Supply Under GST – CA Inter Tax Study Material is designed strictly as per the latest syllabus and exam pattern.
Supply Under GST – CA Inter Taxation Study Material
Question 1.
Explain the meaning of supply as per provisions of Section 7(1) of Central Goods and Services Tax Act, 2017. [Nov. 2018, 5 Marks]
Answer:
As per section 7(1) of CGST Act, 2017, the term supply includes :
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person, in the course or furtherance of business;
(b) import of services for a consideration whether or not in the course or furtherance of business.
(c) the activities specified in Schedule I, made or agreed to be made without a consideration.
As per section 7(1 A), certain activities or transactions, when constituting a supply in accordance with the provisions of section 7(1), shall be either as supply of goods or supply of services as referred to in Schedule II.
Question 2.
Explain the meaning of the term “Recipient of supply of goods and/ or services” under the CGST Act, 2017. [May 2018, 5 Marks]
Answer:
Recipient of supply of goods or services or both, means :
| {a) | where a consideration is payable for the supply of goods or services or both | The person who is liable to pay that consideration |
| (b) | where no consideration is payable for the supply of goods | the person to whom the goods are delivered or made available, or to whom possession or use of the goods is given or made available |
| (c) | where no consideration is payable for the supply of a service | the person to whom the service is rendered |
and
- any reference to a person to whom a supply is made shall be construed as a reference to the recipient of the supply, and
- shall include an agent acting as such on behalf of the recipient in relation to the goods or services or both supplied.
Question 3.
List the activities to be treated as supply under CGST Act, 2017 even if made without consideration. [May 2018 Old Course, 5 Marks]
Answer:
As per section 7(c) of CGST Act, 2017, the activities specified in Scheldule I, made or agreed to be made, without consideration shall be treated as supply. The Schedule I specifies the following four cases:
- Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.
- Supply of goods or services or both between related persons or be-tween distinct persons as specified in section 25 of the CGST Act, 2017, when made in the course or furtherance of business. However, gifts not exceeding ₹ 50,000 in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.
- Supply of goods :
(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or
(b) by an agent to his principal w’here the agent undertakes to receive such goods on behalf of the principal. - 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.
Question 4.
State whether the following supplies would be treated as supply of goods or supply of services as per Schedule II of CGST Act:
(i) Renting of Immovable Property
(ii) Transfer of right in goods without transfer of title in goods
(iii) Works Contract Services
(iv) Temporary transfer of permitting use or enjoyment of any intellectual property right
(v) Sale of personal car to dealer. [Nov. 2018 Old Course, 5 Marks]
Answer:
| Type of Supply | Supply of goods or supply of services | |
| (i) | Renting of immovable property | Supply of services |
| (ii) | Transfer of right in goods without transfer of title in goods | Supply of services |
| (iii) | Works Contract Services | Supply of services |
| (iv) | Temporary transfer of permitting use or enjoyment of any intellectual property right | Supply of services |
| (v) | Sale of personal car to dealer | It is not a supply as given supply is not made by the individual in the course or furtherance of business. |
Question 5.
Explain the services provided by way of tolerating non-performance of a contract and its chargeability under the provisions of the CGST Act, 2017. [May 2019 Old Course, 4 Marks]
Answer:
| Explanation | ||
| 1 | Meaning | The agreement entered into between the parties may stipulate that in case any of the parties breach the contract for any reason including non-performance of the contract, then such person is liable to pay damages in the form of fines or penalty to the other party. The non-performance of a contract is the failure to fulfill the obligations under a contract. |
| 2 | It is Supply | Tolerating non-performance of a contract in lieu of damages or fines is a supply in terms of section 7 of the CGST Act, 2017 as it is made for a consideration by a person in the course or furtherance of business. |
| 3 | It is Service | Tolerating non-performance of a contract is treated as a supply of service in terms of section 7 read with Schedule II of CGST Act, 2017. |
| 4 | Conditional Exemption | As per Entry No. 62 of Exemption Notification No. 12/2017, in case of services provided by the Central Government, State Government, Union territory or local authority by way of tolerating non-performance of a contract for which consideration in the form of fines or liquidated damages is payable is exempt from GST. |
Question 6.
