Bimal Jain
FCA, FCS, LLB, B.Com (Hons)
Supply – Taxable Event under Model GST Law – inclusive and subjective
With step-by-step progress towards Goods and Services Tax (“GST”), the Country is all set to
witness the biggest indirect tax reform of unmatched importance in independent India. GST
would mark a paradigm shift in the indirect taxation of our Country and the concept of
origin based taxation as practiced currently, would no longer be there. In line with the
global practices, concept of destination based taxation would usher in under GST. At the
same time, 17 of the major taxes levied under the Indirect taxation i.e. Central Excise,
Service tax, VAT/CST etc., would be subsumed under the ambit of GST, resulting in change
of the taxable event as well.
“SUPPLY” – the taxable event under the Model GST Law
In GST, a uniform and single taxable event ‘supply’ would replace multiple taxable events
i.e. manufacture, provision of service and sale, etc., as prevalent in the present regime.
Thus, the constant monitoring and compliance required for keeping track of varied tax
trigger points at present would fade away in GST, but, simultaneously, the term ‘supply’ will
hold the greatest significance and shall be important in determining the taxability of all
transactions, whether commercial or otherwise under GST regime.
Section 3 of the Model CGST/SGST Act, 2016 [also applicable for the Model IGST Act vide
Section 2(f) thereof] specifies the meaning and scope of the term supply, broadly, in the
following manner:
Broad Sub- Particulars
Category section of
Section 3
1 Supply includes:
Normal supply 1(a) All forms of supply of goods and/or services such as sale,
of goods transfer, barter, exchange, license, rental, lease or disposal
and/or made or agreed to be made for a consideration by a person
services in the course or furtherance of business.
Import of 1(b) Importation of service, whether or not for a consideration
service and whether or not in the course or furtherance of
business.
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FCA, FCS, LLB, B.Com (Hons)
Broad Sub- Particulars
Category section of
Section 3
Supply 1(c) A supply specified in Schedule I (Matters to be treated as
Without supply without consideration), made or agreed to be made
consideration without consideration.
Supply of 2 Schedule II (Matters to be treated as supply of goods or
goods v/s services), in respect of matters mentioned therein, shall
Supply of apply for determining what is, or is to be treated as either
services supply of goods or supply of services.
Principal - 2A Where a person acting as an agent who, for an agreed
Agent commission or brokerage, either supplies or receives any
Transaction goods and/or services on behalf of any principal, the
transaction between such principal and agent shall be
deemed to be a supply.
Power(s) of 3 Subject to sub-section 2, the Central or a State Government
Central/State may, upon recommendation of the GST council, specify, by
government notification, the transactions that are to be treated as:-
(i) a supply of goods and not as a supply of services; or
(ii) a supply of services and not as a supply of goods; or
(iii) neither a supply of goods nor a supply of services.
Branded 4 Notwithstanding anything contained in sub-section 1, the
service by an supply of any branded service by an aggregator, as defined
aggregator in sec 43B, under a brand name or trade name owned by
under trade or him shall be deemed to be a supply of the said service by
brand name the said aggregator.
Inclusive definition of term ‘supply’
Despite being the first step for taking off under GST regime, the Model GST Law has chosen
to define ‘supply’ in an inclusive manner, without even defining what ‘supply’ actually
means. Thus, the proposed definition of the term ‘supply’ under the Model GST Law suffers
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FCA, FCS, LLB, B.Com (Hons)
from ambiguity as it starts with the word “Supply includes….”. It is crucial here to note that
the term “includes” is generally used to expand the meaning of the former word. Even, the
wide import of term “includes” has been settled in number of judicial pronouncements to
establish that its usage expands the meaning. In the case of Doypack Systems (Pvt) Ltd. Vs.
Union of India [1988 (36) ELT 201 (SC)], the Hon’ble Supreme Court has interpreted the
meaning of the term ‘includes’, as “It is well settled that the word ‘includes’ is an inclusive
definition and expands the meaning.”
Similarly, in the case of Tata Consultancy Services Vs. State of Andhra Pradesh [2004 (178)
ELT 22 (S.C.)], the Hon’ble Supreme Court has interpreted the meaning of the word
‘includes’, to suggest that “….When the word ‘includes’ is used in an interpretation clause, it
must be construed as comprehending not only such things as they signify according to their
nature and import but also those things which the interpretation clause declares that they
shall include. [See Scientific Engineering House Pvt. Ltd. v. Commissioner of Income-tax,
Andhra Pradesh (1986) 1 SCC 11].”
