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TMI BlogAnnexure 8: Check list for Key Points for supply and supply of goods or services or bothX X X X Extracts X X X X X X X X Extracts X X X X ..... * Duty drawback availed * Payment received (Bank/Cash) * Composite/Mixed Supply 2. 2.Whether any activity or transaction which falls within the scope of supply has not been identified by the Registered Person? * Non-GST Supply: Sr. No. 5F of GSTR 9 * Schedule III of SGST/CGST Act * Invoice/Bill of Supply * Contract * Consideration received * Analysis of cash flow and mapping cash flow onto the returns * Business purpose 3. Whether supply has been correctly classified as Inter- State supply/Intra- State as per Section 7(5) & 8 of the IGST Act, 2017? * Sr. No. 3.1 & 3.2 of GSTR 3B * Section 10, 12, 13 of IGST Act * Invoice/Bill of Supply * Party-wise supply with address * Contract * Transportation document * Whether B2B or B2C in case of supply of services 4. What is the treatment of promotional items given free to end consumers by FMCG companies? * Sr. No. 5E & 5 F of GSTR-9 * Sr. No. 14N, 14P, 14Q of GSTR-9C * Sales promotion expenses * Ledger account of Distributors/Franchisees/Agents * Stock Register 5. Whether the Zero - rated supply is verified as per the provisions of law? * Sr. 5A & 4C of GSTR-9 * Section 16 of IGST Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... * Contract * Bank Statement (payment made) * Letter of credit/ telegraphic transfer * Director report 13. Whether the goods for business use have been put to personal use? * Section 17 (1) of CGST/SGST Act * Schedule II of CGST/SGST Act * Stock register * Drawings account * Nature of expenses especially telephone, repair and maintenance, insurance etc. 14. Whether tax has been paid on RCM on inward supplies? * Section 9(3) and 9(4) of CGST/SGST Act * Self- invoices issued * Payment vouchers * Examine the nature of expenses especially freight (inward and outward), legal charges, import of services etc. * Bank Statement (payment made) 15. Whether tax paid on advances received? * Sr. No. 4F of GSTR-9 * Section 12 and 13 of CGST/SGST Act * Bank Statement (Payment received) * Cash book for any cash received * Loans and advances in the Balance Sheet * Ledger account of debtors * Current liabilities on account of unearned income/advance received 16. Whether any credit note issued for supplies made? * Sr. No. 4I of GSTR-9 * Section 34 of CGST/SGST Act * Credit Note Vouchers * Goods return register * Ledger account of sale returns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... free, whereas the other is against fees. He is providing the same services from both the coaching centres. But, the services provided from the free coaching centre does not fulfil the first characteristic of supply (i.e. consideration) in GST. So, it is not a supply in GST. But, the services from the other coaching centre fulfills all the characteristics of supply. It must be remembered that consideration may not wholly be in monetary form; it may be in forms other than money too. For instance, supply of a new mobile phone worth Rs.50000 in exchange for a specified old mobile phone worth Rs.10000 and Rs.40000 in cash. When the consideration is not wholly in money, the value of the supply is to be ascertained as per rule 27 of the CGST Rules, 2017. B. Supply should be "in the course or furtherance of" business - One of the characteristics of supply is that supply should be "in the course or furtherance of" business except a few. 'In the course or furtherance' is not defined in GST law, but is broad enough to cover any supply made in connection with the business and therefore the phrase needs to be analyzed in detail. The Australian Concise Oxford Dictionary (1997) defines the phras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... employer to an employee shall not be treated as supply. 3. Supplies of goods by principal to his agent where the agent undertakes to supply such goods on behalf of the principal. Supplies of goods by an agent to his principal where the agent undertakes to receive such goods on behalf of his principal. 4. Import of services by a person from a related person or from any of his other establishments outside India, in the course or furtherance of business. 1. Permanent transfer or disposal of business assets without consideration: There is no doubt that disposal of business assets against consideration is a supply. However, if ITC on any business asset has been availed, then disposal of such business assets even if made without consideration should also be treated as supply. Examples - a. Permanent transfer: Example No. 1 - Suppose XYZ Ltd., is in the business of hospitality. He purchases an air conditioner and a car for his hotel business and avails ITC on the air-conditioner but no ITC is availed in respect of the car. After 2 years, he permanently transfers the AC to one director and the car to another director, both without any consideration. Though no consideration is taken in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y no. 2 of Schedule I, gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply. Example: Company X gives a mobile phone worth Rs. 25000/- to each member of its sales team as a gift in 2017-18. The same Company X gives a high-end laptop worth Rs. 60,000/- to the head of the sales team for his performance. Here, the gift of mobile phone to a salesperson as stated above, would not be treated as supply since the value of such gift to an employee does not exceed Rs.50,000/- in that FY. However, say, the company over and above the above, also gifts a family tour package to that employee which is worth Rs.30,000/- in the same FY. In