Kalinga University

Department of Commerce & Management

Course- BBA Sem- 6th

Subject- Goods & Service Tax
Subject Code: BBA618
Notes-Unit 2
MEANING AND SCOPE OF SUPPLY

TAXABLE EVENT UNDER GST

Taxable event under GST law is supply of goods or services or both. It means no supply no GST.

The term, ―supply‖ has been inclusively defined in the Act. The meaning and scope of supply under
GST can be understood in terms of following six parameters, which can be adopted to characterize a
transaction as supply:

1. Supply of goods or services. Supply of anything other than goods or services does not
attract GST.

2. Supply should be made for a consideration.

3. Supply should be made in the course or furtherance of business.
4. Supply should be made by a taxable person.
5. Supply should be a taxable supply.
6. Supply should be made within the taxable territory
Exceptions:

(1) Any transaction involving supply of goods or services without consideration is not a
supply, barring few exceptions, in which a transaction is deemed to be a supply even
without consideration.

(2) Further, import of services for a consideration, whether or not in the course or
furtherance of business istreated as supply.

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SCOPE OF SUPPLY [SECTION 7 OF CGST ACT, 2017]

As per Section 7(1) Supply As per Section 7(2) Supply excludes

includes
(a) all forms of supply of goods (a) activities or transactions specified in Schedule III; or
or services or both such as
(b) such activities or transactions undertaken by the
sale, transfer, barter,
Central Government, a State Government or (Union
exchange, licence, rental,
territory w.e.f. 27th June 2018) any local authority in
lease or disposal made or
which they are engaged as public authorities, as may
agreed to be made for a
be notified by the Government on the
consideration by a person in
recommendations of the Council,
the course or furtherance of
business; Note: Activities specified in Schedule III (i.e. Negative list):
(aa) the activities or 1. Services by employee to employer in the course of or
transactions, by a person, in relation to his employment.
other than an individual, to
2. Services by court or Tribunal
its members or constituents
or vice versa, for cash, 3. Services by Member of Parliament and others
deferred payment or other 4. Services by funeral, burial etc.
valuable consideration
(w.r.e.f. 1-7-2017, inserted 5. Sale of land/Building
in the Finance Act, 2021) 6. Actionable claim other than lottery, betting and
(b) import of services for a gambling. w.e.f. 1-2-2019:
consideration whether or 7. Supply of goods from a place in the non-taxable
not in the course or territory to another place in the non-taxable territory
furtherance of business; without such goods entering intoIndia.
(‗and‘ w.e.f. 29th Aug 2018
inserted retrospectively 8. (a) Supply of warehoused goods to any person before
from 1.7.2017) clearance for home consumption;
(c) the activities specified in (b) Supply of goods by the consignee to any other
Schedule I, made or agreed person, by endorsement of documents of title to
to be made without a the goods, after the goods have been dispatched
consideration; (w.e.f. 29th from the port of origin located outside India but
Aug 2018 ‗and‘ omitted before clearance for home consumption.‖;
retrospectively from
Explanation 1: For the purpose of paragraph 2, the
1.7.2017)
(d) w.e.f. 29th Aug 2018, term ―court‖ includes District Court, High Court and
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 omitted retrospectively Supreme Court.
from 1.7.2017: the activities
Explanation 2: For the purpose of this paragraph, the
to be treated as supply of
expression ―warehoused goods‖ shall have the same
goods or supply of services
meaning as assigned to it in the Customs Act, 1962
as referred to in Schedule II.
w.e.f. 29th Aug 2018,
applicable retrospectively from
1.7.2017
(1A) where certain activities or
transactions constitute a
supply in accordance with the
provisions of sub- section (1),
they shall be treated either as
supply of goods or supply of
services as referred to in
Schedule II.‖

As per Section 7(3) Subject to the provisions of sub-sections (1), (1A) and (2), the Government may, on the
recommendations 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.

