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MEANING AND SCOPE OF SUPPLYUNDER MODEL GST LAW, INDIA

Presented by CA. Deepak Vachher Date 25th Sep 2016

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

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AGENDA

Overview

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Meaning and scope of supply as per section 3 of IGST

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

Section 3Meaning & Scope of Supply

SUPPLY INCLUDES:

SECTION 3(1)(A) : NORMAL SUPPLY OF GOODS AND/OR SERVICES

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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)

InterpretationThe 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.

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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 thereThe benefit factor.Payment(expenses incurred for running of branch there) made by Indian Head office to its branch /agency is not liable to GSTSimilarly export benefits will also not be available. For transactions between them.

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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 doubtIf 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

useAssets retained after

deregistration

Supply of goods and / or services by a taxable

person to another taxable or nontaxableperson in the course or

furtherance of business.

Supply of goods by a registered taxable person to a job-worker interms of section 43A shall not be treated as supply of goods.

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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

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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 propertyDevelopment, 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.

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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

supplyThis 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

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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

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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.

Thank you!