this case, since the value of the gift exceeds Rs.50,000/-, the entire amount of Rs.55, 000/-(=Rs.25, 000/- + Rs.30, 000/-) would be treated as a supply by the employer. In the second case also, gift of laptop worth Rs.60, 000/- to the sales head would be treated as a supply since the value of gift exceeds Rs.50,000/-. Sometimes companies' gift to non-related persons without any consideration. The same may be illustrated as follows - a. Gifts provided by pharmaceutical com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rincipal is treated as supply by the agent to his principal even if such is made without consideration. The key here is whether the invoice for the supply has been issued by/to the agent in his own name rather than in the name of the principal; if so, the transaction between the principal and the agent is a supply, otherwise not. (Circular no. 57/31/2018-GST dated 4th September, 2018 refers) The same is illustrated below- A manufacturer of hosiery products in Kolkata engages an agent in Siliguri to sell his products as an agent. When the manufacturer transfers his stock to the agent it would be treated as supply by the principal to the agent and subsequently when the agent sells the same to the customer such would be treated as supply by the agent. This manufacturer further engages an agent in Nadia to receive cotton yarn from vendors of Nadia. When the agent transfers cotton yarn to the manufacturer the same would be treated as supply by the agent to the principal. Import of services from a related person or from overseas establishment Import of services is a supply, if it is made for a consideration. However, Import of Service without consideration would also be treated as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the employer in the course of or in relation to his employment. ii) Services by any court or Tribunal. iii) Functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities; iv) The duties performed by any person who holds a post in pursuance of the provisions of the Constitution in that capacity; v) The duties performed by any person as a Chairperson or a Member or a Director in a body established by the Central/ State Govt. or a local authority and who is not deemed as an employee before the commencement of this clause. vi) Services of funeral, burial, crematorium or mortuary including transportation of the deceased. vii) Sale of land, sale of building (other than specified in Para. 5(b) of schedule II of the Acts]. viii) Actionable claim, other than lottery, betting and gambling. ix) Supply of goods from one non-taxable territory to another without entering into India. x) (a) Supply of warehoused goods to any person before clearance for home consumption. (b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mples of Actionable Claims * Lottery ticket, * Betting & gambling, * Right to credit in a provident fund, * Dividends on shares, debentures, negotiable instruments such as bills of exchange etc., * Rights shares or option to purchase shares, * Bank guarantee, Examples of Non-Actionable Claim * Copyright, * Right to claim damage in the event of breach of contract, * Right to use, * Coupons and Vouchers. There are several examples of actionable claims. But, only lottery, betting and gambling are liable to GST. iii) Sale of land, sale of building (other than specified in Para. 5(b) of schedule II of the CGST/ SGST Act): Sale of land is outside the ambit of GST. But there may be many activities and transactions related to land which can be taxable in GST. Some of these activities are mentioned in Sch. II. Schedule II: Activities or transactions to be treated as supply of goods or supply of services 1. TRANSFER (a) Any transfer of title in goods is a supply of goods - Transfer of title of goods means transfer of possession and control on such goods i.e transfer of ownership. However, sometimes, title may be transferred before getting physical possession of goo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the owner and the hirer or there may be a tripartite agreement between seller, the buyer and the financer. Obviously the second type of agreement is more popular nowadays. However, this kind of tripartite arrangement cannot be considered as hire purchase. In this case, full payment is made by the financing company for the purchase of the buyer and the purchaser becomes the owner of the goods. The finance company has only the right to seize the goods for non-payment of loan. In case of failure to pay the loan, the finance company sells the goods after taking possession of the goods. In such a case, it is a supply in GST and there is specific valuation rule 32(5) of the CGST/ SGST Rules, 2017 which reads as follows: "Where a taxable supply is provided by a person dealing in buying and selling of second hand goods i.e., used goods as such or after such minor processing which does not change the nature of the goods and where no input tax credit has been availed on the purchase of such goods, the value of supply shall be the difference between the selling price and the purchase price and where the value of such supply is negative, it shall be ignored: Provided that the purchase val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly of services - Any treatment or process applied to another person's goods is a service. Further, any treatment or process undertaken by a person on goods belonging to another registered person is defined as "job work" in GST. Now, if consumables are supplied by the job worker in the process of applying treatment or process then also it would be treated as supply of services. However, if goods are also supplied by the job worker for manufacturing of a product