Manifestly, the settings of the definition of ‘supply’ as adopted by legislature, leaves the
interpretation of the term ‘supply’ open for all, including tax payers and the Centre & the
State Governments, which would lead to bizarre outcomes. The prudent approach here
could have been to draw the meaning of such a crucial definition in crystal and definitive
manner. Here, it would not be out of place to look at the meaning of term supply, as
adopted in the other countries like Canada, Malaysia where GST is applicable.
Under Canadian Goods & Services Tax “supply means the provision of property or a service
in any way, including sale, transfer, barter, exchange, licence, rental, lease, gift, or other
disposition”. Similarly, under Malaysia Goods & Services Tax, where GST made applicable
with effect from April, 2015, Section 4 thereof defines supply as “subject to subsections (2)
and (3), “supply” means all forms of supply, including supply of imported services, done for a
consideration and anything which is not a supply of goods but is done for a consideration is a
supply of services.…..”
Keeping in mind, the importance the term supply would entail in GST, the term supply could
have been defined in exhaustive manner to ensure the boundaries restricting any sort of
wide interpretation of the taxable event.
To add more woes, Section 3(1)(a) of the Model CGST/SGST Act, uses the term “such as”
while covering all forms of supply of goods and/or services under the taxable net. Thus, all
or any form of supply which is made for a consideration by a person in the course or
furtherance of business, would be supply to attract GST. Even barters and exchange would
be taxable under GST. Furthermore, the Model GST Law has gone a step ahead to even tax
the supplies made without consideration as per Schedule I. The Schedule I to the Model
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FCA, FCS, LLB, B.Com (Hons)
CGST/SGST Act, comprises of a list of matters/ transactions, which would be treated as
‘supply without consideration’, which are as under:
Permanent transfer/disposal of business assets.
Temporary application of business assets to a private or non-business use.
Services put to a private or non-business use.
Assets retained after deregistration.
Supply of goods and/or services by a taxable person to another taxable or non- taxable
person in the course or furtherance of business. But, this will not cover goods sent for
job work.
Perusal of the above provisions reveals that the government wants to levy tax on each and
every transaction entered by a taxable person and don’t want to leave any room for
charging GST. Even any business assets/ services used for private/ non-business use, shall
also be treated as supply. This can be best understood with a simple example of a Company
providing mobile phones to its employees, which are used for making business calls and
personal calls as well. Since, use of mobile phones for making personal calls would be
exigible to GST, valuation would be another problematic area and it would be an uphill task
to bifurcate the usage of business assets/services to a private or non-business use. At the
same time, one may also ponder as to how the department will ascertain the proportion of
personal and business use or administer such transactions for levying GST.
It may not be out of place here to mention that on one hand, the credit of GST will be
restricted to so much of the input tax as is attributed to the purposes of business only [as
per Section 16 of the Model CGST/SGST Act], but, on the other hand, GST would be payable
on business assets/services put to a private or non-business use. Thus, the assesses would
have despairs from both the sides.
In the light of above discussions, it is critical that the lawmakers should wake up to the
realities of the situation and ensure to have concrete taxable base by defining the term
‘supply’ in clear and unambiguous manner, which is the pivotal term under the proposed
GST regime, that would be the centric point to determine levy & collection of GST.
Knowingly or unknowingly, the Model GST Law has sown the seeds for another series of
fresh litigation, which the present indirect taxation is crippled with, when it comes to
determining the test of manufacture for levy of Excise duty or rendering of services to levy
Service tax. The law is striving hard even as on date to settle down after several decades of
jurisprudence. It would indeed be quite interesting to watch how the term supply is re-
defined, amended, explained, substituted in the Final GST Law, keeping in mind the long
trodden path so far.
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Bimal Jain
FCA, FCS, LLB, B.Com (Hons)
Time of Supply & Place of Supply of Goods and/or Services under GST
GST is going to be big game changer and the prevailing concepts of manufacturing of goods/
provision of services/ sale of goods would no longer be relevant as tax would be levied on
‘supply’ of goods and/or services and common base has to be arrived at for levy & collection
of GST in all cases.
Closely linked to the taxable event of ‘supply’, are the principles governing the place of
supply to determine the taxing jurisdiction as GST essentially seeks to replace an origin-
based tax levy currently prevailing in India, with a destination-based consumption tax levy.
