SUPPLY WITH SCHEDULES

A. Charging section – Forward Charge

1. Section 9(1) of Central Goods and Services Tax Act, 2017 (CGST Act) and governs levy of GST on all intra-state supplies of goods or services or both other than on the supply of alcoholic liquor for human consumption. Similarly, Section 5(1) of Integrated Goods and Services Tax Act, 2017 (IGST Act) governs the levy of GST on all inter-state supplies of goods or services. Proviso to section 5 (1) provides for IGST to be levied on import of goods and to be collected in accordance with the provisions of Section 3 of Customs Tariff Act, 1975.
2. The GST on all intra-state and inter-state supplies would be levied on the value determined under Section 15 of the CGST Act as per the rates notified by the Government, on the recommendation of the GST Council. Further, Proviso to Section 5 (1) of IGST Act provides for valuing the goods imported as per the Customs Tariff Act, 1975 and the GST to be levied at the point when custom duties are levied on the said goods at the time of clearance.
3. GST on supply of following items has not been levied as of now . It shall be levied with effect from such date as may be notified by the Government on the recommendation of the GST council:
   • Petroleum crude
   • High speed diesel
   • Motor spirit (commonly known as petrol)
   • Natural gas
   • Aviation turbine fuel.

B. Charging section – Reverse Charge Mechanism (RCM)

1. Pursuant to powers granted under Section 9(3), the Government, on the recommendations of the GST Council has notified specific categories of supply of goods and services vide Notifications 04/2017 – Central Tax (Rate) and 13/ 2017 - Central Tax (Rate) dated 28.06.2017 (as amended from time to time) where the tax would be required to be paid by the recipient under reverse charge mechanism.
2. Section 9 (4) provides that in case of supplies received from unregistered persons, the person receiving the goods and/ or services shall be liable to pay tax on reverse charge. The levy has been exempted w.e.f. 13.10.2017 vide notification dated 38/2017 – Central Tax (Rate). Further, w.e.f. 01.02.2019, this section has been amended and it now provides for levy of GST only on notified registered persons in respect of notified supplies received from unregistered persons under the reverse charge mechanism. Till date, no such services have been notified to be covered under this section .
3. It is important to note that the tax liability under RCM is mandatorily to be paid in cash and the person receiving supplies liable to RCM is required to self – generate an invoice as well as payment voucher and disclose the particulars in the returns / statements to be filed. Persons who are required to pay tax under RCM are required to mandatorily register under GST to discharge the liability thereof.

C. Supply and its Scope

Since GST is levied on ‘supply of goods or services or both’ it is necessary to analyse the meaning of the word ‘supply’. Supply is defined under section 7 of the CGST Act, 2017.

1. Supply includes:

• all forms of supply of goods or services such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration in the course or furtherance of business
• import of services for a consideration, whether or not in the course or furtherance of business
• activities specified in Schedule I made or agreed to be made without consideration. These are :
  • permanent transfer or disposal of business assets on which ITC has been availed
  • supply of goods or services or both between related persons or distinct persons in the course or furtherance of business (excluding gifts up to Rs. 50,000 given by an employer to employee in a financial year).
  • supply of goods between a principal and an agent where the agent undertakes to supply/receive such goods on behalf of the principal import of services from a related person or from any establishments outside India in the course or furtherance of business

The following terms may be relevant :

• Persons (including legal persons) shall be deemed to be related if such persons are - officers or directors of one another’s business; legally recognised partners in business; employer and employee; directly or indirectly owning, controlling or holding 25% or more shares or stock; directly or indirectly controlling the another; are directly or indirectly controlled by a third person or control a third person; or are members of the same family; Further, persons associated in the business of another in which one is a sole agent/ sole distributor/sole concessionaire of the other are ‘related’ persons.
• Any person who has obtained or is required to obtain more than one registration in the same State or Union Territory or in different States or Union Territories shall be treated as ‘distinct persons’ in respect of each registration. Similarly, establishment in India and those outside India are treated as ‘distinct persons’.

• Relevant Circulars in the context of Schedule I:Clarifications issued w.r.t principal – agent relationship in the context of entry 3 of Schedule I:

• As would be seen from the above, the definition of ‘supply’ is very wide. It is an inclusive definition and takes within its fold certain supplies which are without consideration. Supplies between related and distinct persons (branches and offices), within and outside India, between principal and agents and with employees, are of particular significance.

2. Schedule II – Classification of goods and services

• Schedule II classifies activities and transactions as either supply of goods or supply of services for the purpose levy of of GST

• Relevant Circulars in the context of Schedule II

3. Schedule III – Exclusions from the meaning of ‘Supply’

• Schedule III specifies activities which shall be neither supply of goods nor supply of services, for the purpose of levy of GST
  • 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. The term “Court” includes District Court, High Court and Supreme Court
  • Functions performed by Members of Parliament, State Legislature, Panchayats, Municipalities of other local authorities
  • Duties performed by any person who holds any post in pursuance of provisions of Constitution in that capacity
  • Duties performed by any person as Chairperson or a Member or a Director in a body established by Central / State Government or local authority and who is not deemed an employee before the commencement of this clause
  • Services of funeral, burial, crematorium or mortuary including transportation of the deceased
  • Sale of land, subject to clause (b) of para 5 of Schedule II, sale of building
  • Actionable claims, other than lottery, betting and gambling
• Following additional activities / transactions have been specified in Schedule III w.e.f 01.02.2019
  • Supply of goods from a place in non-taxable territory to another place in non-taxable territory without such goods entering into India
  • Supply of warehoused goods to any person before clearance for home consumption
  • Supply of goods by consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption.

D. Types of Supply

1. Taxable supply– supply of goods or services or both liable to GST
2. Exempt supply– supply of goods or services or both taxable at nil rate, supplies wholly exempt from tax, non-taxable supplies
3. Non-taxable supply– supply of goods or services or both not liable to GST
4. Composite supply– two or more taxable supplies of goods or services or both, in any combination, where one supply is a pre-dominant / principal supply and are naturally bundled and supplied in conjunction with each other in the ordinary course of business;
5. Mixed Supply– Two or more individual supplies of goods or services in any combination made in conjunction with each other for a single price
6. Continuous supply– Supply of goods or services on a continuous or recurrent basis. Continuous supply may be of goods or services.
   • Continuous supply of goods means a supply of goods which is provided, continuously or on recurrent basis, under a contract (whether or not by means of a wire, cable, pipeline or other conduit), for which the supplier invoices the recipient on a regular or periodic basis.
   • Continuous supply of services means a supply of services which is provided, continuously or on recurrent basis, under a contract, for a period exceeding three months with periodic payment obligations.

The above are important for the purpose of classification, determination of the rate of tax, the time of supply, the place of supply as well as for the purpose of computation of the input tax credit and reversal thereof.