Mrs. Pragati received legal advice for her personal problems & paid 1,000 pound as legal fees to Miss. Unnati of U.K. (London).
Explain whether the above activity of import of service would amount to supply u/s. 7 of the CGST Act, 2017?
If in above case both of them are real sisters & no consideration is paid then will it change your answer?
Further in the above case both of them are real sisters & Mrs. Pragati receives legal advice for her business & she didn’t pay any consideration then what will be your answer? [May 2018 Old Course, 5 Marks]
Answer:
| Pragati received legal advice | Statutory Provision: Supply, under section 7 of the CGST Act, 2017,
In given case: |
| If both of them are real sisters & no consideration | Statutory Provision: The import of services by a taxable person from a related person located outside India, without consideration is treated as supply if it is provided in the course or furtherance of business. |
| Case 1: Legal advice for her personal problems | |
| The import of service without consideration by Mrs. Pragati from her real sister “Miss Unnati” (related person) will not be treated as supply as it is not in course or furtherance of business. | |
| Case 2: Legal advice for her business | |
| The import of service without consideration by Mrs. Pragati from her sister – Miss Unnati (related person) will be treated as supply if she receives legal advice for her business, i.e. in course or furtherance of business. |
Question 7.
How the tax liability on composite and mixed supplies is determined under GST law? Answer in single sentence each.
Answer:
As per section 8 of CGST Act, 2017:
| Composite Supply |
|
| Mixed Supply |
|
Question 8.
Mr. Z, a supplier registered in Hyderabad (Telangana), procures goods from China and directly supplies the same to a customer in US. With reference to the provisions of GST law, examine whether the said activity of supply of goods by Mr. Z to customer in US is taxable under GST. If yes, determine the place of supply of the same.
Answer:
| Facts of the given Case Study |
|
| Related Provisions |
|
| Decision |
|
Question 9.
Examine whether the following activities would amount to supply under section 7 of the CGST Act:
(a) Damodar Charitable Trust, a trust who gets the eye treatment of needy people done free of cost, donates clothes and toys to children living in slum area.
(b) Sulekha Manufacturers have a factory in Delhi and a depot in Mum-bai. Both these establishments are registered in respective States. Finished goods are sent from factory in Delhi to the Mumbai depot without consideration so that the same can be sold.
(c) Raman is an Electronic Commerce Operator in Chennai. His brother who is settled in London is a well-known lawyer. Raman has taken legal advice from him free of cost with regard to his family dispute.
(d) Would your answer be different if in the above case, Raman has taken advice in respect of his business unit in Chennai?
Answer:
| Activity given in question | Whether supply under | Reason | |
| (a) | Free eye treatment of needy people and donation of clothes, toys, etc. | No | Since it is without consideration, NOT covered in section 7 and also does not come under the purview of Schedule I. |
| (b) | Finished goods transferred from factory to depot (Both are in different states) | Yes | ♦ Schedule I of CGST Act, inter alia, stipulates that supply of goods or services or both between related persons or between distinct persons as specified in section 25, is supply even without consideration provided it is made in the course or furtherance of business!
♦ Further, where a person who has obtained or is required to obtain registration in a State in respect of an establishment, has an establishment in another State, then such establishments shall be treated as establishments of distinct persons [Section 25 of the CGST Act], ♦ In view of the same, factory and depot of Sulekha Manufacturers are establishments of two distinct persons. ♦ Therefore, supply of goods from Delhi factory of Sulekha Manufacturers to Mumbai Depot without consideration, but in course/furtherance of business, is supply under section 7 of the CGST Act. |
| (c) | Legal advice received by Raman for personal purposes from brother free of cost. | No | ♦ Schedule I of CGST Act, inter alia, stipulates that import of services by a taxable person from a related person located outside India, without consideration is treated as supply if it is provided in the course or furtherance of business.
