Supply under GST: Time, Place and Value of Supply

 Supply under GST

1. Meaning of Supply

Supply includes sale, transfer, exchange, barter, license, rental, lease and disposal. If a person undertakes either of these transactions during the course or furtherance of business for consideration, it will be covered under the meaning of Supply under GST. 

2. Definition of Supply

As per Section 7 of the CGST Act, 2017, the term ‘supply’ includes:

• All forms of supply of goods 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.
• Import of services for a consideration whether or not in the course or furtherance of business.
• Activities specified in Schedule I, made or agreed to be made without a consideration.
• Activities to be treated as supply of goods or supply of services as referred to in Schedule II.

3. Scope of Supply

The scope of supply under GST encompasses:

• Goods and Services: All kinds of movable properties and intangible properties are included.
• Consideration: Must be for consideration except in specified cases.
• Business: Must be in the course or furtherance of business.
• Schedules: Certain activities specified in Schedules I and II to be treated as supply even if made without consideration.

4. Elements of Supply

Supply has two important elements: 

• Supply is done for a consideration

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 the Central Government or a State Government is not considered as consideration. It is immaterial whether the payment is made by the recipient or by any other person. 

A deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply.

Further, when there is barter of goods of services, the same activity constitutes supply as well as a consideration. When a barber cuts hair in exchange for a painting, hair cut is a supply of services by the barber. It is a consideration for the painting received. 

However, there are exceptions to the requirement of ‘Consideration’ as a pre-condition for a supply to be called a supply as per GST. As per schedule to CGST Act, 2017, activities as mentioned below shall be treated as supply even if made without consideration: 

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: 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— (a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or (b) 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 taxable person from a related person or from any of his other establishments outside India, in the course or furtherance of business.

• Supply is done in course of furtherance of business

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. Sale of goods or service even as a vocation is a supply under GST. Therefore, even if a famous politician paints paintings for charity and sells the paintings even as a one-time occurrence, the sale would constitute supply. 

However, there is one exception to this ‘Course or Furtherance of Business’ rule i.e., import of services for a consideration.

If the aforementioned elements are not met with, it is not considered as a sale.

Examples:

• Mr. A buys a table for Rs.10,000 for his personal use and sells it off after 10 months of use to a dealer. This is not considered as supply under CGST as this is not done by Mr A for the furtherance of business.
• Mrs. B provides free coaching to neighbouring students as a hobby. This is not considered as supply as this act is not performed for a consideration.

However, as specified in Schedule I of GST Act, certain activities are considered as supply even if it is made without consideration. 

5. Classification of supply and types

1. Taxable Supply 

For a supply to attract GST, the supply must be taxable. Taxable supply has been broadly defined and means any supply of goods or services or both which, is leviable to tax under the Act. Exemptions may be provided to the specified goods or services or to a specified category of persons/ entities making supply.

2. Supply in the Taxable Territory 

For a supply to attract GST, the place of supply should be in India except for the State of Jammu and Kashmir. The place of supply of any goods or services is determined based on Sections 10, 11, 12 and 13 of IGST Act 2017.

3. Inter/Intra State Supply 

The location of the supplier and the place of supply determines whether a supply is treated as an Intra State supply or an Inter State supply. Determination of the nature of supply is essential to ascertain whether integrated tax is to be paid or Central plus State tax are to be paid. Inter- State supply of goods means a supply of goods where the location of the supplier and place of supply are in different States or Union territories. Intra State supply of goods means supply of goods where the location of the supplier and the place of supply are in the same State or Union territory. Imports, Supplies from and to SEZs are treated as deemed Inter-State supplies.

4. Composite supply and Mixed Supply:

There are a few supplies which are made together with two or more items. Such supplies are further classified into Composite Supply and Mixed Supply.   

A supply comprising of two or more goods/services, which are necessarily supplied in conjunction with each other as per frequent business practices followed in that area. In other words, these items cannot be supplied individually. There is a principal supply and a secondary supply in the whole transaction. In such cases, the tax rate on principal supply will apply to the entire supply. 

E.g. Buying a Dry Fruit Gift Box for Diwali. It includes dry fruits, a box, and a wrapper. Box and wrapper cannot be sold individually without the main content which is dry fruit. This is a composite supply. 

A supply comprising of two or more goods/services, wherein the supplies are independent of each other and are not necessarily required to be sold together is called a mixed supply. The first condition to be met for mixed supply is that ‘it should not be a composite supply’. In such cases, the tax rate that is higher of the two supplies will be applicable to the entire supply. 

E.g Buying a Christmas package consisting of cakes, aerated drinks, chocolates, Santa caps, and other gift items. Each of these items can be sold separately and are not dependent on each other. This is a mixed supply.  

The GST Law lays down the tax liability on a composite or mixed supply in the following manner. 

