GST

Definition of Supply under GST

Definition of ‘supply’ Under section 2(92) read with section 3 ‘supply’ includes all
forms of supply of goods and/or services such as sale, transfer, barter,
exchange, licence, rental, lease or disposal made or agreed to be made for a
consideration by a person in the course or furtherance of business. Schedule I
specified the supply.

Analysis: Supply is the term replaced for the term sale; no scope has been left for
any confusion and the definition includes every term which shall be coined as
sale. Even the supply which is made or agreed to be made without a
consideration will also amount to sale.

Any transfer of title to goods is a supply of goods, transfer of right to use goods
[section 4(8) of APVAT Act, 2005], Hire purchase transactions, transfer of business
assets are also brought under the ambit of term ‘supply’ as per Schedule II.

1.Supply includes

(a)all forms of supply of goods and/or services 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)importation of service, whether or not for a consideration and whether or not

in the course or furtherance of business, and

(c) a supply specified in Schedule I, made or agreed to be made without a

consideration

2.Schedule II, in respect of matters mentioned therein, shall apply for

determining what is, or is to be treated as a supply of goods or a supply of
services.

Activities which are not Supply

Activities and transactions specified in Schedule III –

 Services by an employee to the employer in the course of or in relation to his

employment;
 Services of funeral, burial, crematorium or mortuary including transportation of
the deceased.

 Actionable claims, other than lottery, betting and gambling

 Sale of land / Sale of building after occupation or completion will not attract
GST. Thus, sale of building before completion or before occupancy will attract
GST

Such activities or transactions undertaken by the Central Government, a State

Government or any local authority in which they are engaged as public
authorities, as may be notified by the Government on the recommendations of
the Council.

Deemed Supply of Goods & Services

Following matters will be treated as deemed supply of goods and services and will
attract GST :

1.In case of Transfer of title in goods, OR, Right in goods, OR of undivided share
in goods without the transfer of title, OR, transfer under an agreement which
stipulates that property will pass at a future date upon payment of full
consideration

2.In case of Land & Building, – Any lease, tenancy, easement, license to occupy
land or building ( both for commercial or residential purpose, fully or partly)

3.Treatment or Process , which is being applied to another person’s goods is a

supply

4.Transfer of Business Assets – Where goods forming part of the assets of a

business are transferred or disposed of, and are no longer forming part of
business OR Where goods held for business are put to use for any private use, in
such a way, as not for business OR Where any person ceases to be a taxable
person, any goods earlier forming part of business, unless (a) the business is
transferred as a going concern to another person, or (b) the business is carried on
by a personal representative who is deemed to be a taxable person With or
Without for a Consideration

5.Supply of Services – Following shall be treated as deemed “supply of Services”

:

 renting of immovable property;

 construction of a complex, building, civil structure or a part thereof, including a
complex or building intended for a sale to a buyer, wholly or partly, except
where the entire consideration has been received after issuance of completion
certificate;

Temporary transfer or permitting the use or enjoyment of any intellectual

property right;

6.Composite Supply – Following shall be treated as deemed “supply of

Services” :

o works contract as defined in section 2 (119) of CGST Act

o 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.

7.Supply of goods – supply of goods by any unincorporated association or body

of persons to a member thereof for cash, deferred payment or other valuable
consideration.

Inward Supply or Purchases– “Inward Supply” in relation to a person, shall

mean receipt of goods and/or services whether by purchase, acquisition or any
other means and whether or not for any consideration

Outward Supply or Sales – “Outward Supply” in relation to a person, shall

mean supply of goods and/or services, whether by sale, transfer, barter,
exchange, license, rental, lease or disposal made or agreed to be made by such
person in the course or furtherance of business

Continuous Supply – Means a supply of services which is provided, or

agreed to be provided, continuously or on recurrent basis, under a
contract, for a period exceeding three months with periodic payment
obligations and includes supply of such services as the Government may,
subject to such conditions, by notification, specify.

Mixed Supply under GST

Mixed Supply – means two or more individual supplies of goods or services, or
any combination thereof, made in conjunction with each other by a taxable
person for a single price where such supply does not constitute a composite
supply.

