Scope of Supply
In this Article we are going to discuss about
the Scope of supply & Related Scheduled.
Section 7 of CGST Act, 2017:- Scope of Supply.
Schedule 1:- Activities to be treated as supply even if
made without consideration.
Schedule 2:- Activities or Transactions to be treated as
supply of goods or supply of service.
Schedule 3:- Activities or Transactions which shall be
treated neither as a supply of goods nor a supply of services.
Section 7 of CGST Act, 2017:- SCOPE OF SUPPLY
(1) For the purposes of this Act, the expression
“supply” includes,
(a) All forms of supply of goods or services or
both such as sale, transfer, barter, exchange, licence, rental, lease or
disposal made or agreed to be made for a consideration by a person in the
course or furtherance of business.
(aa) Activities or transactions involving supply
of goods or Service by any person, Other than an individual, to its member or
constituent or vice-versa, for cash, deferred payment, or other valuable
consideration. (Inserted wide Finance
Bill 2021.)
(b) Import of services for a consideration whether
or not in the course or furtherance of business AND
(c)
The activities specified in Schedule I, made or agreed to be made without a
consideration.
(1A) where certain activities or
transactions constitute a supply in accordance with the provisions of
sub-section (1), they shall be treated either as supply of goods or supply of
services as referred to in Schedule II.
(2) Notwithstanding anything contained
in sub-section (1),
(a)
Activities or transactions specified in Schedule III; or
(b)
such activities or transactions undertaken by the Central Government, a State
Government or any local authority in
which they are engaged as public authorities, as may be notified by the
Government on the recommendations of the Council, shall be treated neither as a
supply of goods nor a supply of services.
(3) Subject to the provisions of
sub-sections (1), (1A) and (2), the Government may, on the recommendations of
the Council, specify, by notification, the transactions that are to be treated
as,
(a)
A supply of goods and not as a supply of services; or
(b)
A supply of services and not as a supply of goods.
SCHEDULE I:-ACTIVITIES TO BE TREATED AS SUPPLY
EVEN IF MADE WITHOUT CONSIDERATION.
1.
Permanent transfer or disposal of business assets where input tax credit has
been availed on such assets.
2.
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.
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.
4.
Import of services by a person from a related person or from any of his other
establishments outside India, in the course or furtherance of business.
SCHEDULE II:- ACTIVITIES OR TRANSACTIONS TO BE
TREATED AS SUPPLY OF GOODS OR SUPPLY OF SERVICES.
1. Transfer,
(a) Any transfer of the title in goods is a supply
of goods.
(b) Any transfer of right in goods or of undivided
share in goods without the transfer of title thereof, is a supply of services.
(c) Any transfer of title in goods under an
agreement which stipulates that property in goods shall pass at a future date
upon payment of full consideration as agreed, is a supply of goods.
2. Land and Building,
(a) Any lease, tenancy, easement, licence to occupy
land is a supply of services.
(b) any lease or letting out of the building
including a commercial, industrial or residential complex for business or
commerce, either wholly or partly, is a supply of services.
3.
Treatment or process,
Any treatment or process which is applied to
another person's goods is a supply of services.
4. Transfer of business assets,
(a) Where goods forming part of the assets of
a business are transferred or disposed of by or under the directions of the
person carrying on the business so as no longer to form part of those assets,
such transfer or disposal is a supply of goods by the person.
(b) where, by or under the direction of a
person carrying on a business, goods held or used for the purposes of the
business are put to any private use or are used, or made available to any
person for use, for any purpose other than a purpose of the business, the usage
or making available of such goods is a supply of services.
(c) Where any person ceases to be a taxable
person, any goods forming part of the assets of any business carried on by him shall be deemed to be
supplied by him in the course or furtherance of his business immediately before
he ceases to be a taxable person, unless-
(i)
The business is transferred as a going concern to another person; or
(ii)
The business is carried on by a personal representative who is deemed to be a
taxable person.
5. Supply of services, the following shall be
treated as supply of services, namely-
(a) Renting of immovable property.
(b) Construction of a complex, building, civil
structure or a part thereof, including a complex or building intended for sale
to a buyer, wholly or partly, except where the entire consideration has been received
after issuance of completion certificate, where required, by the competent
authority or after its first occupation, whichever is earlier.
Explanation:-For
the purposes of this clause,
(1)
the expression "competent authority" means the Government or any
authority authorised to issue completion certificate under any law for the time
being in force and in case of non-requirement of such certificate from such
authority, from any of the following, namely-
(i) An architect registered with the Council
of Architecture constituted under the Architects Act, 1972; or
(ii) A chartered engineer registered with
the Institution of Engineers (India); or
(iii) A licensed surveyor of the respective
local body of the city or town or village or development or planning authority.
(2)
The expression "construction" includes additions, alterations,
replacements or remodeling of any existing civil structure.
(c)
Temporary transfer or permitting the use or enjoyment of any intellectual
property right.
(d)
Development, design, programming, customization, adaptation, up gradation,
enhancement, implementation of information technology software.
(e)
Agreeing to the obligation to refrain from an act, or to tolerate an act or a
situation, or to do an act; and
(f)
Transfer of the right to use any goods for any purpose (whether or not for a
specified period) for cash, deferred payment or other valuable consideration.
6.
Composite supply, the following composite supplies shall be treated as a supply
of services, namely,
(a)
Works contract as defined in clause (119) of section 2; and
(b)
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 for human consumption), where such supply or
service is for cash, deferred payment or other valuable consideration.
Supply
of goods by any unincorporated association or body of persons to a member
thereof for cash, deferred payment or other valuable consideration. (Omitted wide Finance Act, 2021)
SCHEDULE III:- ACTIVITIES OR TRANSACTIONS
WHICH SHALL BE TREATED NEITHER AS A SUPPLY OF GOODS NOR A SUPPLY OF SERVICES.
1.
Services by an employee to the employer in the course of or in relation to his
employment.
2.
Services by any court or Tribunal established under any law for the time being
in force.
3.
(a) the functions performed by the Members of Parliament, Members of State
Legislature, Members of Panchayats, Members of Municipalities and Members of
other local authorities,
(b) The duties performed by any person who
holds any post in pursuance of the provisions of the Constitution in that
capacity; or
(c) the duties performed by any person as a
Chairperson or a Member or a Director in a body established by the Central
Government or a State Government or local authority and who is not deemed as an employee before the commencement of
this clause.
4.
Services of funeral, burial, crematorium or mortuary including transportation
of the deceased.
5.
Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of
building.
6.
Actionable claims, other than lottery, betting and gambling.
7.
Supply of goods from a place in the non-taxable territory to another place in
the non-taxable territory without such goods entering into India.
8.
(a) Supply of warehoused goods to any person before clearance for home
consumption.
(b) Supply of goods by the consignee to any
other person, by endorsement of documents of title to the goods, after the
goods have been dispatched from the port of origin located outside India but
before clearance for home consumption.
Explanation
1:- For the purposes of paragraph 2, the term "court" includes
District Court, High Court and Supreme Court.
Explanation
2:- For the purposes of paragraph 8, the expression “warehoused goods” shall
have the same meaning as assigned to it in the Customs Act, 1962.’
("Warehoused goods"
means goods imported and allowed to be deposited in a licensed warehouse as per
Section 2(44) Custom Act, 1962.)
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