1. Composite Supply comprising two or more supplies one of which, is a principal supply, shall be treated as supply of such principal supply. 
2. Mixed Supply comprising two or more supplies, shall be treated as supply of that particular supply which attracts the highest rate of tax.

5. Import of services:

Import of goods/services with consideration is considered as supply whether for personal or business use.

6. Time of Supply

Time of supply is crucial for determining when goods and services are considered sold or supplied. It helps sellers determine the due date for their GST liability payment. The time of supply differs for goods and services.

For goods, the time of supply is the earliest of the following:

• Date of invoice issuance
• Date of payment/advance receipt
• Last date for invoice issuance

For services, the time of supply is the earliest of the following:

• Invoice issuance date
• Payment/advance receipt date

• Date of service provision (if invoice not issued within the prescribed time)

Under the reverse charge mechanism, the time of supply for the service recipient is the earliest of:

• Payment date
• 30 days from the invoice issuance date for goods (60 days for services)

1. Time of Supply Under GST

In the realm of Goods and Services Tax (GST), understanding the concept of “Time of Supply” is crucial for accurate compliance and efficient financial management. Time of Supply signifies the point at which a transaction is considered to be liable for GST.

2. Significance of Time of Supply

Time of Supply plays a pivotal role in GST as it determines the applicable tax rate, the date when tax liability arises, and the time when businesses can claim Input Tax Credit (ITC). Accurate identification of the Time of Supply ensures that businesses meet their tax obligations in a timely manner, thus contributing to a seamless and transparent tax regime.

3. Determining Time of Supply

The Time of Supply under GST is determined based on the earliest of the following events:

1. Invoice Issuance

For supply of goods, Time of Supply is the date of issuance of the tax invoice or the date of receipt of payment, whichever is earlier.

2. Continuous Supply

In the case of continuous supply, like services provided under a contract, Time of Supply is determined by the earliest of the dates of issuance of invoice or completion of supply.

3. Unregistered Recipient

If the recipient is unregistered and the invoice is issued within 30 days from the supply date, Time of Supply is the date of supply. If the invoice is not issued within 30 days, Time of Supply is the date of issuance of the invoice.

4. Reverse Charge Mechanism

For supplies under the reverse charge mechanism, Time of Supply is the earliest of the date of payment or the date immediately following 60 days from the date of issue of invoice.

4. Implications for Businesses

Understanding Time of Supply has significant implications for businesses:

1. Tax Liability

Businesses must calculate and pay GST based on the correct Time of Supply to avoid penalties and interest charges.

2. Input Tax Credit (ITC)

The eligibility to claim ITC depends on the Time of Supply. Proper determination ensures accurate ITC claims.

3. Cash Flow Management

Knowing the Time of Supply helps businesses plan for the outflow of taxes, ensuring optimal cash flow management.

5. Compliance Tips

Time of Supply is a cornerstone in the GST framework, impacting taxation, compliance, and financial operations of businesses. By mastering this concept and adhering to its determination guidelines, businesses can ensure seamless GST compliance, optimize tax planning, and streamline their operations.

1. Accurate Record Keeping

Maintain meticulous records of invoices, payments, and supply dates to correctly determine Time of Supply.

2. Automated Systems

Utilize accounting software to automate the calculation of Time of Supply and facilitate accurate GST filing.

3. Regular Review

Periodically review transactions to ensure Time of Supply is correctly determined, especially for continuous supplies.

7. Place of Supply

The place of supply is crucial for determining the nature of supply (intrastate or interstate) and the applicable GST.

Location of Service Receiver	Place of supply	Nature of Supply	GST Applicable
Maharashtra	Maharashtra	Intra-state	CGST + SGST
Maharashtra	Kerala	Inter-state	IGST

1 Place of Supply of Goods

1. Domestic Transactions:

• Supply Involving Movement of Goods: The place of supply is the location where the movement of goods terminates for delivery to the recipient.
• Supply without Movement of Goods: The place of supply is the location of the goods at the time of the delivery to the recipient.
• Goods Assembled or Installed: The place of supply is the place of such installation or assembly.
• Goods Supplied on Board a Conveyance: The place of supply is the location at which such goods are taken on board.

2. International Transactions:

• Export of Goods: The place of supply is the location outside India where the goods are exported.
• Import of Goods: The place of supply is the location in India where the goods are imported.

2 Place of Supply of Services

• General Rule: The place of supply of services is the location of the recipient of services. If the recipient's location is not available, the place of supply is the location of the supplier.
• Specific Cases:
• Immovable Property Services: The place of supply is where the immovable property is located.
• Restaurant and Catering Services: The place of supply is where the services are actually performed.
• Admission to Events: The place of supply is where the event is actually held.
• Transportation of Goods: The place of supply is the destination of the goods.
• Telecommunication Services: The place of supply varies based on the service type (fixed line, mobile, DTH).

