Indirect Taxes

SUPPLY WITH SCHEDULES

Charging section – Forward Charge
1. Section 9(1) of Central Goods and Services Tax Act, 2017 (CGST Act) 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.
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. Refer the Reverse Charge Mechanism Chapter for the notified class u/s. 9(4).
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.
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 ₹ 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:

Circular	Gist
57/31/2018-GST of F. No. CBEC-20/16/4/2018-GST dated 04.09.2018 [AS corrected by Circular NO. CBEC/20/16/04/2018-GST, DATED 5-11-2018]	This circular clarifies that in order to determine whether a principal – agent relationship exists or not, one needs to determine whether the agent is wearing the representative hat and is supplying or receiving goods on behalf of the principal. The circular further clarifies that if the invoice is issued or received by the agent in his own name, it would fall under the ambit of entry 3 of Schedule I. The crucial point is whether or not the agent has the authority to pass or receive the title of the goods on behalf of the principal.
73/47/2018-GST of F. No. 20/16/04/2018-GST dated 05.11.2018	This circular clarifies the scope and ambit of principal – agent relationship in the context of del-credere agent (DCA) as follows :
	Whether a transaction with DCA falls under the ambit of entry 3 of Schedule I will be decided as per clarification issued in Circular No. 57/31/2018 dated 04.09.2018
	In respect of short term loan extended by DCA to the buyer to enable him to make the payment to the supplier for procurement of goods and services, the interest charged by the DCA to the recipient would not form part of value of supply by the principal to recipient as the transaction of extending loan is on a principal to principal basis. Further, service by way of extending deposits, loans and advances where consideration is represented by way of interest or discount is exempted vide notification 12/2017 – Central Tax (Rate) dated 28.06.2017.
	If DCA is an agent covered under entry 3 of Schedule I, interest charged by DCA to the buyer will form part of value of supply by the DCA to buyer as the transaction would no more be an independent supply but a part of the supply by DCA to the recipient. The value of interest therefore, would be required to be included in the value of supply as per section 15 (2) (d) of CGST Act.

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.

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 GST

Particulars	Deemed to be supply of Goods	Deemed to be supply of Services
Para 1 : Transfer
Transfer of title in goods	✔
Transfer of title in goods under an agreement stipulating that the property in goods shall pass at a future date upon payment of full consideration	✔
Transfer of right in goods, or of undivided share in goods without the transfer of title thereof		✔
Para 2 : Land & Building
Lease, tenancy, easement, license to occupy land		✔
Lease or letting out of building including commercial, industrial or residential complex for business / commerce, either wholly or partly		✔
Para 3 : Treatment or Process
Any treatment or process applied to another person’s goods is a supply of service		✔
Para 4 : Transfer of business assets
Transfer of business assets – Where goods forming part of business assets are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, whether or not for consideration	✔
Transfer of business assets – Where by or under the direction of a person carrying on a business, goods held or used for the purpose of business are put to any private use or are used or made available to any person for use for the purpose other than for business, whether or not for consideration		✔
Supply of any goods forming part of the assets of any business on a person ceasing to be a taxable person shall be deemed to be supply of goods in the course or furtherance of business, except in following cases: Business is transferred as a going concern to another person Business is carried on by a personal representative who is deemed to be a taxable person	✔
Para 5 : Supply of Services
Renting of immovable property		✔
Construction of complex, building, civil structure or part thereof, including a complex or building intended for sale to a buyer (wholly or partly) unless the entire consideration is received after issuance of completion certificate, where required, by the competent authority or after its’ first occupation, whichever is earlier		✔
Temporary transfer or permitting the use or enjoyment of any IPR		✔
Development, design, programming, customisation, adaptation, upgradation, enhancement, implementation of information technology software		✔
Agreeing to the obligation to refrain from an act, or to tolerate an act or situation, or to do an act		✔
Transfer of right to use any goods for any purpose		✔
Para 6 : Composite supply
Works contract as defined u/s 2 (119) of CGST Act		✔
Supply, by way of or as part of any service or in any manner whatsoever, of goods being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption)		✔
Para 7 : Supply of Goods
Supply of goods by an unincorporated association or body of persons to a member thereof	✔

Relevant Circulars in the context of Schedule II

44/18/2018-CGST of F. No. 341/28/2017-TRU dated 02.05.2018	This circular deals with issue relating to taxability of tenancy rights (‘pagadi system’) under GST. The circular clarifies that grant of tenancy rights to a new tenant against payment of tenancy premium / periodic rent shall be taxable, unless the same is for a residential dwelling for use as residence, in which case the same shall be exempt. The circular also clarifies that an outgoing tenant surrendering the tenancy rights for a consideration in the form of a portion of tenancy premium shall be liable to GST.
11/11/2017 – GST of F. No. 354/263/2017-TRU dated 20.10.2017	This circular clarifies the classification issue revolving around printing contracts, viz., whether they shall be classifiable as supply of goods or services, as under:
	Supply of Printing of books, pamphlets, brochures, annual reports, and the like, where only content is supplied by the publisher or the person who owns the usage rights to the intangible inputs while the physical inputs including paper used for printing belong to the printer, shall constitute supply of service
	Supply of printed envelopes, letter cards, printed boxes, tissues, napkins, wall paper etc. falling under Chapter 48 or 49, printed with design, logo etc. supplied by the recipient of goods but made using physical inputs including paper belonging to the printer, predominant supply is that of goods and shall therefore constitute as supply of goods

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 or 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.

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.