SUPPLY UNDER GST

The taxable event under GST shall be the supply of goods or services or both made for
consideration in the course or furtherance of business. The taxable events under the existing
indirect tax laws such as manufacture, sale, or provision of services shall stand subsumed in the
taxable event known as ‗supply.‘
Meaning and Scope of Supply under GST
A. Section 7 (1) – Supply
The term Supply has been defined under section 7 (1) of the CGST Act by way of Scope of
Supply which includes:
a. All forms of Supply of goods or services or both 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;

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 b. import of services for a consideration whether or not in the course or furtherance of
business; and
c. the activities specified in Schedule I, made or agreed to be made without a consideration.
B. Section 7 (1)(a)
To constitute a Supply, two conditions subject to exceptions stated under the Act must be fulfilled
simultaneously.
1. Supply shall have been made for a consideration and
2. Supply shall have been made in the course or furtherance of business.
For example if a person sells his old TV to the kabariwala for Rs. 3000.00 then such Supply shall
not be considered supply for the purpose of GST though such Supply has been made for
consideration but such Supply has not been made in course of business.
Further example a businessman distributes free gifts in general public without any condition.
Such activity shall not be treated as Supply for the purpose of GST though such activity has been
made in course and furtherance of the business but such Supply has been made without
consideration.
Press Release dated 13-07-2017 by the Government clarifies ―the sale of old gold by an
individual is for a consideration, it cannot be said to be in the course or furtherance of his
business (as selling old gold jewellery is not the business of the said individual), and hence does
not qualify to be a Supply.‖
C. Section 7 (1)(b) – Supply made for consideration but, not in of the course of Business.
The activity where element of consideration is available but other element as ― in the course of
business or furtherance of business‖ is not available, shall be treated as Supply.
Such activity is ―Import of services for a consideration whether or not in the course or
furtherance of business.”
D. Section 7 (1)(c) – Supply made in the Course of business but without consideration – Schedule
I
Transaction without consideration – The Legislature empowers the law-makers to notify
activities in schedule I which shall have been made or agreed to be made without a consideration.
Such activities shall be treated as Supply and GST be charged on such Supply. Schedule I is
provided as under:
1. Permanent transfer or disposal of business assets where input tax credit has been availed on
such assets.
2. Supply of goods or services or both between related persons or between distinct persons as
specified in section 25, when made in the course or furtherance of business:

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1. Transfer a. any transfer of the title in goods is a Supply of goods;
b. any transfer of right in goods or of undivided share in goods
without the transfer of title thereof, is a Supply of services;
c. any transfer of title in goods under an agreement which
stipulates that property in goods shall pass at a future date
upon payment of full consideration as agreed, is a Supply of
goods.

2. Land and Building (a) any lease, tenancy, easement, licence to occupy land is a
Supply of services;
(b) any lease or letting out of the building including a
commercial, industrial or residential complex for business
or commerce, either wholly or partly, is a Supply of
services.
3. Treatment or Any treatment or process which is applied to another person‘s
process goods is a Supply of services
4. Transfer of business a. where goods forming part of the assets of a business are
assets transferred or disposed of by or under the directions of the
person carrying on the business so as no longer to form part
of those assets, whether or not for a consideration, such
transfer or disposal is a Supply of goods by the person;
b. where, by or under the direction of a person carrying on a
business, goods held or used for the purposes of the business
are put to any private use or are used, or made available to
any person for use, for any purpose other than a purpose of
the business, whether or not for a consideration, the usage or
making available of such goods is a Supply of services;
c. where any person ceases to be a taxable person, any goods
forming part of the assets of any business carried on by him
shall be deemed to be supplied by him in the course or
furtherance of his business immediately before he ceases to
be a taxable person, unless—
i. the business is transferred as a going concern to another
person; or
ii. the business is carried on by a personal representative
who is deemed to be a taxable person.
5. Supply of services The following shall be treated as Supply of services, namely:—

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 a. renting of immovable property;
b. construction of a complex, building, civil structure or a part
thereof, including a complex or building intended for sale to
a buyer, wholly or partly, except where the entire
consideration has been received after issuance of completion
certificate, where required, by the competent authority or
after its first occupation, whichever is earlier.
Explanation.—For the purposes of this clause—
(1) the expression ―competent authority‖ means the
Government or any authority authorised to issue completion
certificate under any law for the time being in force and in
case of non-requirement of such certificate from such
authority, from any of the following, namely:—
(i) an architect registered with the Council of Architecture
constituted under the Architects Act, 1972 (20 of
1972) ; or
(ii) a chartered engineer registered with the Institution of
Engineers (India); or
(iii) a licensed surveyor of the respective local body of the
city or town or village or development or planning
authority;
(2) the expression ―construction‖ includes additions,
alterations, replacements or remodelling of any existing civil
structure;
c. temporary transfer or permitting the use or enjoyment of any
intellectual property right;
d. development, design, programming, customisation,
adaptation, upgradation, enhancement, implementation of
information technology software;
e. agreeing to the obligation to refrain from an act, or to
tolerate an act or a situation, or to do an act; and
f. transfer of the right to use any goods for any purpose
(whether or not for a specified period) for cash, deferred
payment or other valuable consideration.
6. Composite Supply The following composite supplies shall be treated as a Supply of

