This article is edited by Mansi Bathija and written by Lakshay Kumar, a second-year B.A.LLB student of Delhi Metropolitan Education, Indraprastha University. In this article, he talks about the supply of goods and services, which is to supply its nature and scope.
Definition of supply
Supply in general terms refers to the total goods and services that a producer is willing to supply at a given price and at a particular place. According to section 7(1) of central goods and services act supply includes
- All forms of supply of goods, services or both such as sale, manufacture, lease, transfer, disposal made for a consideration by a person in furtherance of his business.
- Import of services made
- The activities mentioned in schedule 1 of central goods and services act 2017
- Al the activities that would be treated as a supply of goods under schedule 2 of the act
Section 7(2) mentions that all the activities mentioned in schedule 3 of the act, as well as all the transactions of the central government or state government, will also be treated as a supply of goods and services.
Scope of Supply
In order to determine the scope of supply, we have to keep in mind six factors, these six factors are-
1. Supply of Goods and Services
The CGST act of 2017 defines what goods or services will come under the definition of supply. Money, securities have been excluded from the ambit of goods and services, however, if there is any activity for which the use of money is involved or if at any stage of transaction conversion of money is done into other denomination then that would come under the ambit of goods and services provided a separate consideration is provided for it. Further schedule two of the act provides which all activities could be included in the supply of goods or in the supply of services
2. Supply for Consideration
consideration means something for something, it can be anything money or kind, without consideration no activity would be treated as supply, however, there are situations under which no consideration is required but still, the activity would be treated as supply these situations are
- Permanent disposal of business assets wherein tax credits have been availed
- Supply of goods and services between two related persons or between two distinct people when the transaction has been made in furtherance of business
- Supply of goods by an agent on behalf of his principal when he receives the goods on behalf of his principle.
- Import of service by a taxable person with some related person or imports done by him with his establishments outside India in furtherance of his business
3. Supply in Furtherance of Business
GST is a tax and therefore it is applicable only in transactions and activities that are done in furtherance of business if any activity or transaction is done in a personal capacity then such activity or transaction would not be taxed under GST. One exception to this rule is when imports are done for a consideration
4. Taxable Supply
For supply to attach GST it is essential that the activity or transaction must be taxable if the transaction or activity is not taxable then it would not fall within the scope of supply.
5. Supply in the Taxable Territory
One more essential requirement which ascertains whether the activity is treated as supply or not is to determine whether the activity or transaction takes place within the taxable territory, in order to get GST applied it is essential that the transaction should take place within India.
6. Inter or Intrastate Supplies
The location of the supplier and the goods supplied determines whether the supply of goods and services would be treated as interstate or intrastate supplies.
If the goods supplied and the suppliers are in the same state then it would be considered as intrastate supply but if the goods supplied and the supplier is of different states then it would be considered an interstate
Time of Supply of Goods and Services
Determining the time of supply of goods
Section 12(2) of the CGST act 2017 mentions the provision regarding the time of supply of goods. According to this section supply of goods needs to be made earlier of the following two dates namely
- The date of issue of invoice by the supplier, or the last date on which he is required to issue the invoice.
- Or the date on which the supplier receives the payment with respect to supply
Time of Supply of Goods under Reverse Charge
Reverse charge means when the tax is to be paid by the receiver of the goods and service rather than the supplier, in that case, the time of supply of goods shall be made to the earliest on the following dates
- The date of receipt of the goods
- The date of payment
- The date immediately after 30 days from the date of issue of invoice by the supplier.
If it is not possible to determine the time of supply under the above-mentioned condition then the time of supply of goods would be the entry date in the recipient’s book.
Time of Supply of Vouchers
In the case of vouchers, the time of supply would be determined on
- On the date of issue of voucher
- On the date of redeeming the voucher
When the time of supply of goods cannot be determined
When the time of supply cannot be determined then, in that case, the earliest dates will be the date of supply namely
- The date when the periodical returns are filed
- The date on which the CGST or SGST is paid
Determining the time of supply of services
Section 13(2) of the CGST act 2017 mentions the provision regarding the time of supply of services. according to section 13(2), the time of supply of service shall be earliest dates from the following namely
- The date of the issue of invoice by the supplier or the date of the issue of the receipt of payment, whichever is earlier.
- The date of provision of service, if the invoice is not issued within the period prescribed under subclause 2 of section 31 of the act, or the date of receipt of payment whichever is earlier
- The dates on which the recipient shows the receipt of services in his account books.
Time of Supply of Services under Reverse Charge
As discussed earlier reverse charge means the tax which is to be paid by the receiver of the services rather than the supplier. In that case, the time of supply of services shall be the earlier of the following dates
- The date of payment entered in the books of the recipients or the date on which the money was debited in the bank account.
- The date immediately following 60 days of the issue of invoice by the supplier.
