TYPES OF ‘SUPPLY’ UNDER ‘GST’ REGIME

[Mr. M. GOVINDARAJAN]

Section 66B of the Finance Act, 1994 provides that there shall be levied a tax at the rate of fourteen per cent. on the value of all services, other than those services specified in the negative list, provided or agreed to be provided in the taxable territory by one person to another and collected in such manner as may be prescribed.  The central excise duty is leviable on the manufacturing of goods.  GST, being subsumed service tax and central excise duty, levies tax on the concept of supply.   The key word that is to be remembered by the stakeholders is ‘supply’.   In this article the meaning of the term ‘supply’ and the types of various supplies are discussed for the information of the readers.

Supply

Section 7 of the Act defines the term ‘supply’ including-

• 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;
• import of services for a consideration whether or not in the course or furtherance of business;
• the activities specified in Schedule I, made or agreed to be made without a consideration;; and
• the activities to be treated as supply of goods or supply or services as referred to in Schedule II;

Types of Supply

Composite Supply

Section 2(30) defines the expression ‘composite supply’ means a supply made by a taxable person to a recipient consisting of two or more taxable supplies of goods or services or both, 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.

Continuous supply

Continuous supply is of two types viz., continuous supply of goods and continuous supply of services.

Section 2(32) defines the expression ‘continuous supply of goods’ as a supply of goods which is provided, or agreed to be provided, continuously or on recurrent basis, under the contract whether or not by means of a wire, cable, pipeline or other conduit, and for which the suppler invoices the recipient on a regular or periodic basis and includes supply of such goods as Government may, subject to such conditions as it may, by notification, specify.

Section 2(33) defines the expression ‘continuous supply of services’ as a supply of services which is provided, or agreed to be provided, continuously or on recurrent basis, under a contract for a period exceeding three months with periodic payment obligation and includes supply of such services as the Government may, subject to such conditions, as it may, by notification, specify.

Inward supply

Section 2(67) defines the expression ‘inward supply’ in relation to a person, as receipt of goods or services or both whether by purchase, acquisition or any other means with or without consideration.

Outward supply

Section 2(83) defines the expression ‘outward supply’ in relation to a taxable person, as supply of goods or services or both, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal or any other mode, made or agreed to be made by such person in the course or furtherance of business.

Mixed supply

Section 2(74) defines the expression ‘mixed supply’ as 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.

Taxable supply

Section 2(108) defines the expression ‘taxable supply’ as a supply of goods or services or both which is leviable to tax under this Act

Non taxable supply

Section 2(79) defines the expression ‘non taxable supply’ as a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act.

Principal supply

Section 2(90) defines the expression ‘principal supply’ as the supply of goods or services which constitutes the predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary.

Inter-State supply

Section 7 of Integrated Goods and Services Tax Act, defines the expression ‘inter-State Supply’ as supply of goods, where the location of the supplier and place of supply are in-

• two different States;
• two different Union territories; or
• a State and a Union territory

shall be treated as a supply of goods in the course of inter-State trade or commerce.

Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-State trade or commerce.

                        Where the location of the supplier and the place of supply are in-

• two different States;
• two different Union territories; or
• a State and a Union territory

shall be treated as a supply of service in the course of inter-State trade or commerce.

Supply of services imported into the territory of India shall be treated to be a supply of services in the course of the inter-State trade or commerce.

Supply of goods or services or both-

• when the supplier is located in India and the place of supply is outside India;
• to or by a Special Economic Zone or a Special Economic Zone unit; or
• in the taxable territory, not being an intra-State supply and not covered elsewhere in this section

shall be treated as a supply of goods or services or both in the course of inter-State trade or commerce.

Intra-State supply

Section 8 of IGST Act, 2017 defines the expression ‘intra-State supply’ as supply of goods where the location of the supplier and the place of supply of goods are in the same State or same Union territory shall be treated as intra-State supply.

The following supply of goods shall not be treated as intra-State supply-

• supply of goods to or by a Special Economic Zone developer or a Special Economic Zone Unit;
• goods imported into the territory of India till they cross the customs frontiers of India; or
• supplies made to a tourist referred to in Section 15.

The supply of services where the location of the supplier and the place of supply of services are in the same State or same Union territory shall be treated as intra-State supply.  The intra-State supply of services shall not include supply of services to or by a Special Economic Zone developer or a Special Economic Zone unit.

Explanation 1. –for the purposes of this Act, where a person has-

• an establishment in India and any other establishment outside India;
• an establishment in a State or Union territory and any other establishment outside that State; or
• an establishment in a State or Union territory and any other establishment being a business vertical registered with that State or Union territory,

then such establishments shall be treated as establishments of distinct persons.

Explanation 2. – A person carrying on a business  through a branch or an agency or a representational office in any territory shall be treated as having an establishment in that territory.

Place of supply

Section 10 of IGST Act, 2017 provides that the place of supply of goods, other than supply of goods imported into, or exported from India, shall be as under-

• Where the supply involves movement of goods, whether by the supplier or the recipient or by any other person, the place of supply of such goods shall be the location of the goods at the time at which the movement of goods terminates for delivery to the recipient.
• Where the goods are delivered by the supplier to a recipient or any other person on the direction of a third person, whether acting as an agent or otherwise, before or during movement of goods, either by way of transfer of documents of title to the goods or otherwise, it shall be deemed that the said third person has received the goods and the place of supply of such goods shall be the principal place of business of such person;
• Where the supply does not involve movement of goods, whether by the supplier or recipient, the place of supply shall be the principal place of business of such person;
• Where the goods are assembled or installed at site, the place of supply shall be the place of such installation or assembly;
• Where the goods are supplied on board a conveyance, including a vessel, an aircraft, a train or a motor vehicle the place of supply shall be the location at which such goods are taken on board.

Where the place of supply of goods cannot be determined, the place of supply shall be determined in such manner as may be prescribed.