Chapter 2: Supply Under GST

Chapter 2: Supply Under GST

Question 1:

Define "Supply" under GST. What are the different types of supply under the Goods and Services Tax Act, 2017?

Answer:

Supply under GST is the most critical concept as it forms the basis for the levy of tax. Section 7 of the GST Act defines “supply” broadly as any transaction involving the sale, transfer, barter, exchange, license, rental, lease, or disposal of goods or services, whether for consideration or not.

Types of Supply under GST:

  1. Taxable Supply: A supply of goods or services that is liable to GST at the applicable rate.
  2. Exempt Supply: Goods or services that are not subject to GST, either due to a specific exemption or because they fall outside the scope of GST.
  3. Non-Taxable Supply: Supplies that are neither taxable nor exempt under the Act (for example, alcoholic liquor for human consumption).
  4. Export Supply: Goods or services provided outside India, which are treated as "exports" and are zero-rated under GST.
  5. Interstate and Intrastate Supply: Supplies made within the same state are intrastate, while those made across states are interstate.

Question 2:

Explain the term "Composite Supply" under GST with an example.

Answer:

A Composite Supply is a supply of goods or services that consists of two or more supplies that are naturally bundled together and provided in conjunction with each other. The main supply is the one that gives the overall nature to the composite supply, and the tax rate of the principal supply applies to the entire bundle.

Example:

  • A restaurant service is a composite supply consisting of the supply of food (goods) and the provision of services (service of food). The principal supply in this case is the supply of food, and hence, the entire bundle is taxed at the rate applicable to food services (e.g., 5% GST under the restaurant services category).

Question 3:

What is "Mixed Supply" under GST? How is it different from a "Composite Supply"?

Answer:

A Mixed Supply refers to a supply consisting of two or more individual supplies of goods or services that are not naturally bundled and are supplied together for a single price. Unlike composite supply, there is no predominant or principal supply in mixed supply.

Difference from Composite Supply:

  • Composite Supply: The supplies are naturally bundled and work together as a single package, and tax is applied based on the principal supply.
  • Mixed Supply: The supplies are not naturally bundled, and each supply can be taxed separately, but the tax is levied on the highest rate of tax applicable to any of the supplies in the bundle.

Example of Mixed Supply:

  • A combo pack of a chocolate box, a pen, and a T-shirt sold together. These are separate items not naturally bundled, but sold together for one price. The tax rate will be based on the highest rate applicable to any of the items in the pack.

Question 4:

Discuss the concept of "Supply for Consideration" under GST. What are the circumstances where supply can take place without consideration?

Answer:

Supply for Consideration under GST means that there must be a payment or monetary exchange for the goods or services provided. However, not all supplies under GST require consideration to be taxable.

Circumstances Where Supply Takes Place Without Consideration:

  • Barter/Exchange: Where goods or services are exchanged without any monetary transaction, such as barter transactions.
  • Gifts: Goods or services provided as a gift (subject to certain limits) will be considered a supply under GST. For example, if a business provides free samples, it is treated as a supply even though no monetary consideration is involved.
  • Import of Services for Personal Use: A transaction where services are imported without monetary payment but for personal use is still considered a supply under GST.

GST considers such transactions as "supply" to ensure the tax is applied on a wide array of transactions, including those without explicit consideration.

Question 5:

What are the "Time of Supply" provisions under GST? Explain how time of supply affects the determination of tax liability.

Answer:

The Time of Supply under GST determines when the supply of goods or services is deemed to have occurred, as it is the point at which the liability to pay tax arises. The time of supply plays a crucial role in determining the due date for payment of tax.

The Time of Supply is determined based on the following criteria:

  1. For Goods: The time of supply is the earlier of:
    • The date of issue of invoice by the supplier.
    • The date of receipt of payment by the supplier.
  2. For Services: The time of supply is the earlier of:
    • The date of issue of invoice.
    • The date of completion of service.
    • The date of receipt of payment.
  3. For Reverse Charge Mechanism (RCM): If the reverse charge applies, the time of supply is the earliest of the date of:
    • Receipt of goods or services.
    • Payment of the invoice.
    • Invoice date.

The correct identification of the time of supply helps in determining when the GST liability must be paid to the government. It also impacts the claiming of Input Tax Credit (ITC), as the ITC is available based on the time of supply.

  


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