLASSIFICATION OF GST ON BASIS OF SUPPLY

The nature, pace type of supplies helps a person to determine which type of GST is to levied on Such supplies. Such supplies attract GST Taxes such as IGST, SGST & CGST. These taxes are levied on the basis of supply within state or among states :-

• Intra State Supplies:- If goods are services are transported within same state i.e. both supplier and recipient stays in one state and destination of supply is in same state then such supplies are   treated as Intra State Supplies.  Such supplies include both purchase and sale of goods & services. Such Supplies attract CGST (Central Goods & Services Taxes ) and SGST (State Goods and Services Tax) .  The GST collected on such supplies are equally divide among State and central.

Example :  A shopkeeper sold some goods of value Rs. 10000 within a state and such transactions attract 18% GST . So, in this case  9% of GST amount i.e. Rs 900 is collected as SGST and remaining 9% of GST amount i.e. Rs.900 is collected as CGST.

• Inter State Supplies :- If goods are transported from one state to another . i.e.  both supplier and recipient lived in different states. i.e. there is border of states among them such supplies are known as Inter State Supply. Such Supplies include both purchase & sale of  goods & services. The GST collected on such supplies are directly collected in hands of central.

Example :- If  shopkeeper  transported goods  from one state to another of vale Rs. 10000 and such transactions attracts 18% GST . So in this case single tax IGST of Rs. 18000 is levied and collected on such transaction.

 

 

Also Read – Introduction to GST