Definition of Supply under GST, Meaning of Supply Under GST. Goods and Services Tax (GST) envisages two types of supply, intra state and interstate. The following table illustrates the nature of supply. It is important to know whether a given supply is interstate or intra-state. The tax or taxes payable are different in each case. For example, IGST is payable for interstate supply and CGST +SGST is payable for intra-state supply
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
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(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.
(3) Notwithstanding anything contained in sub-section (1),
- (a) activities or transactions specified in schedule III; or
- (b) activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities as specified in Schedule IV,
shall be treated neither as a supply of goods nor a supply of services.
(4) Subject to sub-section (2) and sub-section (3), the Central or a State Government may, upon recommendation of the Council, specify, by notification, the transactions that are to be treated as—
- (a) a supply of goods and not as a supply of services; or
- (b) a supply of services and not as a supply of goods; or
- (c) neither a supply of goods nor a supply of services.
(5) The tax liability on a composite or a mixed supply shall be determined in the following manner —
- (a) a composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply;
- (b) a mixed supply comprising two or more supplies shall be treated as supply of that particular supply which attracts the highest rate of tax.
What is not intra-state supply?
- (i) Supplies to and by SEZ
- (ii) Imported goods till they cross the customs frontiers of India
- (iii) Supplies made to a foreign tourist taking the goods out of India
Earlier, purchases made by foreign tourists in India were treated as intrastate sale and VAT was being collected. Now under GST regime, IGST paid on goods taken out of India by a foreign tourist will be refunded under IGST Act, 2017. This practice is to conform to global taxation policies.
The following supplies will be treated as interstate supplies:
- (i) Supplies received from SEZ unit in Noida to Domestic Tariff Area
- (ii) Supplies made to SEZ developer in Kandla from Ahmedabad
- (iii) Goods imported from France
- (iv) Supplier is in Delhi and supply is made in Switzerland
- (v) Supplier is within Rajasthan and supply is made in Punjab, place of supply being Punjab
- (vi) Supplier is in Chandigarh (UT) and supply is made in Himachal Pradesh
Supply in Territorial Waters [Section 9 IGST Act, 2017]
Notwithstanding anything contained in this Act, –
- (a) where the location of the supplier is in the territorial waters, the location of such supplier; or
- (b) where the place of supply is in the territorial waters, the place of supply,
shall, for the purposes of this Act, be deemed to be in the coastal State or Union territory where the nearest point of the appropriate baseline is located.
The expression territorial waters have not been defined under the GST law. It should be understood that area upto 12 nautical miles from base line of sea coast into the sea.
Note: 1 nautical mile = 1.853 Km
If the supplier is in territorial waters, the location of supplier or if the supply is in territorial waters, the place of supplies shall be taken as the coastal state or Union Territory closest to the base line
Example 1: Suppose there is a supply from the territorial waters where the supplier is located and the nearest base line is at Kandla, Gujarat state, then the place of supply is said to be in Gujarat.
Example 2: Some goods were supplied to a fishing trawler located in territorial waters near Yanam, a part of Union Territory of Puducherry. Since the nearest base line is at Yanam, place of supply shall be the Union Territory of Puducherry. If the supplier is located in Puducherry, it shall be an intra-state supply. If the supplier is located in Chennai, it is an interstate supply.
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