Frequently asked Questions

Meaning and Scope of Supply

Q 1. What is the taxable event under GST?

Ans. The taxable event under GST shall be the supply of
goods or services or both made for consideration in the
course or furtherance of business. The taxable events under
the existing indirect tax laws such as manufacture, sale, or
provision of services shall stand subsumed in the taxable
event known as ‘supply’.

Q 2. What is the scope of ‘supply’ under the GST law?

Ans. The term ‘supply’ is wide in its import covers all
forms of supply of goods or services or both that includes
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. It also
includes import of service. The model GST law also provides
for including certain transactions made without
consideration within the scope of supply.

Q 3. What is a taxable supply?

Ans. A ‘taxable supply’ means a supply of goods or
services or both which is chargeable to goods and services
tax under the GST Act.

Q 4. What are the necessary elements that constitute supply under CGST/SGST Act?

Ans. In order to constitute a ‘supply’, the following elements
are required to be satisfied, i.e.-

(i) the activity involves supply of goods or services
or both;

(ii) the supply is for a consideration unless otherwise
specifically provided for;

(iii) the supply is made in the course or furtherance of
business;

(iv) the supply is made in the taxable territory;

(v) the supply is a taxable supply; and

(vi) the supply is made by a taxable person.

Q 5. Can a transaction in which any one or more of the above criteria is not fulfilled, be still considered as supply under GST?

Ans. Yes. Under certain circumstances such as import of
services for a consideration whether or not in the course or
furtherance of business (Section 7(1) (b)) or supplies made
without consideration, specified under Schedule-I of CGST
/SGST Act, where one or more ingredients specified in
answer to question no.4 are not satisfied, it shall still be
treated as supply for levy of GST.

Q 6. Import of Goods is conspicuous by its absence in Section 7. Why?

Ans. Import of goods is dealt separately under the
Customs Act, 1962, wherein IGST shall be levied as
additional duty of customs in addition to basic customs
duty under the Customs Tariff Act, 1975.

Q 7. Are self-supplies taxable under GST?

Ans. Inter-state self-supplies such as stock transfers,
branch transfers or consignment sales shall be taxable
under IGST even though such transactions may not involve
payment of consideration. Every supplier is liable to
register under the GST law in the State or Union territory
from where he makes a taxable supply of goods or
services or both in terms of Section 22 of the model GST
law. However, intra-state self-supplies are not taxable
subject to not opting for registration as business vertical.

Q 8. Whether transfer of title and/or possession is necessary for a transaction to constitute supply of goods?

Ans. Title as well as possession both have to be transferred
for a transaction to be considered as a supply of goods.
In case title is not transferred, the transaction would be
treated as supply of service in terms of Schedule II (1) (b).
In some cases, possession may be transferred immediately
but title may be transferred at a future date like in case of
sale on approval basis or hire purchase arrangement.
Such transactions will also be termed as supply of goods.

Q 9. What do you mean by “supply made in the course or furtherance of business”?

Ans. “Business” is defined under Section 2(17) include any
trade, commerce, manufacture, profession, vocation etc.
whether or not undertaken for a pecuniary benefit.
Business also includes any activity or transaction which is
incidental or ancillary to the aforementioned listed
activities. In addition, any activity undertaken by the
Central Govt. or a State Govt. or any local authority in
which they are engaged as public authority shall also be
construed as business. From the above, it may be noted that
any activity undertaken included in the definition for
furtherance or promoting of a business could constitute a
supply under GST law.

Q 10. An individual buys a car for personal use and after a year sells it to a car dealer. Will thetransaction be a supply in terms of CGST/SGST Act? Give reasons for the answer.

Ans. No, because supply is not made by the individual in
the course or furtherance of business. Further, no input
tax credit was admissible on such car at the time of its
acquisition as it was meant for non-business use.

Q 11. A dealer of air-conditioners permanently transfers an air conditioner from his stock in trade, for personal use at his residence. Will the transaction constitute a supply?

Ans. Yes. As per Sl. No.1 of Schedule-I, permanent transfer
or disposal of business assets where input tax credit has
been availed on such assets shall constitute a supply under
GST even where no consideration is involved.

Q 12. Whether provision of service or goods by a club or association or society to its members will be treated as supply or not?

