Concept of Supply under GST
The basis of charge of GST is the supply. So the concept of supply needs to be clear in order to determine the applicability of GST.
In general, supply for GST purposes covers all forms of supply where goods and/or services are supplied in return for a consideration. Any transaction involving supply of goods and/or services without consideration is not a supply unless it is deemed to be a supply under law. Drawing upon the international experience, the following criteria have been identified to distinguish a transaction as supply on which GST is levied;
(i) supply of goods and / or services
(ii) supply is for a consideration
(iii) supply is made in the course or furtherance of business
(iv) supply is made in the taxable territory
(v) supply is a taxable supply, and
(vi) supply is by a taxable person.
Consideration criteria for supply under GST
One of the essential conditions for the supply of goods and/or services to fall within the ambit of GST is that a supply is made for a consideration. For GST purposes, consideration does not refer only to money. It covers anything which might be possibly done, given or made in exchange for something else. For example, it might be something exchanged in a barter arrangement, such as in a part exchange, or where a service is performed in return for another service or it may simply be a condition imposed upon the making of the supply. A consideration may be monetary, non-monetary or a combination of both but it must be capable of being expressed in monetary terms. There must be a direct link between the supply and the consideration. In order to qualify as consideration for a supply, there must be at least two parties. A direct link is established between the supply made and the consideration given. A consideration need not always flow from the recipient of the supply. It could be made by a third person. Consideration refers to ‘reciprocal performance’ capable of being expressed in monetary terms.
The Model GST Law defines consideration in relation to the supply of goods and/or services to any person to include (a) 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 and/or services, whether by the said person or by any other person;
(b) the monetary value of any act or forbearance, whether or not voluntary, in respect of, in response to, or for the inducement of, the supply of goods and/or services, whether by the said person or by any other person.
However, a deposit whether refundable or not, given in respect of the supply of goods and/or services shall not be considered as payment made for the supply unless the supplier applies the deposit as consideration for the supply.
Certain transactions made without considerations (free supply of goods and services) are deemed to be supply for GST purposes. For example, the permanent transfer /disposal of business assets, temporary application of business assets to a private or non-business needs, services put to a private or non-business use, self-supply of goods or services, assets retained after de-registration and a supply made by the same PAN based entity across different States without consideration (stock/branch transfer) shall be deemed to be taxable supplies, though no consideration may be involved.
Related Topic: Tax deductions under different sections
Valuation of Supply under GST
The Model GST Law proposes to adopt the concept of ‘transaction value’ for determining the taxable value of supply on which the goods and services tax shall be levied.
Section 15 of the Model GST Law provides that the transaction value for the purpose of valuing a taxable supply shall include:
- any amount that the supplier is liable to pay
- royalties and license fees
- any taxes, duties, fees and charges levied
- incidental expenses such ascommission and packing done by supplier at or before the time of delivery
- any discount or incentives that maybe allowed after the supply has been effected. However post-supply are excluded.