Taxability – The tax liability on a mixed supply comprising two or more supplies
shall be treated as supply of that particular supply which attracts the highest rate
of tax .

Composite Supply & Principal Supply under GST

Composite Supply is a supply made by a taxable person to a recipient comprising
two or more supplies of goods or services, or any combination thereof, which are
naturally bundled and supplied in conjunction with each other in the ordinary
course of trade, one of which is a principal supply

Example – Where goods are packed and transported with insurance, the supply of
goods, packing materials, transport and insurance is a composite supply and
supply of goods is the principal supply.

Principal Supply Means: 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 and does not constitute, for the
recipient an aim in itself, but a means for better enjoyment of the principal
supply.

Zero Rated Supply under GST

Zero Rated Supply Means export of goods or services or both; or supply of goods
or services or both to a Special Economic Zone developer or a Special Economic
Zone unit (eligible for ITC).

Important Points to Note

1.Supply of goods or services or both is “ taxable event “ in GST as that event
triggers liability to pay GST

2.Supply of goods and services for consideration is always taxable

3.Supply by taxable person to related person is subject to GST even if there is no

consideration that is no amount charged and will cover the followings :

This will cover transactions between group companies ( like deputation of

persons, supply of goods on loan basis, common facilities shared by group
companies), transactions between branches

4.Free Gifts to related persons will be subject to GST

5.Benefits provided to employee by the employers like transport, meals,
telephone. However, gifts upto Rs. 50K to employees will not be subject to GST,
but input credit will have to be reversed.

6.Supply by principal to agent is subject to GST, GST is payable on supplies to C &

F agents. However, commission agent has to pay GST only on his commission.

7.Import of services from related persons or from business establishment outside

India is subject to GST even if there is no consideration. Branch / Head office in
India receiving free services from Head Office / Outside India will be subject to
GST.

8.Lottery, betting and gambling is subject to GST

9.Lottery tickets are goods and GST will be payable. GST will also be payable on
services relating to betting and gambling

10.Some services provided by government are taxable and mostly will be subject
to reverse charge.

'Goods' is defined as per Section 2 (7) of the 'Act' as. “Every kind of movable
property other than actionable claims and money; and includes stock and shares,
growing crops, grass, and things attached to or forming part of the land which are
agreed to be severed before sale or under the contract of sale.”

Section 2(75) of CGST Act: Definition of “Money”

“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.

Meaning of term “Money” as defined in Section 2(75) “money means 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 recognized by the Reserve Bank of India when
used as 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(102) of CGST Act - “services” means anything other than goods, money
and securities but includes activities relating to the use of money or its conversion
by cash or by any other mode, from one form, currency or denomination, to
another form, currency or denomination for which a separate consideration is
charged.

Meaning of actionable claims

Section 2(1) of GST Act states that actionable claims shall have the meaning
assigned to it in section 3 of Transfer of Property Act, 1882.

As per section 3 of above act, actionable claims means a claims to any debt, other
than a debt secured by mortgage of immovable property or by hypothecation or
pledge of movable property, or by any beneficial interest in movable property,
either actual or constructive, of claimant, which the civil courts recognise as
affording ground for relief, whether such debt or beneficial interest be existent,
accruing, conditional or contingent.

Following persons are not liable to registration as per sections 22-24:

 Any person engaged exclusively in the business of supplying goods and/or

services that are not liable to tax or are wholly exempt from tax under CGST Act.
 An agriculturist to the extent of supply of produce out of cultivation of land
 Any supplier if his aggregate turnover in a financial year does not exceed Rs. 20
lakh.
 Any supplier if his aggregate turnover in a financial year does not exceed Rs. 10
lakh from Special Category States. Following is the list of aforesaid “Special
Category States”
o 1. Arunachal Pradesh
o 2. Assam
o 3. Jammu & Kashmir
o 4. Manipur
o 5. Meghalaya
o 6. Mizoram
o 7. Nagaland
o 8. Sikkim
o 9. Tripura
o 10. Himachal Pradesh
o 11. Uttarakhand
Who is liable to pay taxes under GST?

A taxable person is liable to pay tax under GST.