Whenever there is a supply of goods, it may be comparatively easier to identify the place of
supply, however, in case of supply of services, it would lead to chaos if no mechanism is
established since there is no physical movement unlike goods.
Thus, under GST regime, the principles of time of supply and place of supply, undoubtedly,
would play the crucial role.
Understanding provisions of ‘Time of supply’ under the Model GST Law
POT is referred to the point of time, when a transaction is to be taxed. Thus, we need to
understand when liability to pay CGST/SGST (Intra-State Supply) and IGST (Inter-State
Supply) will arise. For determining time of supply for goods and services, separate provisions
have been prescribed under Chapter-IV of Model CGST/SGST Act, 2016 (“Model CGST/SGST
Act”), applicable to levy of IGST vide Section 27 of Chapter-IX of the ModeI IGST Act, 2016
(“ModeI IGST Act”).
I: Time of supply of goods
A. For normal supply: CGST/SGST and IGST on the goods shall be payable at the earliest of
the following dates on which:
(i) Goods are removed for supply to the recipient (for goods required to be removed);
(ii) Goods are made available to the recipient (for goods not required to be removed);
(iii) Invoice is issued by supplier;
(iv) Payment is received by supplier;
(v) Recipient shows receipt of goods in his books of account.
B. For continuous supply of goods:
Situation Time of supply
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FCA, FCS, LLB, B.Com (Hons)
Successive statements of accounts or Date of expiry of the period to which such
successive payments are involved successive statements of accounts or
successive payments relate
No successive statements of account Date of issue of invoice (or
any other document)
or
Whichever is
Date of receipt of earlier
payment
C. For supply of goods under reverse charge: Time of supply shall be the earliest of the
following dates of:
(i) Receipt of goods,
(ii) Payment,
(iii) Receipt of invoice,
(iv) Debit in books of account.
II: Time of supply of services
A. CGST/SGST and IGST on the services shall be payable at the earliest of the following:
Situation Time of supply
1. Invoice issued within Date of issue of invoice
prescribed period
or Whichever is
earlier
Receipt of payment
2. Invoice not issued within Date of completion of
prescribed period the provision of service
Whichever is
or earlier
Receipt of payment
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FCA, FCS, LLB, B.Com (Hons)
3. Not falling under (1) or (2) Date on which the recipient shows the
above receipt of services in his books of account
B. For continuous supply of services:
Situation Time of supply
Where due date of payment is Date on which the payment is liable to be
ascertainable from the contract made by recipient of service, whether or
not any invoice has been issued or any
payment has been received by the
supplier
Where due date of payment is not Each such time when the
ascertainable from the contract supplier of service-
Receives the payment
Whichever is
or earlier
Issues an invoice
Where the payment is linked to the Time of completion of that event
completion of an event
C. Supply of services under reverse charge: Time of supply shall be determined in same
manner as in case of goods discussed supra.
Understanding Place of supply of goods and/ or services
At first place, the importance of determination of place of supply, lies in identification of
nature of supply as ‘Inter-State’ or ‘Intra-State’, based on which CGST & SGST/ IGST would
be applicable. Similarly, principles of place of supply hold importance for determining
imports and exports of goods and/or services, for which one of the condition is that place of
supply should be in India (for imports) and out of India (for exports).
Principles for determining place of supply of goods:
Section 5 of the Model IGST Act governs the principles of place of supply for goods as under:
Scenario Place of supply
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FCA, FCS, LLB, B.Com (Hons)
When movement of goods Location of goods where movement terminates for delivery
is involved
When goods are supplied Principal place of business of third person on whose
by transfer of documents direction goods were supplied to another person.