Time of Supply for the Vouchers
In case of supply for the vouchers, the time of supply for the vouchers shall be
- The date of issue of the voucher if it is identifiable
- The date of redemption of voucher
When the time of Supply of Services Cannot be Determined
If the time of supply of services cannot be determined as per the above-mentioned provision then, in that case, the time of supply shall be
- The date on which the periodical return has been filed or
- The date on which the tax has been filed
Place of Supply of Goods and Services
Rules for the Place of Supply of Goods
When the supply is for the movement of goods from the place of supply is determined by the final location the goods are to be delivered.
Example- a manufacturer of certain goods in Rajasthan receives an order from Mumbai to supply a certain quantity of goods to him, in that case, the manufacturer directs his branch officer in goa to transport those goods to Mumbai, in this case, the place of supply will be goa and it being an inter-state movement Integrated GST will apply
When there is movement of goods at the instance of the direction of the third party then the place of supply shall be the third person’s place of business.
Example – if a dealer in Karnataka receives an order from Kerala, the Kerala dealer directs the goods to be delivered to Delhi then the place of supply would be the business place of Kerala dealer irrespective of the fact that the order is taken from Karnataka. The transaction will attract integrated GST
When there is no movement of goods from the place of supply shall be the location of the supply of goods during final delivery
Example – if a company is registered in Delhi and opens its branch in Mumbai and receives an order from company b in Mumbai, then, in that case, however, there is no movement of goods but there is certainly a supply of goods and therefore it is an intra-state supply it will attract central GST and state GST
Rules for the Place of Supply of Services
1 ) In case services are provided to the registered recipient then the place of supply would be the location of such registered recipient. if the service is provided to an unregistered recipient then the place of supply of services would be either the location provided by the recipient and if not then the place of supply service would be the location of the service provider.
2) If the service provided involves the use of any immovable property then the place of service would be the place where the immovable property is located
Example- say for example Mr x lives in Punjab but has his property in Delhi and wants the services of Mr b for some construction who lives in Haryana then the place of service would be Delhi as the recipient, supplier and the recipient’s property is located in India, however if the property would have been located in some foreign country then the place of supply of service would have been the actual place where Mr x lives that is Punjab
3) if the service is related to professional work like fitness, grooming, health services including plastic surgery, cosmetics, etc then the place of service provided will be the place where those services were performed
Example- for example, A who lives in Delhi visits and stays in a hotel and avails the restaurant services, he also pays for the same. In this case, the place of supply of service is the place where all these services were availed that is Kerala
4) if some banking services are provided then the place of supply of service would depend on the following situations
- If the location is available with the bank then the place of supply of service would be the location of the person who is seeking service or
- If the location of the recipient is not available with the bank then the place of supply of service would be the location of the service provider
Example- if a person who lives in Delhi has a bank account in HDFC bank in Delhi gets a check issued at HDFC bank Pune, then, in that case, the place of supply of service would be Delhi as the address registered with HDFC bank in Delhi, however, if the same person issues the check with HDFC bank Mumbai without having any bank account in Mumbai the place of supply of service would be Mumbai only, the place where he availed the service
5) if someone is availing insurance service then the place of supply in case of a registered user would be the location of the registered recipient, in case he is an unregistered person then the place of supply of service would be the location of the service recipient
Example- a person living in Delhi travels from Mumbai to Karnataka and gets his travel insurance done in Karnataka, the place of supply of service would be Delhi as the insurance company has registered the address of the recipient in Delhi
Value of Supply of Goods and Services
Value of supply of goods and services literally means the payment that the recipient of the goods or services has to pay to the person who has provided him with the goods and services. Section 15 of the GST act provides the provision regarding the value of supply of goods and services.according to sec 15(1) value of supply means transaction value which is the price paid or actually paid by the recipient to the supplier or where both the supplier and the recipient are unknown in that case price would be the sole consideration for the supply.
Things included in the Value of Supply
According to section 15(2), the following things would comprise the value of the goods and services
- Any tax, CESS, fees or any charge that was applicable before the act came into force, the state goods and services tax, union territory goods and service tax, goods and services tax ( compensation to the states) is charged by the supplier separately.
- Any amount that the supplier was liable to pay but in place of him the recipient has paid and that amount has not specifically be included in the price actually paid
- Any incidental price, or commission or packing is done by the supplier towards his performance of his duties.
- Any late fees, or penalty imposed or delayed payment of any consideration or supply
- Subsidies directly included in the price excluding the subsidies provided by the central government and state government.
Discounts which are not included in the value of supply
The value of supply shall not include any discounts which are given
- Which is given before or at the time of supply
- After the supply has been affected if
- Such a discount is established in the agreement made or before the time of supply.
- The input tax credit has been reversed by the recipient of the supply
One of the most important aspects of Goods and Services tax is the supply of Goods and Services, this article analyses the various provisions concerning the supply of goods and services, apart from that the article also examines the time period under which the goods are to be provided or services to be rendered to the customer. Not only this the article also discourses about the place where the goods and services which are to be provided.