Consideration for Supply - GST Ready Reckoner - GST

Consideration for Supply Consideration in relation to Supply of Goods Services has specifically been defined in relation to the supply of goods or services or both in the section 2(31) CGST Act, 2017. Consideration in relation to the supply of goods or services or both includes (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of; does not include Any subsidy given by the Central Government or a State Government is not considered as consideration . It is immaterial whether the payment is made by the recipient or by any other person. If subsidy directly link with supply, from by a person other than govt. shall be include in consideration. Subsidy which is not directly link with supply which not include in transaction value of supply. A deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply. The GST payable by you on a *taxable supply for which the *consideration is a deposit that was held as security for the performance of an obligation is attributable to the tax period during which the deposit: (a) is forfeited because of a failure to perform the obligation; or (b) is applied as all or part of the consideration for a supply. Type of Consideration Consideration can be in monetary form or non-monetary form or both. (a) Monetary consideration includes payment by cash, cheque or credit card, bank transfer and deduction from bank account. (b) Non-monetary consideration essentially means compensation in kind such as the following: Supply of goods and services Refraining or forbearing to do an act Tolerating an act or a situation Doing or agreeing to do an act If consideration for supply not in the money (as in the barter Transaction) or in the consideration is partly in money and partly something else (as in the Exchange offer), the value of supply is the monetary equivalent of the consideration. Explanation Term monetary value of any act aims to cover provision of services in satisfaction of payment obligation for supply of goods and vice-versa. Term Forbearance is agreeing for not doing something. it is a non-compete agreements. However, there are exceptions to the requirement of Consideration as a pre-condition for a supply to be called a supply as per GST. As per schedule I to CGST Act, 2017, activities as mentioned therein shall be treated as supply even if made without consideration. Important Notifications Clarification 1. Levy of GST on the service of display of name or placing of name plates of the donor in the premises of charitable organisations receiving donation or gifts from individual donors [ Circular No. 116/5/2019-GST Dated 11.10.2019 ] In case of donation GST is not leviable, where all the three conditions are satisfied namely 1. the gift or donation is made to a charitable organization, 2. the payment has the character of gift or donation and 3. the purpose is philanthropic (i.e. it leads to no commercial gain) and not advertisement. Some examples of cases where there would be no taxable supply are as follows:- (a) Good wishes from Mr. Rajesh printed underneath a digital blackboard donated by Mr. Rajesh to a charitable Yoga institution. (b) Donated by Smt. Malati Devi in the memory of her father written on the door or floor of a room or any part of a temple complex which was constructed from such donation. 2. Clarification on issues regarding treatment of supply by an artist in various States and supply of goods by artists from galleries [ Circular No. 22/22/2017-GST Dated 21.12.2017 ] the art work for supply on approval basis can be moved from the place of business of the registered person (artist) to another place within the same State or to a place outside the State on a delivery challan along with the e-way bill wherever applicable and the invoice may be issued at the time of actual supply of art work. It is further clarified that in case of supply by artists through galleries, there is no consideration flowing from the gallery to the artist when the art works are sent to the gallery for exhibition and therefore, the same is not a supply. It is only when the buyer selects a particular art work displayed at the gallery, that the actual supply takes place and applicable GST would be payable at the time of such supply. 3. Returnable packing material Whether GST will be leviable in case of returnable packing material like drums, gas cylinder etc. supplied with finished goods? in such case GST will be levied on the value charged for the supply only. [ S.No. 61 of Tweet FAQ released by CBEC on 26.06.2017 ] Relevant case laws No GST on interest free refundable deposit received. [ E-Square Leisure Pvt. Ltd.- 2019 (4) TMI 805 - AAR, Maharashtra ] GST on notional interest on interest free refundable deposit not includible. [ M/S. Midcon Polymers Pvt. Ltd. - 2020 (9) TMI 784 - AAR, Karnataka ] In a contrary view in Rajkot Nagarik Sahakari Bank Ltd. , it was hels that GST is payable on the notional interest/monetary value of the act of providing refundable interest free deposit will be considered as consideration. [ M/S. Rajkot Nagarik Sahakari Bank Ltd - 2019 (8) TMI 1213 - AAR, Gujarat ] Value of goods transport services to include diesel supplied free by customer? [ M/S Shri Navodit Agarwal - 2019 (4) TMI 1402 - AAR, Chhattisgarh ] Issue - Do we need to charge GST on Freight amount excluding diesel cost or on total amount which is inclusive of diesel cost? Ruling - The ruling so sought by the Applicant is accordingly answered as under:- In confirmation to the views expressed by the applicant, they (applicant) are required to charge GST upon M/s Shree Raipur Cement, C.G on the total amount including the cost of diesel i.e. on the total freight amount inclusive of the cost of diesel so provided by the service recipient i.e. M/s Shree Raipur Cement. Charity (Dharamda) is not includible in value, [ M/S D.J. Malpani Versus Commissioner of Central Excise, Nashik - 2019 (4) TMI 587 - SC (3 Member bench) ] Issue - While selling goods, the appellant-assessee charged the customers invoices for the price of goods plus Dharmada, a charitable donation. According to the appellant, the Dharmada was paid voluntarily by customers and was meant for charity. It was accordingly credited to charity. However, the Superintendent, Central Excise, Nashik issued show cause notices and raised a demand of duty in respect of Dharmada, claiming it was part of the price for the sale of manufactured goods and included it for computing assessable value. Judgment - In the circumstances we hold that when an amount is paid as Dharmada along with the sale price of goods, such payment is not made in consideration of the transfer of goods. Such payment is meant for charity and is received and held in trust by the seller. If such amounts are meant to be credited to charity and do not form part of the income of the assessee they cannot be included in the transaction value or assessable value of the goods. Thus, the answer to the question referred by the Division Bench is as follows: - The Dharmada collected by the appellant which is clearly an optional payment made by the buyer cannot be regarded as part of the transaction value for the sale of goods. ​​​​​​​Note - The decision in case of Central Excise but Principal should apply under GST also. Example: - 1. The best example of consideration not entirely in the form of money is seen in the exchange offer in the retail trade of consumer durable: - when we go to buy a new mobile phone, we are offered two bargains. Firstly , we can pay money and take mobile phone home. Secondly , we may exchange our old mobile phone and pay lesser money to the extent of value determined for old mobile phone. Here money equivalent value of old mobile phone agreed between supplier and recipient will also be a part of consideration of new mobile phone on which GST will be charged by Supplier. 2. An artist performing on a street does an activity without consideration even though passersby may drop some coins in his bowl kept after feeling either rejoiced or merely out of compassion. They are, however, under no obligation to pay any amount for listening to him nor have they engaged him for his services. On the other hand, if the same person is called to perform on payment of an amount of money, then the performance becomes an activity for a consideration 3. Similarly, the developer or the builder, who is constructing apartments in exchange of land from the landowner, would be subject to the levy of tax under the GST law. given the fact that supply includes barter. 4. If a grant is given to a researcher and in return, the grantor receives research finding exclusively for his own benefit, then the person receiving the grant must account for GST on the research services on a tax inclusive basis. 5. Consideration can be in the form of Money or otherwise. E.g. under a Joint Development Agreement (JDA) Model, the flats handed by the developer to the landowner will be considered as 'Consideration' for the development right given to the developer by the landowner.