Supply is considered a taxable event for the purpose of charging tax under GST. Tax liability arises at the “time of supply of goods or services.” As a result, determining whether or not a transaction falls within the meaning of supply is critical in determining GST’s applicability.
Concept Before GST
There was no concept of Supply in the previous indirect tax regime. The stage at which indirect taxes were levied differed according to tax laws. The ‘excise duty’ was levied on manufactured goods when they were removed from the factory. For services rendered, a ‘Service Tax’ was levied based on certain rules known as the ‘point of taxation rules.
What is Supply Under GST?
Sale, transfer, exchange, barter, license, rental, lease, and disposal are all forms of supply. If a person engages in either of these transactions for consideration in the course or furtherance of business, it will fall under the definition of supply under GST.Â
There are two critical components to supply:
- The supply is done for a fee.
- Supply is done in the course of doing business.
If the aforementioned requirements are not met, the transaction is not considered a sale.
Classification of Supply and Types
A few supplies are created by combining two or more items. These supplies are further subdivided as Composite Supply and Mixed Supply.
A supply consisting of two or more goods/services that must be supplied in tandem in accordance with common business practices in that area. In other words, these items cannot be provided separately. In the entire transaction, there is a primary supply and a secondary supply. In such cases, the principal supply tax rate will be applied to the entire supply. E.g. Purchasing a Diwali Dry Fruit Gift Box. It comes with dry fruits, a box, and a wrapper. The box and wrapper cannot be sold separately from the main content, which is dry fruit. This is a Composite Supply.
A mixed supply is one that consists of two or more goods or services that are independent of one another and are not required to be sold together. The first requirement for mixed supply is that it not be a composite supply. In such cases, the higher of the two tax rates will be applied to the entire supply. For example, purchasing a Christmas package that includes cakes, aerated drinks, chocolates, Santa caps, and other gift items. Each of these items can be sold separately and are not interdependent. There is a mixed supply here.
Scope list of supply and taxability
Business asset transfer
- Business assets transferred/disposed of with or without consideration
- If the owner ceases to be a taxable person, his business assets are presumed to have been provided to him in the course of his business –
Transfer of goods without the transfer of title
Building and land
- Land lease, rent, tenancy, easement, or license to occupy
- Leasing or renting out a building (which includes a commercial/industrial/residential complex for business use, either entirely or partially)
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