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 services, namely:—
(a) works contract as defined in clause (119) of section 2; and
(b) Supply, by way of or as part of any service or in any other
manner whatsoever, of goods, being food or any other article for
human consumption or any drink (other than alcoholic liquor for
human consumption), where such Supply or service is for cash,
deferred payment or other valuable consideration.
7. Supply of Goods The following shall be treated as Supply of goods, namely:—
Supply of goods by any unincorporated association or body of
persons to a member thereof for cash, deferred payment or other
valuable consideration.

Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an
employer to an employee shall not be treated as Supply of goods or services or both.
3. Supply of goods—
i. by a principal to his agent where the agent undertakes to Supply such goods on behalf of
the principal; or
ii. by an agent to his principal where the agent undertakes to receive such goods on behalf
of the principal.
4. Import of services by a person from a related person or from any of his other
establishments outside India, in the course or furtherance of business.
In Advance Ruling upheld by AAAR-Karnataka in the case of Columbai Asia Hospitals P.
Ltd; wherein the Hon‘ble Court held that administrative services provided by Head Office to
their branches situated in other States shall be treated as supply of services. Last para of the
judgment is that ―The India Management Office (IMO) of the Appellant is providing a service
to its other distinct units by way of carrying out activities such as accounting, administrative
work, etc with the use of the services of the employees working in the IMO, the outcome of
which benefits all the other units and such activity is to be treated as a taxable Supply in terms
of the entry 2 of Schedule I read with Section 7 of the CGST Act.‖
E. Section 7 (1A) – Schedule II for Treatment of Activity as Supply of Goods or Supply of
Services
To avoid any litigation in regard of that a particular activity is a Supply of goods or a Supply of
services the Legislature makes provisions in this respect. Schedule II has been prescribed
wherein (Schedule II) it has been fixed that a particular activity shall be treated either as Supply
of goods or as Supply of services. Schedule II is reproduced as under:
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 ACTIVITIES OR TRANSACTIONS TO BE TREATED AS SUPPLY OF GOODS OR
SUPPLY OF SERVICES
F. Section 7 (2) – Neither a Supply of Goods nor a Supply of services –
(a) activities or transactions specified in Schedule III; or
(b) such activities or transactions undertaken by the Central Government, a State Government or
any local authority in which they are engaged as public authorities, as may be notified by the
Government on the recommendations of the Council.
Schedule III is reproduced:
1. Services by an employee to the employer in the course of or in relation to his employment.
2. Services by any court or Tribunal established under any law for the time being in force.
3.
(a) The functions performed by the Members of Parliament, Members of State Legislature,
Members of Panchayats, Members of Municipalities and Members of other local authorities;
(b) The duties performed by any person who holds any post in pursuance of the provisions of the
Constitution in that capacity; or
(c) The duties performed by any person as a Chairperson or a Member or a Director in a body
established by the Central Government or a State Government or local authority and who is
not deemed as an employee before the commencement of this clause.
4. Services of funeral, burial, crematorium or mortuary including transportation of the deceased.
5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.
6. Actionable claims, other than lottery, betting and gambling.
7. Supply of goods from a place in the non-taxable territory to another place in the non-taxable
territory without such goods entering into India.
8. (a) Supply of warehoused goods to any person before clearance for home consumption;
(b) Supply of goods by the consignee to any other person, by endorsement of documents of title to
the goods, after the goods have been dispatched from the port of origin located outside India but
before clearance for home consumption.]
Explanation 1.—For the purposes of paragraph 2, the term ―court‖ includes District Court, High
Court and Supreme Court.
Explanation 2.—For the purposes of paragraph 8, the expression ―warehoused goods‖ shall have
the same meaning as assigned to it in the Customs Act, 1962 (52 of 1962).