Who is a taxable person in GST?
A person is registered or is liable to be registered under the law would be a
taxable person in GST. A person would be liable to be registered under the law
under two categories:
a) Person liable to be registered mandatorily.
b) Person liable to be registered provided aggregate turnover of supply
of goods or services or both exceeds threshold limit.
Generally, a person is liable to pay tax on the supply of goods or
services made by him.
The tax is generally paid by the person on the supply of goods or services
made by him. This is called Forward charge of Tax.
In some of the cases, a person is liable to pay tax on the goods or services
received by him. The law casts the responsibility to pay tax on the person
receiving the supply of goods or services rather than the person supplying
the goods or services. This is called Reverse charge of tax.
Taxable Person
• A person is registered or is liable to be registered under the law would be a
taxable person in GST
Registration under GST Act 2017

The structure of GST stands on the foundation of the registration system, for it is
a registered person who is liable to pay tax and who is eligible to avail the benefits
of the input tax credit mechanism. A registered person can also collect GST from
his recipients. An unregistered person is not taxed and is also kept outside
the input tax credit mechanism.

The GST law gives a limited option to certain categories of persons to avoid
registration and thus avoid the tax liability lawfully. However, if one falls within
the reach of an extensive list of statutorily prescribed criteria requiring
compulsory registration, the supplier must get registered.

Registration under GST

(A. Provision B. Rules)
 A. Provision
Section 22: Person Liable for Registration
Section 23: Non Liable for Registration
Section 24: Compulsory Registration
Section 25: Registration Procedure
Section 26: Deemed Registration
Section 27: Special Provision for nonresident and
Casual taxable person
Section 28 : Amendment of Registration
Section 29: Cancellation of Registration
Section 30: Revocation of Cancellation

 PERSONS LIABLE FOR GST REGISTRATION – SECTION 22 OF THE CGST ACT:

a) State or UTs:
Every supplier of the goods or services or both needs to register in a State or a
Union Territory, if his turnover exceeds Rs.20 lakhs.
b) Special Category States:
In case of special category states namely AP, J&K, Assam, Nagaland, Mizoram,
Sikkim, Uttarakhand, etc., the person shall be liable to be registered if his
turnover exceeds Rs.10 lakhs.
c) Aggregate Turnover:
Means aggregate value of all taxable supplies, exempt supplies, Exports, and
inter-State supplies of persons having the same PAN but excludes taxes (Reverse
charge of tax).
d) Registration:
Any person who is registered before the appointed day i.e. 1st July 2017 is liable
to be registered under the CGST Act.
e) Registration of Transferee or Successor:
If a registered business by a taxable person is transferred to another person, then
such a person, be it successor or a transferee, shall be liable to be registered
under the Act.

f) Registration in case of amalgamation or demerger:

A transfer due to sanction of a scheme or an arrangement for amalgamation or a
demerger takes place of two or more companies in accordance with the order of
the High Court or Tribunal, the transferee shall be liable to be registered.
  PERSONS NOT LIABLE TO BE REGISTERED – SECTION 23 OF THE CGST ACT:

Following persons are not liable for registration:

a) Exempted Goods or Services:
Any person who is engaged exclusively in supply of those goods or services which
are wholly exempted from tax or are not liable to pay tax under CGST or under
IGST Act.
b) An Agriculturist:
For those supply only which is produced out of cultivation of land.
c) Notified Person:
Furthermore, the government on the recommendation of the GST council may
issue notification & specify special category of persons who are not liable for
registration.

 COMPULSORY GST REGISTRATION – SECTION 24 OF THE CGST ACT:

As per GST Law, the following categories of persons shall be required to be

registered compulsorily irrespective of the threshold limit:

a) Persons making any inter-State taxable supply

b) Casual taxable persons
c) Persons who are required to pay tax under reverse charge
d) Non-resident taxable persons
e) Persons who are required to deduct tax under section (51or 37-----TDS, TCS)
f) Persons who supply goods and/or services on behalf of other registered taxable
persons whether as an agent or otherwise
g) Input service distributor
h) Persons who supply goods and/or services, other than branded services,
through electronic commerce operator
i) Every electronic commerce operator
j) An aggregator who supplies services under his brand name or his trade name
k) Such other person or class of persons as may be notified by the Central
Government or a State Government on the recommendations of the Council.

Procedure for GST Registration:

a) Details to be furnished:
Before applying for registration process, person has to declare the following:
• PAN
• Mobile number
• E-mail address
• State or UT
In Part A of FORM GST REG-01 on the Common Portal, either directly or through
a Facilitation Centre notified by Commissioner.

b) Reference Number:
On successful verification of the PAN, mobile number and e-mail, a temporary
reference number shall be generated and communicated to the applicant.

c) Application:
Using the reference number, the applicant shall electronically submit an
application in Part B of FORM GST REG-01, duly signed or verified through
electronic verification code (EVC), along with documents specified in the form.

d) Specified Documents:
The following specified documents are required to be submitted along with the
application:

A. Documents required for Private Limited Company, Public Company (limited

company) / One Person Company (OPC):

i) Company documents

• PAN card of the company

• Registration Certificate of the company
• Memorandum of Association (MOA)/ Articles of Association (AOA)
• Copy of Bank Statement
• Declaration to comply with the provisions
• Copy of Board resolution

ii) Director related documents

• PAN and ID proof of directors

iii) Registered Office documents

• Copy of electricity bill/ landline bill, water bill

• No objection certificate of the owner
• Rent agreement (in case premises are rented)
B. Documents required for Limited Liability Partnerships (LLPs):

i) LLP Documents

• PAN card of the LLP

• Registration Certificate of the LLP
• LLP Partnership agreement
• Copy of Bank Statement of the LLP
• Declaration to comply with the provisions
• Copy of Board resolution

ii) Designated Partner related documents

• PAN and ID proof of designated partners

iii) Registered Office documents

• Copy of electricity bill, landline bill, water bill

• No objection certificate of the owner
• Rent agreement (in case premises are rented)

C. Documents required for Normal Partnerships

i) Partnership documents

• PAN card of the Partnership

• Partnership Deed
• Copy of Bank Statement
• Declaration to comply with the provisions

ii) Partner related documents

• PAN and ID proof of designated partners

iii) Registered Office documents

• Copy of electricity bill / landline bill, water bill

• No objection certificate of the owner
• Rent agreement (in case premises are rented)
• Documents required for Sole proprietorship / Individual

iv) Individual documents

• PAN card and ID proof of the individual
• Copy of Cancelled cheque or bank statement
• Declaration to comply with the provisions

v) Registered Office documents

• Copy of electricity bill/ landline bill, water bill

• No objection certificate of the owner
• Rent agreement ( in case premises are rented)

D. Acknowledgement:

On the receipt of an application, an acknowledgement shall be issued to the

applicant in FORM GST REG-02.

GST Composition Scheme

Composition Scheme is a simple and easy scheme under GST for taxpayers. Small
taxpayers can get rid of tedious GST formalities and pay GST at a fixed rate of
turnover. This scheme can be opted by any taxpayer whose turnover is less than
Rs. 1.0 crore*.

1. Who can opt for Composition Scheme?

A taxpayer whose turnover is below Rs 1.0 crore* can opt for Composition
Scheme. In case of North-Eastern states and Himachal Pradesh, the limit is now Rs
75* lakh.
Turnover of all businesses registered with the same PAN should be taken into
consideration to calculate turnover.

As per 23rd GST Council Meeting held on 10th Nov 2017

The main threshold for composition scheme was recommended for an increase to
Rs. 1.5 crore (from earlier 1 crore). But this is yet to be notified

2. Who cannot opt for Composition Scheme

The following people cannot opt for the scheme:
Supplier of services other than restaurant related services
Manufacturer of ice cream, pan masala, or tobacco
Casual taxable person or a non-resident taxable person
Businesses which supply goods through an e-commerce operator

3. What are the conditions for availing Composition Scheme?

The following conditions must be satisfied in order to opt for composition
scheme:

 No Input Tax Credit can be claimed by a dealer opting for composition

scheme
 The taxpayer cannot make any inter-state supply of goods.
 The dealer cannot supply GST exempted goods
 Taxpayer has to pay tax at normal rates for transactions under Reverse
Charge Mechanism
 If a taxable person has different segments of businesses (such as textile,
electronic accessories, groceries, etc.) under the same PAN, they must
register all such businesses under the scheme collectively or opt out of
the scheme.
 The taxpayer has to mention the words ‘composition taxable person’ on
every notice or signboard displayed prominently at their place of
business.
 The taxpayer has to mention the words ‘composition taxable person’ on
every bill of supply issued by him.
 Those supplying goods can provide services of upto Rs. 5 lakh,

4. How can a taxpayer opt for composition scheme?

To opt for composition scheme a taxpayer has to file GST CMP-02 with the
government. This can be done online by logging into the GST Portal.
This intimation should be given at the beginning of every Financial Year by a
dealer wanting to opt for Composition Scheme.

5. How Should a Composition Dealer raise bill?

A composition dealer cannot issue tax invoice. This is because a composition
dealer cannot charge tax from their customers. They need to pay tax out of their
own pocket.
Hence, the dealer has to issue a Bill of Supply.
The dealer should also mention “composition taxable person, not eligible to
collect tax on supplies” at the top of the Bill of Supply.

6. What are the GST rates for a composition dealer?

Following chart explains the rate of tax on turnover applicable for composition
dealers :
As per notification dated 01.01.2018, turnover in case of traders has been
defined as ‘ Turnover of taxable supplies of goods’.

7. How should GST payment be made by a composition dealer?

GST Payment has to be made out of pocket for the supplies made.
The GST payment to be made by a composition dealer comprises of the following:

 GST on supplies made.

 Tax on reverse charge
 Tax on purchase from unregistered dealer.

8. What are the returns to be filed by a composition dealer?

A dealer is required to file a quarterly return GSTR-4 by 18th of the month after
the end of the quarter. Also, an annual return GSTR-9A has to be filed by 31st
December of next financial year.
Also, note that a dealer registered under composition scheme is not required to
maintain detailed records.

9. What are the advantages of Composition Scheme?

The following are the advantages of registering under composition scheme:

 Lesser compliance (returns, maintaining books of record, issuance of

invoices)
 Limited tax liability
 High liquidity as taxes are at a lower rate

10. What are the disadvantages of Composition Scheme?

Let us now see the disadvantages of registering under GST composition scheme:

 A limited territory of business. The dealer is barred from carrying out inter-
state transactions
 No Input Tax Credit available to composition dealers
  The taxpayer will not be eligible to supply exempt goods or goods through
an e-commerce portal.

................
There are four slabs fixed for GST Rates - 5%, 12%, 18% and 28%.
Items exempted under GST:

Milk, eggs, curd, buttermilk, Fresh vegetables and fruits, Un-branded wheat and
rice, un-branded flour, Puja Items

Items under 5%

Frozen Vegetables and fruits, branded wheat and rice, branded flour, hand-made
safety matches, cotton, cotton fabrics, Footwear below Rs.500

Items under 12%

Butter, Cheese, Dry fruits, mobile phones, ayurvedic products

Items under 18%

Biddi wrapper leaves, biscuits, footwear exceeding Rs. 500, man-made fibre, hair
oil, soap, and toothpaste

Items under 28%

Biris, LED TV, AC, Cars, tobacco products, cement

Particulars CGST SGST IGST

Meaning Central goods and State goods and Integrated goods

Services tax services tax and services tax

Replaced Replaced service tax, Replaced luxury tax, Combined form

/Combined excise duty Sales tax entry tax, excise duty of CGST and IGST
etc. Sales tax etc.

Levied Levied by the Central Levied by the state Levied by the

government government Central
government
Collection of Central Govt. State Govt. Central Govt.
Tax

Applicability Intra-state supply Intra-state supply Inter-state

supply

Registration No registration till No registration till Registration is

crosses the crosses the threshold mandatory
threshold limit limit
Threshold More than Rs.20 More than Rs.20 lakh No such limit
limit lakh and more than and more than Rs.10
Rs.10 lakh for special lakh for special
categories states categories states

Composition The dealer can use The dealer can use the Composition
the benefit upto Rs.1 benefit upto Rs.1 scheme is not
Crore/1.5 crore Crore(…see updates) applicable in
(…see updates) under composition interstate supply.
under composition scheme.
scheme.