during movement of goods
(Bill to Ship to Model)
When movement of goods Location of goods at the time of delivery
is not involved (like sale of
goods at showroom)
When goods are assembled Place of such installation or assembly
or installed at site
When goods are supplied
Location at which such goods are taken on board
on board a conveyance (like
food supplied by Indian
Railways on journey)
Principles for determining place of supply of services:
Section 6 of the Model IGST Act governs the principles of place of supply of services in
following 3 broad categories:
General Rule - B2B and B2C
Specific Rules for identified situations
Place of supply of services are different for B2B and B2C Supplies for certain specified
services
The principles of place of supply for services are tabulated hereinbelow for ease
understanding:
S. No. Services Place of supply of services
1 General Rule B2B supplies: location of recipient
B2C supplies: location of recipient where address
on record exists,
If not, then the location of supplier of services
Specific Rules for identified situations & different treatment for certain B2B and B2C of
specified services
1. Immovable property related Location of immovable property
services
Where property / vessel located in more than one
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FCA, FCS, LLB, B.Com (Hons)
state- proportionate allocation amongst states as
per the contract or on reasonable basis
2 Performance based services Place of actual performance --> Specific services
covered such as supply of restaurant and catering
services, health service etc.- place of performance
Services in relation to training and performance
appraisal-
B2B supply: location of recipient
B2C supply: place of performance
3 Event based services Admission and ancillary services:
Place where event held or where the park/ other
place is located
Organization of event and services in relation to
such event and ancillary services or assigning of
sponsorship:
B2B supply: location of recipient
B2C supply: where event is held
Proportionate value of services to be considered
where the event is held in more than one State and
a consolidated amount is charged
4 Goods transportation B2B supply: location of recipient
services
B2C supply: location at which such goods are
handed over for their transportation
5 Passenger transportation B2B supply: location of recipient
services
B2C supply: Place where the passenger embarks on
the conveyance for a continuous journey
6 Services on board a Location of the first scheduled point of departure
conveyance of that conveyance for the journey
Similarly principles of place of supply has also been prescribed for Telecommunication
services including data transfer, broadcasting, cable and DTH services, Banking and other
financial services, Insurance services, Advertisement services to the Central Government, a
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Bimal Jain
FCA, FCS, LLB, B.Com (Hons)
State Government, a statutory body or a local authority.
Apparently, there are numerous parameters given under the Model GST Law, for
determining ‘time of supply’ and ‘place of supply’ for goods & services, which may be a
major challenge initially for successful transition.
OUR GST BOOK (2ND EDITION) RELEASED, TITLED "GST LAW & ANALYSIS - WITH
CONCEPTUAL PROCEDURES"
With the blessings of the Almighty God and your best wishes & gratitude, we are pleased to
announce release of our book on GST, titled, "GST LAW & ANALYSIS – WITH CONCEPTUAL
PROCEDURES" (2nd Edition), covering detailed commentary on Model GST Law and Draft
Business Processes along with FAQs & practical illustrations/ diagrams/ flowcharts of various
aspects of GST in respective chapters of the book along with DVD containing PPT on Model
GST Law, Videos on various aspects of Model GST Law, Draft Rules on Registration,
Payment, Invoice, Return and Refund, etc.
For detailed contents, please access the following link of slides:
http://www.slideshare.net/Youngglobal/gst-law-analysis-with-conceptual-procedures-with-
free-dvd-october-2016
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This book can be ordered online at:
http://www.bookskhoj.com/ViewDetails.aspx?viewId=8728
Or order it from your local supplier across the Country.
Videos on GST:
Watch the following video presentations to understand the intricacies of taxable event i.e.
Supply under GST along with principles of time of supply and place of supply of goods
and/or services:
Highlights of Draft GST Law, 2016: https://www.youtube.com/watch?v=7ByfCXugAk0
Presentation on Draft GST Law - Levy, Taxable Event: Supply, Taxable Person,
Composition Scheme: https://www.youtube.com/watch?v=XrWHZMZf8GQ
GST impact & preparedness for Service sector:
https://www.youtube.com/watch?v=0Hwh92GSm-A
GST Preparedness & Implementation on SME & MSME Sector:
https://www.youtube.com/watch?v=WlmKDQdCdkA
Supply, Time of Supply (POT) and Place of Supply for Goods and Services in GST:
https://www.youtube.com/watch?v=7M5dqo0CZoY
Highlights - GST ITC, Job work, ISD and Draft Rules on Registration, Invoice, Payment,
Returns & Refund: https://www.youtube.com/watch?v=Gr6yzpU1gZY
Hope the information will assist you in your Professional endeavours. In case of any query/
information, please do not hesitate to write back to us.
Thanks & Best Regards,
Bimal Jain
FCA, FCS, LLB, B.Com (Hons)
Author of a book on Goods and Services Tax, titled, "GST LAW AND ANALYSIS – WITH
CONCEPTUAL PROCEDURES” (2nd Edition)
A2Z TAXCORP LLP
Tax and Law Practitioners
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