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The definition of supply under GST is not an exhaustive definition. A definition is said to be
exhaustive when it gives complete meaning and the meaning cannot be stretched any further. But
this is not the case with the definition of supply under the Act. It uses the words “includes” and
not “means”. Hence, the definition of supply can be extended even beyond what is provided
under the law.
Types of Supplies
The definition of supply includes all forms of supplies. It means the definition extends beyond
the supplies exemplified under the definition. Hence, “supply “includes all forms of supply such
as:
Sale is one of the forms of transfer of property in goods for cash, deferred payment or
other valuable consideration.
Transfer includes sale, exchange, extinguishment of rights, relinquishment, conversion,
redemption.
Barter is exchange of goods for goods. For example, if guns are purchased by paying the
price in gold, it is barter and covered under the definition of supply.
Exchange: If new AC is purchased in exchange for old AC valued at 25% of its original
cost and by paying balance amount in cash, the act of giving away old AC in exchange is
an act of supply.
License is permission to use something. For example, if a person is granted a license to
use equipment in consideration for some compensation then such permission or license is
an act of supply.
Rental: Providing an immovable property for rent is an act of supply.
Lease: The act of letting out a property for defined period of time is lease. For example, if
land is given for one year lease, this is an act of supply.
Disposal: Disposal is an act of throwing away a property at a value much lower than its
acquisition cost. For example, sale of scrap of furniture is an act of disposal.
As per definition of supply, both supply “made” or “agreed to be made”, are taxable. Hence not
only making of supply but also only agreeing to make supply is an act of supply.
Example 1: If a person agrees to provide a machine in future for Rs. 50 lakhs and pays
Rs. 10 lakhs for agreeing to make supply of machine in future, the advance of ` 10 lakhs is also
chargeable to tax under the law.
For example Gift from relatives , Donation received by temple ,Free samples distributed by
pharmaceutical company to doctors, Gifts under promotional scheme of the products.
Definition of Consideration
Further, the term consideration is defined under section 2(31) of CGST Act as follows:
any payment made or to be made, whether in money or otherwise, in respect of, in response to,
or for the inducement of, the supply of goods or services or both, whether by the recipient or by
any other person but shall not include any subsidy given by the Central Government or a State
Government;
AND
the monetary value of any act or forbearance, in respect of, in response to, or for the inducement
of, the supply of goods or services or both, whether by the recipient or by any other person but
shall not include any subsidy given by the Central Government or a State Government
Section 7(1)(c) read with Schedule I of the CGST Act specifies the following activities without
consideration to be treated as supply: \
Permanent transfer or disposal of business assets where input tax credit has been availed
on such assets.
Supply of goods or services or both between related persons or between distinct persons
as specified in section 25, when made in the course or furtherance of business:
Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an
employer to an employee shall not be treated as supply of goods or services or both.
Supply of goods— by a principal to his agent where the agent undertakes to supply such
goods on behalf of the principal; or by an agent to his principal where the agent
undertakes to receive such goods on behalf of the principal.
Import of services by a taxable person from a related person or from any of his other
establishments outside India, in the course or furtherance of business
Import of services
Import of services by a taxable person from a related person or from any of his other
establishments outside India, in the course or furtherance of business without consideration,
also falls in the definition of supply and becomes taxable.
As per section 7(1)(b), import of service for consideration whether or not in the course or
furtherance of business is covered by the definition of “Supply”. Hence, the import of service
not in course or furtherance of business but made for consideration is covered by the
definition of supply.
Definition of Business
Since the supply is taxable only if it is in the course or furtherance of business, it becomes
necessary to understand as to what is business? The term business has been defined in section
2(17) as follows:
“Business” includes––
(a) any trade, commerce, manufacture, profession, vocation, adventure, wager or any other
similar activity, whether or not it is for a pecuniary benefit;
(b) any activity or transaction in connection with or incidental or ancillary to sub-clause (a);
(c) any activity or transaction in the nature of sub-clause (a), whether or not there is volume,
frequency, continuity or regularity of such transaction;
(d) supply or acquisition of goods including capital goods and services in connection with
commencement or closure of business;
(e) provision by a club, association, society, or any such body (for a subscription or any other
consideration) of the facilities or benefits to its members admission, for a consideration, of
persons to any premises;
(g) services supplied by a person as the holder of an office which has been accepted by him in
the course or furtherance of his trade, profession or vocation;
(h) services provided by a race club by way of totalisator or a license to book maker in such club
; and
(i) any activity or transaction undertaken by the Central Government, a State Government or any
local authority in which they are engaged as public authorities
Section 2 (52) “goods” means every kind of movable property other than money and securities
but includes actionable claim, growing crops, grass and things attached to or forming part of the
land which are agreed to be severed before supply or under a contract of supply;
Section 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 form, currency or denomination for which a separate
consideration is charged;
SCHEDULE III
There are certain activities which are items not covered under GST. They are beyond the scope
of GST, i.e., GST will not apply on them. These are classified under Schedule III of the GST Act
as “Neither goods nor services”.
Schedule I
There are a few supplies which are made together with two or more items. Such supplies are
further classified into Composite Supply and Mixed Supply.
E.g. Buying a Dry Fruit Gift Box for Diwali. It includes dry fruits, a box, and a wrapper. Box
and wrapper cannot be sold individually without the main content which is dry fruit. This is a
composite supply.
A supply comprising of two or more goods/services, wherein the supplies are independent of
each other and are not necessarily required to be sold together is called a mixed supply. The first
condition to be met for mixed supply is that ‘it should not be a composite supply’. In such cases,
the tax rate that is higher of the two supplies will be applicable to the entire supply.
E.g Buying a Christmas package consisting of cakes, aerated drinks, chocolates, Santa caps, and
other gift items. Each of these items can be sold separately and are not dependent on each other.
This is a mixed supply.
REFERENCE:
1. Cleartax.in
2. Taxmann.com
3. gstindia.com
4. ICAI Background Material on GST Law for Commerce Students, January 2019
edition.
EDITED BY: NEELAKSHI ARORA
EXERCISE
SHORT ANSWER QUESTIONS: