Consideration - GST Ready Reckoner - GST

As per section 2(31) of CGST Act 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; the supply of goods or services or both; whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government; (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, the supply of goods or services or both; whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government : (c) Deposit is not consideration 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. Money means - the Indian legal tender or any foreign currency, cheque, promissory note, bill of exchange, letter of credit, draft, pay order, traveller cheque, money order, postal or electronic remittance or any other instrument recognised by the Reserve Bank of India - when used as a consideration to settle an obligation or exchange with Indian legal tender of another denomination but shall not include any currency that is held for its numismatic value; [ Section 2(75) of CGST Act, 2017 ] Consideration has defined in other Laws 1. As per Explanation (a) to section 67 of Services Tax Act Consideration includes- (i) any amount that is payable for the taxable services provided or to be provided; (ii) any reimbursable expenditure or cost incurred by the service provider and charged, in the course of providing or agreeing to provide a taxable service, except in such circumstances, and subject to such conditions, as may be prescribed; (iii) any amount retained by the lottery distributor or selling agent from gross sale amount of lottery ticket in addition to the fee or commission, if any, or, as the case may be, the discount received, that is to say, the difference in the face value of lottery ticket and the price at which the distributor or selling agent gets such ticket. 2. As per Contract Act, 1872 The definition of 'consideration' as given in section 2(d) of the Indian Contract Act, 1872 as follows - When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or abstain from doing, something, such act or abstinence or promise is called a consideration for the promise In simple terms, 'consideration' means everything received or recoverable in return for a provision of service which includes monetary payment and any consideration of non- monetary nature or deferred consideration as well as recharges between establishments located in a non-taxable territory on one hand and taxable territory on the other hand. 3. As per Guidance Note 2.2.2 of Education Guide issued 20th Jun 2012 2.2.2 What are the implications of the condition that activity should be carried out for a 'consideration'? To be taxable an activity should be carried out by a person for a 'consideration' Activity carried out without any consideration like donations, gifts or free charities are therefore outside the ambit of service. For example grants given for a research where the researcher is under no obligation to carry out a particular research would not be a consideration for such research. An act by a charity for consideration would be a service and taxable unless otherwise exempted. ( for exemptions to charities please see Guidance Note 7) Conditions in a grant stipulating merely proper usage of funds and furnishing of account also will not result in making it a provision of service. Donations to a charitable organization are not consideration unless charity is obligated to provide something in return e.g. display or advertise the name of the donor in a specified manner or such that it gives a desired advantage to the donor. 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.