Concept of Supply

CA Vishal Bhattad
CA INTER GST
AMENDMENTS
Changes as per,
1. CGST Amendment Act, 2018,

2. All Notifications and Circulars upto 30th Apr 2019
Applicable for Nov 2019 Exam
CONCEPT OF SUPPLY
Definition of term service amended [Section 2(102) of the CGST Act]
Sec 2(102): Services
Means anything other than goods, money and securities
But includes activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or
denomination, to another from currency or denomination for which a separate consideration is charged.
Explanation For removal of doubts, it is hereby clarified that the expression “services” includes facilitating or arranging
transactions in securities. Newly Inserted by CGST
Amendemnt Act, 2018
Analysis: If some service charges or service fees or documentation fees or broking charges or such like fees or
charges are charged in relation to transactions in securities, the same would be a consideration for provision of service
and chargeable to GST.
Definition of term business amended [Section 2(17)(h) of the CGST Act]

(h) Services provided by a race club by way of totalisator or a licence to book maker Old Provision
(h) Services provided by Activities of a race club including by way of totalisator or a New Provision
Amended by CGST
licence to book maker or activities of a licensed book maker in such club and Amendment Act, 2018
Wager
Betting
Analysis
Thus, the scope of term ‘business’ has widened to include all the activities of race club and all the activities of a licence
book maker in such club. Further, since term ‘services’ used earlier in this clause led to ambiguity as actionable claims
have been defined as ‘goods’ in the CGST Act, it has been replaced with ‘activities’.
SCHEDULE I
Import of Service without consideration (Para 4 of Schedule I of the CGST Act)
Old Provision New Provision

Omitted by CGST
Amendment Act, 2018
Import of services by a taxable person Import of services by a taxable person

Ü from a related person outside India or Ü from a related person outside India or
Ü from any of his other establishments outside India, Ü from any of his other establishments outside India,
in the course or furtherance of business. in the course or furtherance of business.
Analysis
This amendment is to ensure that import of services by entities which are not registered under GST (for instance, who are
only making exempted supplies), but are otherwise engaged in business activities is taxed when received from a related
person or from any of their establishments outside India.
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Example : Mr. Sagar import interior design service for designing his office from his brother Mr. Raj who resides in
UK from last 1 year. Mr. Sagar is engage in exempt supply of goods. He has not taken registration in gst. whether it
is treated as supply under GST law?
Before amendment After amendment
In given case referring to the above provision Mr. Sagar has In given case referring to the above provision Mr. Sagar
imported interior design service for business without consideration has imported interior design service for business without
from his brother in UK is not treated as supply of service. As he is consideration from his brother in UK is treated as supply
not a taxable person in India. Even it is in course of business. of service. As it is in course of business.
Special Note : Students are expected to answer the questions on the basis of the position of law as amended by the
significant notifications/ circulars issued till 30.04.2019
Significant Notifications/ Circulars/ Order

Para 3 of Schedule 1
3. Supply of goods -
(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or
(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal
Scope of Principal-agent relationship in the context of Schedule I of the CGST Act regarding. (Circular No.
57/31/2018-GST dt 04/09/2018)
1 Supply of goods by Principle to Agent

a Where the invoice for further supply is being issued by then, any provision of goods from the principal to the
the agent in his name agent would fall within the fold of the said para
b where the invoice is issued by the agent to the Then such agent shall not fall within the
customer in the name of the principal ambit of Schedule I of the CGST Act
2 Supply of goods by Agent to Principal

a where the goods being procured by the agent on behalf then further provision of the said goods by the agent to
of the principal are invoiced in the name of the agent the principal would be covered by said para
b where the goods being procured by the agent on behalf then further provision of the said goods by the agent to
of the principal are invoiced in the name of the principal the principal would not be covered by said para
Scope of principal and agent relationship under Schedule I of CGST Act, 2017 in the context of del-credere agent
(Circular no 73/47/2018 dt 5/11/2018)
Q1- Who is a DCA i.e. del-credere agent?

Ans:- A DCA is a selling agent who is engaged by a principal to assist in supply of goods or services by
contacting potential buyers on behalf of the principal.
Q2- Differentiation factors between DCA and other agents?