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 Notification No. 14/2017-Central Tax (Rate) Dated 28/06/2017 issued for section 7(2) for neither
Supply of goods nor Supply of services. Following activity has been prescribed:
―Services by way of any activity in relation to a function entrusted to a Panchayat under article
243G of the Constitution or to a Municipality under article 243W of the Constitution.‖
Notification No. 25/2019-Central Tax (Rate) Dated: 30/09/2019 issued for section 7(2) for neither
Supply of goods nor Supply of services. Following activity has been prescribed:
―Service by way of grant of alcoholic liquor licence, against consideration in the form of licence fee
or application fee or by whatever name it is called.‖

G. Composite Supply Under GST

Section 2 (30) defines “composite Supply” means a Supply made by a taxable person to a recipient
consisting of two or more taxable supplies of goods or services or both, or any combination thereof,
which are naturally bundled and supplied in conjunction with each other in the ordinary course of
business, one of which is a principal Supply.
Illustration: Where goods are packed and transported with insurance, the Supply of goods, packing
materials, transport and insurance is a composite Supply and Supply of goods is a principal Supply;
H. Mixed Supply Under GST
Section 2(74) defines “mixed Supply” means two or more individual supplies of goods or services,
or any combination thereof, made in conjunction with each other by a taxable person for a single
price where such Supply does not constitute a composite Supply:
Illustration: A Supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits,
aerated drinks and fruit juices when supplied for a single price is a mixed Supply. Each of these
items can be supplied separately and is not dependent on any other. It shall not be a mixed Supply if
these items are supplied separately;
I. Tax liability on composite and mixed supplies – Section 8
(a) – Rate of Tax in composite supply shall be the rate of tax which is applicable to the Principal
Supply and
(b) – Rate of Tax in mixed supply shall be the rate of tax which attracts higher rate of tax in mixed
supply.
Example for composite Supply – A person sells Furniture to the customer. To deliver the furniture
he incurs amount on account of packing material and transport charges. The charges for packing
material and charges for transport are separately shown in Tax Invoice. Such transaction is a
combination of three supplies i.e. supply of furniture, supply of packing material and transport
charges. Principal Supply is furniture, therefore, tax at the rate applicable to the furniture shall be
charged for this composite/all supplies.
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 Example for mixed Supply – There is a basket of goods comprising goods say A,B,C and D. Rate of
tax for A is 5, for B is 12, for C is 18 and for D is NIL rate. In this case the maximum rate is 18,
therefore, tax be charged @ 18 for this mixed Supply.
The person may sell such goods separately instead of mixed Supply. If he sells goods separately
then rate of tax be charged separately according to rate of tax apply on each Supply.

J. Nature of Supply
The tax is paid according to the nature of supply. If supply pertains to intrastate the Central GST
and State GST are paid and if supply pertains to interstate the IGST is paid.
Location of Supplier and the place of supply determine whether a supply is intrastate supply or
interstate supply.
 Section 7 of the IGST Act is for interstate of supply.
 Section 8 of the IGST Act is for intrastate of supply.
 Sections 10,11,12 and 13 of the IGST Act are for place of supply.
SUPPLY MADE IN THE COURSE OR FURTHERANCE OF BUSINESS:

(a) in the course of business: Every person carries out certain activities regularly for
running trade or commerce.

Example: 1

CMA Ram a practicing Cost Accountant carries out the activity of Accounting, Auditing, Filing returns,
Certifying documents and so on so forth. These activities can be considered as performed in the course of
business.

(b) furtherance of business: Every business person use to think how to develop his
business or carrying out new activities. Such activities called as furtherance of business.

Example: 2

M/s X Ltd. manufacturing of motor cars. Company use to sell more number of cars in Southern India. In view of
demand in Southern India, company intends to establish manufacturing unit in Chennai. M/s X Ltd. appointed
Mr. Y as a consultant for searching, evaluating and shortlisting places for prospective targets. Finally company
decided to establish unit at Ambattur Industrial Estate Chennai. Hence, Mr. Y carried out various activities is in
furtherance of business of M/s X Ltd.

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GST is essentially a tax only on commercial transactions. Hence, only those supplies that are
in the course or furtherance of business qualify as supply under GST. Hence, any supplies
made by an individual in his personal capacity do not come under the ambit of GST unless they
fall within the definition of business as defined in the Act.

TIME, AND PLACE OF SUPPLY UNDER GST

TIME OF SUPPLY
Time of supply means the point in time when goods/services are considered supplied’.
When the seller knows the ‘time’, it helps him identify due date for payment of taxes. That is,
the time of supply fixes the point when the liability the liability to charge GST arises. It also
indicates when a supply is deemed to have been made.
Goods and services have a separate basis to identify their time of supply. Let’s understand
them in detail.
A. Time of Supply of Goods

Time of supply of goods is earliest of:

i. Date of issue of invoice
ii. Last date on which invoice should have been issued
iii. Date of receipt of advance/ payment*.

