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Meaning of supply under gst model law india

The term supply has been discussed in detail considering the definition given in GST Model Law.

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Meaning of supply under gst model law india

  1. 1. 1 MEANING AND SCOPE OF SUPPLY UNDER MODEL GST LAW, INDIA Presented by CA. Deepak Vachher Date 25th Sep 2016
  2. 2. DISCLAIMER The views expressed in this presentation are of the Member. The content of this presentation has not been specifically discussed by the IDT committee and the views expressed herein may not be taken to necessarily represent the views of the committee 2
  3. 3. AGENDA Overview 3 Meaning and scope of supply as per section 3 of IGST
  4. 4. The Goods and Services Tax (GST) is one of the biggest tax reform in indirect taxation system which will integrate Excise duty, Service Tax, Value Added Tax, Central Sales Tax and lot of other indirect taxes which are existing at state level. GST is a broad based and a single comprehensive tax levied on goods and services consumed in an economy. This is levied at every stage of production – distribution chain till retail level with applicable setoffs in respect of tax remitted at previous stage. It is a distinction based tax and levied at single point at the time of final consumption by ultimate consumer. The entire indirect tax system will get transformed with the rollout of GST and will significantly impact to the various sectors of the industry. Result would be change in pricing strategies, working capital requirement and supply chain management. It could be a challenge for the industry to migrate from existing indirect tax system to proposed GST system without hampering their business. Although the GST model and its mechanics are relatively simple (Output tax less input tax) but it will impact significantly to industries in terms of change in their IT system to ensure the requirements of GST. In this presentation, we will cover section 3 of the said Act, which has the Meaning & Scope of Supply About GST OVERVIEW
  5. 5. Section 3 Meaning & Scope of Supply
  6. 6. SUPPLY INCLUDES: SECTION 3(1)(A) : NORMAL SUPPLY OF GOODS AND/OR SERVICES 6 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 Section 3(1)(a) Interpretation The list is only illustrative and not exhaustive owing to use of the wordings “such as” These 8 expressions are not defined in the GST and expressions like lease and rental are closely related and used interchangeable Covers all the regular transactions of sale or services For Consideration and in the course or furtherance of business In the course of business implies a period of time during which business is in progress, promoting, advancement, or progress etc., of business Furtherance of business can be commonly understood as helping, forwarding, promoting, advancement, or progress etc., of business. ‘for consideration’ is subject to other part of section 3 where in certain transactions even without consideration are deemed as supply.
  7. 7. 7 Importation of service, whether or not for a consideration and whether or not in the course or furtherance of business, and Section 3(1)(b) SUPPLY INCLUDES: SECTION 3(1)(B) : IMPORT OF SERVICES Interpretation Contrary to Section 3(1)(a) when there is no consideration then there is no supply So if these specified transactions are made with considerations then it will fall under section 3(1)(a) Free Services received from outside India will also attract GST. Personal Services will also be liable to GST though some threshold limit will be there The benefit factor. Payment(expenses incurred for running of branch there) made by Indian Head office to its branch /agency is not liable to GST Similarly export benefits will also not be available. For transactions between them.
  8. 8. 8 A supply specified in Schedule I, made or agreed to be made without a consideration. Section 3(1)(c) SUPPLY INCLUDES: SECTION 3(1)(C) : SUPPLY WITHOUT CONSIDERATION Interpretation Services imported are liable for IGST The service receiver will be liable to pay GST under reverse charge whether bused for business or not Free samples and 1+1 offers are liable to GST Statutory requirement like CSR activities are also liable to GST Benefit of doubt If there is consideration but there is no furtherance of business then this will not be supply as per 3(1)(a) and 3(1)(c). Schedule 1 Permanent transfer/disposal of business assets. Temporary application of business assets to a private or non-business use Services put to a private or non-business use Assets retained after deregistration Supply of goods and / or services by a taxable person to another taxable or nontaxable person in the course or furtherance of business. Supply of goods by a registered taxable person to a job-worker in terms of section 43A shall not be treated as supply of goods.
  9. 9. 9 Schedule II, in respect of matters mentioned therein, shall apply for determining what is, or is to be treated as a supply of goods or a supply of services Section 3(2) Matters to be treated as supply of goods SECTION 3(2) : A SUPPLY OF GOODS OR A SUPPLY OF SERVICES Interpretation Transfer of title in goods Sale of business assets by any other person to recover debt Transfer of future goods(the property therein will pass at future date) Goods forming part of business assets on ceasing to be taxable person Transfer/disposal of business assets with or without consideration Supply of goods by an unincorporated association to its members
  10. 10. 10 Schedule II, in respect of matters mentioned therein, shall apply for determining what is, or is to be treated as a supply of goods or a supply of services Section 3(2) Matters to be treated as supply of services SECTION 3(2) : A SUPPLY OF GOODS OR A SUPPLY OF SERVICES…. CONTINUED Interpretation Transfer of right to use goods Lease, tenancy, easement, license to occupy land, letting out of property Job work on others goods Personal use/making available for non- commercial use of business assets Temporary transfer or permitting the use or enjoyment of any intellectual property Development, design, programming, customization, adaptation, up gradation, enhancement, implementation of IT Software Agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do an act Construction of a complex, building, civil structure or a part thereof, including a complex or building intended for sale to a buyer, wholly or partially, except where the entire consideration has been received after issuance of completion certificate, where required, by the competent authority or before its first occupation. Works contract including transfer of property in goods (whether as goods or some other form) involved in the execution of a works contract 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), where such supply or service is for cash, deferred payment or other valuable consideration.
  11. 11. 11 Where a person acting as an agent who, for an agreed commission or brokerage, either supplies or receives any goods and/or services on behalf of any principal, the transaction between such principal and agent shall be deemed to be a supply Section 3(2A) Interpretation Transaction between Principal and Agent deems to be Supply Transaction between Agent and third party will continue to be supply This deemed supply is to tax movement of goods between principal and agent and not for commission or brokerage that being paid by principal and agent, which anyways liable even without this section SECTION 3(2A) : PRINCIPAL – AGENT TRANSACTIONS
  12. 12. 12 Understand Subject to sub-section (2), the Central or a State Government may, upon recommendation of the Council, specify, by notification, the transactions that are to be treated as— (i) a supply of goods and not as a supply of services; or (ii) a supply of services and not as a supply of goods; or (iii) neither a supply of goods nor a supply of services. Section 3(3) SECTION 3(3) : POWER(S) OF CENTRAL AND STATE GOVERNMENT Interpretation This is additional power given to Central and State Government to notify as supply of goods or supply of services
  13. 13. 13 Notwithstanding anything contained in sub-section (1), the supply of any branded service by an aggregator, as defined in section 43B, under a brand name or trade name owned by him shall be deemed to be a supply of the said service by the said aggregator Section 3 (4) SECTION 3(4) : BRANDED SERVICE BY AN AGGREGATOR UNDER TRADE OR BRAND NAME Interpretation Branded Services Transactions involving aggregator as supply in the hands of aggregator Meaning -‘aggregator’ means a person, who owns and manages an electronic platform, and by means of the application and a communication device, enables a potential customer to connect with the persons providing service of a particular kind under the brand name or trade name of the said aggregator; Provision Required The actual supplier of such branded service should get tax immunity as the total supply is already taxed in the hands of aggregator else will lead double taxation.
  14. 14. Thank you!