The factor that differentiates a DCA from other agents is that the DCA guarantees the payment to the
supplier. In such scenarios where the buyer fails to make payment to the principal by the due date, DCA makes the payment to
the principal on behalf of the buyer (effectively providing an insurance against default by the buyer), and for this reason the
commission paid to the DCA may be relatively higher than that paid to a normal agent.
In order to guarantee timely payment to the supplier, the DCA can resort to various methods including extending
short-term transaction-based loans to the buyer or paying the supplier himself and recovering the amount from the buyer with
some interest at a later date.
This loan is to be repaid by the buyer along with an interest to the DCA at a rate mutually agreed between DCA and buyer.
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Issue: Whether a DCA falls under the ambit of agent under Para 3 of Schedule I of the CGST Act?
Clarification: As already clarified vide Circular No. 57/31/2018 GST, whether or not the DCA will fall under the
ambit of agent under Para 3 of Schedule I of the CGST Act depends on the following possible
scenarios:
• In case where the invoice for supply of goods is issued by the supplier to the customer, either
himself or through DCA, the DCA does not fall under the ambit of agent.
• In case where the invoice for supply of goods is issued by the DCA in his own name, the DCA
would fall under the ambit of agent.
Issue: Whether the temporary short-term transaction-based loan extended by the DCA to the recipient (buyer),
for which interest is charged by the DCA, is to be included in the value of goods being supplied by the
supplier (principal) where DCA is not an agent under Para 3 of Schedule I of the CGST Act?
Clarification: In such a scenario following activities are taking place:

1. Supply of goods from supplier (principal) to recipient;
2. Supply of agency services from DCA to the supplier or both;
3. Supply of extension of loan services by the DCA to the recipient.
It is clarified that in cases where the DCA is not an agent under Para 3 of Schedule I of the CGST
Act, the temporary short-term transaction based loan being provided by DCA to the buyer is a
supply of service by the DCA to the recipient on principal to principal basis and is an independent
supply.
Therefore, interest being charged by the DCA would not form part of the value of supply of goods
supplied (to the buyer) by the supplier2
Issue: Whether DCA is an agent under Para 3 of Schedule I of the CGST Act and makes payment to the
principal on behalf of the buyer and charges interest to the buyer for delayed payment along with the
value of goods being supplied, whether the interest will form part of the value of supply of goods also
or not?
Clarification: In such a scenario following activities are taking place:

1. Supply of goods by the supplier (principal) to the DCA;
2. Further supply of goods by the DCA to the recipient;
3. Supply of agency services by the DCA to the supplier or the recipient or both;
4. Extension of credit by the DCA to the recipient.
It is clarified that in cases where the DCA is an agent under Para 3 of Schedule I of the CGST
Act, the temporary short-term transaction based credit being provided by DCA to the buyer no
longer retains its character of an independent supply and is subsumed in the supply of the goods
by the DCA to the recipient. It is emphasised that the activity of extension of credit by the DCA to
the recipient would not be considered as a separate supply as it is in the context of the supply of
goods made by the DCA to the recipient.
It is further clarified that the value of the interest charged for such credit would be required to be
included in the value of supply of goods by DCA to the recipient as per section 15(2)(d) of the
CGST Act.
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CA Vishal Bhattad

1. CGST Amendment Act, 2018,

Deﬁnition of term business amended [Section 2(17)(h) of the CGST Act]

Old Provision New Provision

Import of services by a taxable person Import of services by a taxable person

V’Smart Academy www.vsmartacademy.com CA Vishal Bhattad 09850850800 2

Signiﬁcant Notiﬁcations/ Circulars/ Order

1 Supply of goods by Principle to Agent

2 Supply of goods by Agent to Principal

Q1- Who is a DCA i.e. del-credere agent?

Q2- Differentiation factors between DCA and other agents?

3 CA Vishal Bhattad 09850850800 www.vsmartacademy.com V’Smart Academy

Clariﬁcation: In such a scenario following activities are taking place:

Clariﬁcation: In such a scenario following activities are taking place:

4 CA Vishal Bhattad 09850850800 www.vsmartacademy.com V’Smart Academy

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