For example:
Mr. X sold goods to Mr. Y worth ₹ 1,00,000. The invoice was issued on 15th January. The payment was
received on 31st January. The goods were supplied on 20th January.
*Note: GST is not applicable to advances under GST. GST in Advance is payable at the time of issue
of the invoice. Notification No. 66/2017 – Central Tax issued on 15.11.2017
Let us analyze and arrive at the time of supply in this case. Time of supply is earliest of –
Date of issue of invoice = 15th January

Last date on which invoice should have been issued = 20th January Thus the time of supply is 15th
January.
What will happen if, in the same example an advance of ₹ 50,000 is received by Mr. X on 1st January?
The time of supply for the advance of ₹ 50,000 will be 1st January(since the date of receipt of advance
is before the invoice is issued). For the balance ₹ 50,000, the time of supply will be 15th January.

B. Time of Supply for Services

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Time of supply of services is earliest of:
i. Date of issue of invoice

ii. Date of receipt of advance/ payment.

1. Date of provision of services (if invoice is not issued within prescribed period), Let us
understand this using an example:
Mr. A provides services worth ₹ 20000 to Mr. B on 1st January. The invoice was issued on 20th
January and the payment for the same was received on 1st February.

In the present case, we need to 1st check if the invoice was issued within the prescribed time.
The prescribed time is 30 days from the date of supply i.e. 31st January. The invoice was issued
on 20th January. This means that the invoice was issued within a prescribed time limit.

The time of supply will be earliest of –

(i) Date of issue of invoice = 20th January
(ii) Date of payment = 1st February
This means that the time of supply of services will be 20th January.

C. Time of Supply under Reverse Charge

In case of reverse charge the time of supply for service receiver is earliest of:

i. Date of payment*

ii. 30 days from date of issue of invoice for goods (60 days for services)

*w.e.f. 15.11.2017 ‘Date of Payment’ is not applicable for goods and applies only to services.
Notification No. 66/2017 – Central Tax
For example:

M/s ABC Pvt. Ltd undertook service of a director Mr. X worth ₹ 50,000 on 15th January. The invoice
was raised on 1st February. M/s ABC Pvt Ltd made the payment on 1st May.
The time of supply, in this case, will be earliest of –

1. Date of payment = 1st May

2. 60 days from date of date of invoice = 2nd April Thus, the time of supply of services is 2nd
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 April.

PLACE OF SUPPLY
It is very important to understand the term ‗place of supply‘ for determining the right tax to be
charged on the invoice.
Here is an example:

Location of Place of Nature of Supply GST Applicable

Service Receiver supply
Maharashtra Maharashtra Intra-state CGST + SGST

Maharashtra Kerala Inter-state IGST

A. Place of Supply of Goods

Usually, in case of goods, the place of supply is where the goods are delivered. So, the place
of supply of goods is the place where the ownership of goods changes. What if there is no
movement of goods. In this case, the place of supply is the location of goods at the time of
delivery to the recipient.

For example: In case of sales in a supermarket, the place of supply is the supermarket itself.
Place of supply in cases where goods that are assembled and installed will be the location
where the installation is done.

For example, a supplier located in Kolkata supplies machinery to the recipient in Delhi. The
machinery is installed in the factory of the recipient in Kanpur. In this case, the place of
supply of machinery will be Kanpur.

B. Place of Supply for Services

Generally, the place of supply of services is the location of the service recipient.In cases where
the services are provided to an unregistered dealer and their location is not available the
location of service provider will be the place of provision of service.
Special provisions have been made to determine the place of supply for the following services:
 Services related to immovable property
 Restaurant services
 Admission to events

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  Transportation of goods and passengers
 Telecom services
 Banking, Financial and Insurance services.

In case of services related to immovable property, the location of the property is the place of provision
of services.
Example 1:
Mr. Anil from Delhi provides interior designing services to Mr. Ajay(Mumbai). The property is
located in Ooty (Tamil Nadu).
In this case, place of supply will be the location of the immovable property i.e. Ooty, Tamil Nadu.
Example 2:
A registered taxpayer offers passenger transport services from Bangalore to Hampi. The passengers do
not have GST registration. What will be the place of supply in this case?
The place of supply is the place from where the departure takes place i.e. Bangalore in this case.

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