Scope of Supply Under GST

Goods and Service Tax (GST) is levied on “Supply”.

GST is a tax charged on supply of good and service. Supply is the root origin of GST applicability. A layman considers GST over sales or providing of service which is correct to an extent but it’s periphery is beyond that. In order to hold a complete understanding for working under GST one need to have knowledge of its seed i.e. Supply.

The levy or chargeability arises at supply but its payment liability arises at the “time of Supply”. So to understand better the time of payment of liability of GST one need to understand, “What is Time of Supply” ?

So let’s fine out our knowledge and command over GST.

Scope of Supply

Scope means coverage or extent. So scope of supply means the acts considered as supply. Sec. 7 of the Central Goods and Service Tax Act 2017 (CGST Act 2017) defines Scope of Supply. Let us understand this in simplified manner. Following shall be considered as supply of goods or services or both:

1)    With consideration for business purposes :-

• Sale
• Transfer
• Barter
• Exchange
• License 
• Rental 
• Lease
• Disposal made or agreed 
• Import of service (also if not for business purposes)

2)   Without Consideration for Business purposes or in relation to business :-

• Sale or disposal of business assets where input tax credit is availed on them. 
• Supply between related persons or between or distinct persons as specified under Section 25 (registered or required to take registration under the GST Act) for business purposes. 
• Supply of goods by ‘Principal’ to ‘Agent’ where Agent will supply it on behalf of Principal. 
• Supply of goods by ‘Agent’ to ‘Principal’ where Agent receives on behalf of Principal.
• Import of service from a related person or other entity outside India for business purpose.

Not Considered as Supply of Goods or Services

As per Section 7 of the Act read with Schedule III, The following are not to be considered as supply of goods or services :-

1. Services of Employee to Employer. 
2. Service by any court or tribunal.
3. Functions of Member of Parliament, Member of State Legislature, Members of Municipalities & other local authorities. 
4. Duties of Person holding post under Constitution.
5. Duties of Person as Chairperson or Member or Director of body established by Central, state or local authority and who is not deemed as employee before the commencement of this clause. 
6. Services of Funeral, burial, crematorium or mortuary including transportation of deceased. 
7. Sale of land and building where the entire consideration has been received after issuance of completion certificate by the competent government or statutory authority or after its first occupation, whichever is earlier. 
8. Actionable claim, other than lottery, betting and gambling. 
9. Supply of goods from a non taxable territory to another non taxable territory without entering such goods entering into India. 
10. Supply of warehouse goods to any person before clearance for home consumption.
11. Supply of Goods by the consignee to any other person, by endorsement of document 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. 
12. Activities or transactions undertaken by the Central Government, a State Government or any Local Authority as Public authority.

This is all about what is supply under GST, and what is not considered as supply under GST. This turn out to be the foundation of GST law. In the next blog we will understand about “Time of Supply”. 

Disclaimer :

The above blog is purely for educational and  guidance purpose. It's just the reflection of the author's personal experience and judgment. The author has just provided the general information & understanding and its not at all an alternative of any legal advice or practitioner. It has no connection with the websites mentioned in its contents. The content stated in the blog should be used by the reader at his own discretion and sole responsibility. The content of the blog can be only used for any other document, write-up, article, blog and any written or printed material whether on paper or digitally in any form, with the prior permission of the author.