as per the specification of the Principal then the same may be considered as manufacturing of that particular goods. Accordingly, the job worker is liable to charge GST at applicable rates for supply of that particular goods. In this respect clarification in Circular No: 52/26/2018-GST dated 09.08.2018 is relevant: Fabrication of buses may involve the following two situations - (a) Bus body builder builds a bus, working on the chassis owned by him and supplies the built-up bus to the customer, (b) Bus body builder builds body on chassis provided by the principal for bodybuilding. In situation (a), the supply of a bus is being made, and accordingly the supply would attract GST@ 28%. In situation (b), fabrication of body on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive who is deemed to be a taxable person. Example- A manufacturer of hosiery goods has decided to close his business. At the time of filing application for cancellation of registration, he has raw materials and finished goods as stock worth Rs.10 Lakh. He also has Plant & Machinery worth Rs.15 Lakh. He has disclosed such assets but failed to pay any tax. His application is accepted and registration is cancelled. This manufacturer is liable to pay tax on his stock including Plant & Machinery as the same is deemed to be supplied by him immediately before he ceases to be a taxable person. However, in the present case if the person would have transferred the business as a going concern to another person, in such case, it would have been treated as exempt supply of services in accordance with sl.no 2 of Notification No. 12-CT(R)/2017 dated 28.06.2017. Similarly, in case of death of the person, if the business is carried on by his legal heir as a taxable person under GST then all liability of the deceased proprietor would be transferred to the legal heir. 5. SUPPLY OF SERVICES As per Sch. II the following activities are treated as supply of services: (a) renting of immovable propert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or sale to a buyer, wholly or partly - Where any consideration in respect of construction of complex, building, civil structure or part of it is received partly or wholly, before issuance of completion certificate, then the entire consideration shall be treated as consideration for the services provided and, the same is taxable under the Act. But, if no consideration is received before getting completion certificate or after its first occupancy, whichever is earlier, then sale of that complex or building or any civil structure will neither be treated as supply of services nor as supply of goods. The tax rate on supply related to real estate projects has undergone a change w.e.f. 01.04.2019. The input- output scenario up to 31.3.2019 was as follows: In the real estate sector, a Developer - Promoter or a Landowner - Promoter is primarily engaged in supply of service. A Developer-Promoter is a promoter who constructs or converts a building into apartments or develops a plot for sale. A Landowner-Promoter is a promoter who transfers the land or development rights or FSI to a developer-promoter for construction of apartments and receives constructed apartments against such transfer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r valuable consideration is considered supply of services under Schedule II. It has already been discussed in Sl. No.1(b) above. Let us discuss some rulings by AAR in this respect: Example 1: AAR Kerala in the case of M/s. Abbott Healthcare Pvt. Ltd. - Abbott undertakes an agreement for placement of specified medical instruments to customers like hospitals, labs etc., for their use without any consideration but with the condition that these hospitals, labs etc. agree to purchase at least a specified number of products like reagents, calibrators, disposals etc. The ruling says that it is a composite supply where the principal supply is the transfer of right to use of any goods for any purpose which is supply of service and is liable to GST under SI No. 17 (iii) - Heading 9973 of Notification No. 11/2017 Central Tax (Rate) dated 28.06.2017. Example 2: Case Number 46 of 2019, Order Number 40 of WBAAR/2019-20 - M/s Ishan Resins & Paints Limited, the applicant engaged in the business of leasing out trucks or tankers without operator to GTA raised query as to whether it would be covered under serial no. 22 (b) of Notification No. 12/2017 CT(Rate) dated 28/06/2017 (corresponding State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts in GST, there are several other composite supplies such as fabrication or painting jobs done in automotive body shops, service contracts relating to different machines and equipment etc. However, these would not be covered within the definition of works contract in GST. In such contracts it is important to identify the principal supply for levy of appropriate rate of tax. (ii) Supply, by way of or as part of any service or in any other manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption), where such supply or service is for cash, deferred payment or other valuable consideration is a supply of service - There were several judgements before the 46th amendment of the Constitution of India in this respect. Hon'ble Apex Court in the matter of State of Punjab vs M/S. Associated Hotels Of India (on 4 January, 1972) analyzed the nature of contract where a customer stays in the hotel and meals are served as part of and incidental to that service. Hon'ble Andhra High Court in the matter of Durga Bhavan And Ors. vs The Deputy Commercial Tax Officer on 19th September, 1980 categorized th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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