2. Significance of Place of Supply

Place of Supply is a fundamental concept that determines whether a supply is deemed to be an intra-state or inter-state transaction. This, in turn, affects the applicability of Central GST (CGST) and State GST (SGST) or Integrated GST (IGST). Accurate determination of Place of Supply ensures the correct allocation of tax revenue among states and fosters a fair and transparent tax system.

3. Determining Place of Supply

Place of Supply under GST is determined based on the nature of the supply and the location of the supplier and the recipient. Several scenarios dictate the Place of Supply:

1. Supply of Goods: 

The Place of Supply is the location where the goods are delivered or made available to the recipient.

2. Supply of Services: 

The Place of Supply varies based on the type of service, such as the location of the recipient, the location of the supplier, or the location of the immovable property, if relevant.

4. Implications for Businesses

Understanding Place of Supply has several implications for businesses:

1. Correct Tax Calculation: 

Accurate determination of Place of Supply ensures the correct application of CGST, SGST, or IGST, preventing potential tax discrepancies.

2. Input Tax Credit (ITC): 

Proper identification of the Place of Supply is essential for claiming ITC on taxes paid.

3. Cross-Border Transactions: 

For inter-state supplies, IGST is applicable, simplifying tax payment for businesses engaged in cross-border trade.

4. Compliance Strategies

To navigate Place of Supply effectively and ensure compliance, businesses can adopt these strategies:

1. Stay Updated: 

Regularly review GST guidelines and notifications to stay informed about any changes in Place of Supply rules.

2. Document Verification: 

Maintain comprehensive records of transactions and related documents to accurately determine the Place of Supply.

3. Professional Guidance: 

Seek advice from tax experts or consultants to navigate complex scenarios and ensure correct tax treatment.

Place of Supply under GST is a cornerstone of accurate tax assessment and compliance. By understanding its significance, grasping the determination factors, and implementing effective compliance strategies, businesses can ensure smooth operations, optimal tax planning, and transparent financial practices.

Place of Supply is a fundamental concept that shapes accurate tax assessment and compliance under GST. By comprehending its significance, understanding the factors influencing determination, and implementing effective compliance strategies, businesses can navigate the intricacies of intra-state and inter-state transactions with confidence.

8. Value of Supply

The “Value of Supply” refers to the amount collected by a seller for the goods supplied or services provided. It is crucial to determine the value accurately to calculate the correct GST amount.

1. Value of Supply Under GST

The Goods and Services Tax (GST) system has ushered in a new era of taxation in India, streamlining the way goods and services are taxed. Central to this taxation framework is the concept of “Value of Supply,” which forms the basis for determining the applicable tax liability.

2. Significance of Value of Supply

Value of Supply is a critical concept in the GST framework:

1. Tax Liability Determination: 

The value of supply serves as the foundation for calculating the applicable GST rate and, subsequently, the tax liability.

2. Uniform Taxation: 

A standardized method for calculating the value of supply ensures consistency and transparency in the taxation of goods and services.

3. Methods of Calculating Value of Supply

Under GST, there are several methods for determining the value of supply:

1. Transaction Value: 

The most common method, it is the actual price paid or payable for the goods or services, including all costs and charges.

2. Open Market Value: 

In cases where the transaction value cannot be determined, the value is determined based on the open market value of similar supplies.

3. Value of Similar Supplies: 

If open market value is not available, the value is determined using the value of similar supplies adjusted for specific factors.

4. Cost-Plus Method: 

For services, the value of supply is calculated by adding a certain percentage of the cost to the supplier.

4. Implications for Businesses

Understanding the Value of Supply carries several implications for businesses:

1. Accurate Tax Calculation: 

Correct calculation of the value of supply ensures precise tax assessment, avoiding underpayment or overpayment of taxes.

2. Input Tax Credit (ITC): 

Accurate determination of the value of supply is crucial for claiming ITC on taxes paid.

3. Uniform Treatment: 

A standardized value calculation method promotes uniform treatment of similar supplies, preventing ambiguity and disputes.

5. Compliance Strategies

To navigate the concept of Value of Supply and ensure compliance, businesses can adopt these strategies:

1. Documentation: 

Maintain comprehensive records of transactions, invoices, and relevant documents to accurately calculate the value of supply.

2. Regular Review: 

Periodically review transactions to ensure that the correct value calculation method is being applied.

3. Expert Advice: 

Seek guidance from tax professionals or consultants to navigate complex scenarios and ensure accurate value determination.

9. Intrastate and Interstate Supply

Intrastate Supply

• Definition: When the location of the supplier and the place of supply are in the same state or union territory.
• Tax Implications: Both CGST and SGST/UTGST are applicable.
• Example: A supplier in Maharashtra sells goods to a buyer in Maharashtra; CGST and Maharashtra SGST are charged.

Interstate Supply

• Definition: When the location of the supplier and the place of supply are in different states or union territories.
• Tax Implications: IGST is applicable.
• Example: A supplier in Maharashtra sells goods to a buyer in Gujarat; IGST is charged.