♦ In the given case, Raman has received legal services from his brother free of cost in a personal matter and NOT in course or furtherance of business. ♦ Hence, services provided by Raman’s brother to him would not be treated as supply under section 7 of the CGST Act. |
| (d) | Import of service by Raman for business purposes from brother free of cost. | Yes | ♦ In the above case, if Raman has taken advice with regard to his business unit, services provided by Raman’s brother to him would be treated as supply under section 7 of the CGST Act as the same are provided in course or furtherance of business though received from a related person. |
Question 10.
A professional training institute gets its training material printed from a printing press. The content of the material is provided by the training institute who owns the usage rights of the same while the physical inputs including paper used for printing belong to the printer.
Ascertain whether supply of training material by the printing press con-stitutes supply of goods or supply of services.
Answer:
Facts of the given Case study
- A printing press supplies printing services.
- Content of the material is provided by the recipient of service.
- Paper and other physical inputs belong to the printer.
- The question is whether it is supply of goods or services.
Related Provisions
(a) As per Circular No. 11/11/2017 GST dated 20.10.2017:
The supply of books printed with contents supplied by the recipient of such printed goods is a composite supply and the question, whether such supplies constitute supply of goods or services would be determined on the basis of what constitutes the principal supply.
(b) As per section 2(90) of the CGST Act:
Principal supply is 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.
Decision
- Supply of printing (of the content supplied by the recipient of supply) is the principal supply.
- Therefore, such supplies would constitute supply of service.
Question 11.
State whether the following supplies would be treated as supply of goods or supply of services as per Schedule II of the CGST Act, 2017:
(i) Title in goods under an agreement which stipulates that property shall pass at a future date
(ii) Transfer of right in goods without transfer of title in goods
(iii) Transfer of Title in goods immediately
(iv) Renting of immovable property
(v) The job work performed by a job worker
Answer:
| Activity or Transaction | Goods or Services | |
| (i) | Title in goods under an agreement which stipulates that property shall pass at a future date | Supply of Goods |
| (ii) | Transfer of right in goods without transfer of title in goods | Supply of Services |
| (iii) | Transfer of Title in goods immediately | Supply of Goods |
| (iv) | Renting of immovable property | Supply of Services |
| (v) | The job work performed by a job worker | Supply of Services |
| (vi) | Title in goods under an agreement which stipulates that property shall pass at a future date | Supply of Services |
Question 12.
State in which Schedule (Schedule II or III), the following supplies have been covered. Also determine in which category they shall be classified:
(a) Supply of Goods
(b) Supply of Services
(c) Neither supply of goods nor supply of services:
- Goods forming part of business assets are transferred by the business so as no longer to form part of those assets, without any consideration.
- Services by an employee to the employer in the course of or in relation to his employment.
- Services by any court or Tribunal established under any law for the time being in force.
- Temporary transfer of intellectual property right.
- Services of funeral, burial, crematorium or mortuary including transportation of the deceased.
- Lease rentals collected.
- Sale of land.
Answer:
The Schedule II appended to the CGST Act enlists the matters / transactions to be treated as Supply of either goods or services whereas Schedule ITT specifies the transactions or activities which shall be neither treated as supply of goods nor a supply of services.
| Activity or Transaction | Schedule | Goods or Services | |
| (1) | Goods forming part of business assets are transferred by the business so as no longer to form part of those assets, without any consideration. | II | Supply of Goods |
| (2) | Services by an employee to the employer in the course of or in relation to his employment. | III | Neither Goods nor Services |
| (3) | Services by any court or Tribunal established under any law for the time being in force | III | Neither Goods nor Services |
| (4) | Temporary transfer of intellectual property right | II | Supply of Services |
| (5) | Services of funeral, burial, crematorium or mortuary including transportation of the deceased | III | Neither Goods nor Services |
| (6) | Lease rentals collected | II | Supply of Services |
| (7) | Sale of land | III | Neither Goods nor Services |