Ans. Yes. Provision of facilities by a club, association,
society or any such body to its members shall be treated
as supply. This is included in the definition of ‘business’ in
section 2(17) of CGST/SGST Act.

Q 13. What are the different types of supplies under the GST law?

Ans.

(i) Taxable and exempt supplies.

(ii) Inter-State and
Intra-State supplies,

(iii) Composite and mixed supplies and

(iv) Zero rated supplies.

Q 14. What are inter-state supplies and intra-state supplies?

Ans. Inter-state and intra-state supplies have specifically
been defined in Section 7(1), 7(2) and 8(1), 8(2) of the IGST
Act respectively. Broadly, where the location of the supplier
and the place of supply are in same state it will be intra-
state and where it is in different states it will be inter-state
supplies.

Q 15. Whether transfer of right to use goods will be treated as supply of goods or supply of service? Why?

Ans. Transfer of right to use goods shall be treated as
supply of service because there is no transfer of title in such
supplies. Such transactions are specifically treated as
supply of service in Schedule-II of CGST/SGST Act.

Q 16. Whether Works contracts and Catering services will be treated as supply of goods or supply of services? Why?

Ans. Works contracts and catering services shall be treated
as supply of services as both are specified under Sl. No.
6 (a) and (b) in Schedule-II of the model GST law.

Q 17. Whether supply of software would be treated as supply of goods or supply of services under GST law?

Ans. Development, design, programming,
customization, adaptation, upgradation, enhancement,
implementation of information technology software
shall be treated as supply of services as listed in Sl. No.
5 (2)(d) of Schedule –II of the model GST law.

Q 18. Whether goods supplied on hire purchase basis will be treated as supply of goods or supply of services? Why?

Ans. Supply of goods on hire purchase shall be treated
as supply of goods as there is transfer of title, albeit at a
future date.

Q 19. What is a Composite Supply under CGST/SGST/UTGST Act?

Ans. Composite Supply means a supply made by a taxable
person to a recipient comprising two or more supplies of
goods or services, or any combination thereof, which are
naturally bundled and supplied in conjunction with each
other in the ordinary course of business, one of which is a
principal supply. For example, where goods are packed and
transported with insurance, the supply of goods, packing
materials, transport and insurance is a composite supply
and supply of goods is the principal supply.

Q 20. How will tax liability on a composite supply be determined under GST?

Ans. A composite supply comprising two or more
supplies, one of which is a principal supply, shall be treated
as a supply of such principal supply.

Q 21. What is a mixed supply?

Ans. Mixed Supply means two or more individual supplies
of goods or services or any combination thereof, made in
conjunction with each other by a taxable person for a single
price where such supply does not constitute a composite
supply. For example, a supply of package consisting of
canned foods, sweets, chocolates, cakes, dry fruits, aerated
drink and fruit juice when supplied for a single price is a
mixed supply. Each of these items can be supplied
separately and it is not dependent on any other. It shall not
be a mixed supply if these items are supplied separately.

Q 22. How will tax liability on a mixed supply be determined under GST?

Ans. A mixed supply comprising two or more supplies
shall be treated as supply of that particular supply which
attracts the highest rate of tax.

Q 23. Are there any activities which are treated as neither a supply of goods nor a supply of services?

Ans. Yes. Schedule-III of the model GST law lists certain
activities such as

(i) services by an employee to the
employer in the course of or in relation to his employment,

(ii) services by any Court or Tribunal established under any
law,

(iii) functions performed by members of Parliament,
State Legislatures, members of the local authorities,
Constitutional functionaries

(iv) services of funeral, burial,
crematorium or mortuary and

(v) sale of land and

(vi), actionable claims other than lottery, betting and gambling
shall be treated neither a supply of goods or supply of
services.

Q 24. What is meant by zero rated supply under GST?

Ans. Zero rated supply means export of goods and/or
services or supply of goods and/or services to a SEZ
developer or a SEZ Unit.

Q 25. Will import of services without consideration be taxable under GST?

Ans. As a general principle, import of services without
consideration will not be considered as supply under GST
in terms of Section 7. However, 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, even without consideration will
be treated as supply in terms of Sl. No.4 of Schedule I.