Under the older tax regime, the concept of singular “supply” was absent. Businesses were required to pay indirect taxes at different stages based on different tax laws prevalent in the country. Companies were required to pay the Service Tax based on the “point of taxation” rules. The Excise Duty was levied on the manufactured goods being taken out of the factory. VAT was to be paid based on the value of goods sold or services provided to the customers.
The current regime has combined all the taxes on supply of goods under GST.
So, what is the concept of supply under GST?
What Is The Concept Of Supply Under GST?
Under GST, any taxable event can be referred to as supply. It includes a range of different events, including transfer, exchange, sale, barter, license, lease, rentals, and disposal. If any of these taxable events are carried out by a business, the same would be covered under supply under the new regime of GST.
For an event to be identified as supply, it needs to possess the following major characteristics:
It Should Involve the Supply Of Goods Or Services
The concerned event should involve the supply of goods or services by a business to be considered as a supply under GST. Moreover, it is important to note that along with the transfer of goods, there needs to be a transfer of title as well. For example, when a company sells a pen to a customer, it results in the transfer of the title of the concerned product.
In the case of services to be included under supply, it is important to have a transfer in the right of goods without the transfer of title. For example, if a company provides bus transportation services to a customer, the customer would have the right to occupy their seat without any transfer of title.
The Event Should Be Taxable
For any event to be considered a supply under GST, it needs to be taxable under the current regime. The GST Act mentions a specific category of events that are exempted from taxes.
The Event Should Be Carried Out By A Taxable Person
Along with the concerned event being taxable, it should be carried out by a taxable individual to be considered as supply under GST. A taxable person refers to an individual registered under the GST Act, is liable to be registered under the act, or has volunteered to get registered under the act.
If an exchange of taxable goods takes place between two non-taxable individuals, the event will not be considered a supply under GST. Moreover, it is important to note that if an individual supplies products or services across multiple states or handles multiple business verticals, they need to get registered for every state or vertical respectively.
The Event Should Take Place In A Taxable Territory
Only events carried out within taxable territories can be classified as supply under GST. According to the GST Act, a taxable territory refers to any region that falls within the geographical boundaries of India.
The Event Should Involve An Exchange For Consideration
Here, consideration refers to the barter of goods or services. It also implies the payment made for a supply in cash or kind. If a prepayment or deposit is made for a supply, it can also be considered a supply under GST.
Please note that an event can be termed as supply under GST even if it is carried out without consideration under the following circumstances:
- If a business transfers or disposes of its assets permanently and input tax credits are availed for the same
- If a supply is made between two separated or related individuals for business purposes
- If a supply of goods is made by an agent on behalf of a dedicated supplier or if a supply is received by an agent on behalf of a customer
- If a taxable individual imports goods or services from a related person or from their own business situated outside India for business purposes
The Event Should Take Place During The Course Of A Business Or With The Intention Of Growing A Business
Supply under GST only includes business transactions. Therefore, for an event to be considered as a supply, it should be carried out for business purposes. If a personal exchange of goods or services has taken place, it would not be classified as a supply under GST.
Components Of Supply Under GST
For calculating the tax to be paid for a specific transaction, three components of supply are considered under GST – place, value, and time of supply.
Place of Supply
This attribute is used for determining if the concerned transaction is an intra-state supply, an external trade, or an inter-state supply. This would dictate the type of GST to be levied.
Value of Supply
This attribute is used for ascertaining the taxable value of the transaction carried out to calculate the amount of tax payable for the same.
Time of Supply
This attribute is used for determining the time when GST returns and associated taxes are due for a specific transaction.
Types Of Supply Under GST
Under GST, taxable transactions or supply of goods/services can be broadly classified into two types – taxable supplies and non-taxable supplies.
As the name suggests, these are the transactions that are taxable under GST. Here, the taxpayers are eligible for ITC and can claim refunds on the taxes paid. Taxable supplies can be further classified into regular taxable supplies, nil-rated supplies, and zero-rated supplies.
These are the transactions that are not taxable under GST. In the case of these transactions, the taxpayers cannot claim refunds and are not eligible for ITC.
The Final Word
In terms of GST, supply is considered to be any event that is taxable in accordance with the current tax regime. While calculating the taxes to be paid and refunds claimed, different supplies and their components are taken into consideration for organized, accurate, and smooth taxation.