Explain the Scope of GST.
Answers
THE MEANING AND SCOPE OF SUPPLY.
The constitution defines “Goods and Services Tax” as any taxon supply of goods, or services or both, except for taxes onthe supply of the alcoholic liquor for human consumption. The Central and State governments will have simultaneouspowers to levy the GST on Intra-State supply.
Answer:
The taxable event in GST is supply of goods or services orboth. Various taxable events like manufacture, sale, renderingof service, purchase, entry into a territory of state etc. havebeen done away with in favour of just one event i.e. supply.The constitution defines “Goods and Services Tax” as any taxon supply of goods, or services or both, except for taxes onthe supply of the alcoholic liquor for human consumption.
Supply of Goods or Services or Both
Goods as well as services have been defined in the GST Law.The securities are excluded from the definition of goods aswell as that of services. Money is also excluded from thedefinition of goods as well as services, however, activitiesrelating to the use of money or its conversion by cash or byany other mode, from one form, currency or denomination, toanother form, currency or denomination for which a separateconsideration is charged are included in services.
Schedule II to the CGST Act, 2017 lists a few activities whichare to be treated as supply of goods or supply of services.For instance, any transfer of title in goods would be a supplyof goods, whereas any transfer of right in goods withouttransfer of title would be considered as services.
Further Schedule III to the CGST Act, 2017 spells out activitieswhich shall be treated as neither supply of goods nor supplyof services or outside the scope of GST. This includes:
1. Services by an employee to the employer in the course ofor in relation to his employment.
2. Services of funeral, burial, crematorium or mortuaryincluding transportation of the deceased.
3. Sale of land and sale of building where the entireconsideration has been received after completioncertificate is issued or after its first occupation.
Actionable claims are included in the definition of goods,however, Schedule III provides that actionable claims otherthan lottery, betting and gambling shall be neither goods norservices.
Supply for Consideration
Consideration has specifically been defined in the CGST Act,2017. It can be in money or in kind. Any subsidy given by theCentral Government or a State Government is not consideredas consideration. It is immaterial whether the payment ismade by the recipient or by any other person.
A deposit given in respect of the supply of goods or services orboth shall not be considered as payment made for such supplyunless the supplier applies such deposit as consideration forthe said supply.
Further, when there is barter of goods of services, the sameactivity constitutes supply as well as a consideration. When abarber cuts hair in exchange for a painting, hair cut is a supplyof services by the barber. It is a consideration for the paintingreceived.
However, there are exceptions to the requirement of‘Consideration’ as a pre-condition for a supply to be called asupply as per GST. As per schedule to CGST Act, 2017, activitiesas mentioned below shall be treated as supply even if madewithout consideration:
1. Permanent transfer or disposal of business assets whereinput tax credit has been availed on such assets.
2. Supply of goods or services or both between relatedpersons or between distinct persons as specified insection 25, when made in the course or furtherance ofbusiness: Provided that gifts not exceeding fifty thousandrupees in value in a financial year by an employer to anemployee shall not be treated as supply of goods orservices or both.
3. Supply of goods— (a) by a principal to his agent wherethe agent undertakes to supply such goods on behalf ofthe principal; or (b) by an agent to his principal where theagent undertakes to receive such goods on behalf of theprincipal.
4. Import of services by a taxable person from a relatedperson or from any of his other establishments outsideIndia, in the course or furtherance of business.s
Supply in the Course or Furtherance of Business
GST is essentially a tax only on commercial transactions.Hence, only those supplies that are in the course orfurtherance of business qualify as supply under GST. Hence,any supplies made by an individual in his personal capacity donot come under the ambit of GST unless they fall within thedefinition of business as defined in the Act. Sale of goods orservice even as a vocation is a supply under GST. Therefore,even if a famous politician paints paintings for charity andsells the paintings even as a one-time occurrence, the salewould constitute supply.