Advanced GST questions: taxable event under GST, Scope and Time of Supply

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New Delhi: This Section deals with questions like What is the taxable event under GST? What is the scope of ‘supply’ under the GST law?  What is a taxable supply? And much more.

To guide taxpayers in relation to GST matters, CBEC has issued a range of frequently asked questions related to GST law, procedures, tax rates, specific industry or sector.  Taxpayers can search for information using key words or a topic like Textiles, Restaurants, Composition levy scheme, Registration procedure, Return filing, Job work, input tax credit etc.  For any further information taxpayers may reach out to CBEC twitter handle, or help at cbecmitra.helpdesk@icegate.gov.in or 1800-1200-232.  Taxpayers may also look for latest information on GST at CBEC portals cbec.gov.in and  cbec-gst.gov.in.

FREQUENTLY ASKED QUESTIONS (FAQs) On GOODS AND SERVICES TAX (GST) 2nd Edition. 31st March, 2017

Meaning and Scope of Supply

Q 1.     What is the taxable event under GST?

Ans.   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’ .

Q 2. What is the scope of ‘supply’ under the GST law?

Ans.   The term ‘supply’ is wide in its import covers all forms of supply of goods or services or both that includes 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. It also includes import of service. The model GST law also provides for including certain transactions made without consideration within the scope of supply.

Q 3. What is a taxable supply?

Ans.  A ‘taxable supply’ means a supply of goods or services or both which is chargeable to goods and services tax under the GST Act.

Q 4. What    are    the    necessary    elements    that constitute supply under CGST/SGST Act?

Ans. In order to constitute a ‘supply’, the following elements are required to be satisfied, i.e.-

(i)   the activity involves supply of goods or services or both;

(ii) the supply is for a consideration unless otherwise specifically provided for;

(iii) the supply is made in the course or furtherance of business;

(iv) the supply is made in the taxable territory;  (v) the supply is a taxable supply; and (vi) the supply is made by a taxable person.

Q 5. Can a transaction in which any one or more of the above criteria is not fulfilled, be still considered as supply under GST?

Ans.   Yes. Under certain circumstances such as import of services for a consideration whether or not in the course or furtherance of business (Section 7(1) (b)) or supplies made without consideration, specified under Schedule-I of CGST /SGST Act, where one or more ingredients specified in answer to question no.4 are not satisfied, it shall still be treated as supply for levy of GST.

Q 6. Import of Goods is conspicuous by its absence in Section 7. Why?

Ans.   Import of goods is dealt separately under the Customs Act, 1962, wherein IGST shall be levied as additional duty of customs in addition to basic customs duty under the Customs Tariff Act, 1975.

Q 7. Are self-supplies taxable under GST?

Ans.   Inter-state self-supplies such as stock transfers, branch transfers or consignment sales shall be taxable under IGST even though such transactions may not involve payment of consideration. Every supplier is liable to register under the GST law in the State or Union territory

from where he makes a taxable supply of goods or services or both in terms of Section 22 of the model GST law.  However, intra-state self-supplies are not taxable subject to not opting for registration as business vertical.

Q 8. Whether transfer of title and/or possession is necessary for a transaction to constitute supply of goods?

Ans.   Title as well as possession both have to be transferred for a transaction to be considered as a supply of goods. In case title is not transferred, the transaction would be treated as supply of service in terms of Schedule II (1) (b).  In some cases, possession may be transferred immediately but title may be transferred at a future date like in case of sale on approval basis or hire purchase arrangement. Such transactions will also be termed as supply of goods.

Q 9. What do you mean by “supply made in the course or furtherance of business”?

Ans.    “Business” is defined under Section 2(17) include any trade, commerce, manufacture, profession, vocation etc. whether or not undertaken for a pecuniary benefit. Business also includes any activity or transaction which is incidental or ancillary to the aforementioned listed activities. In addition, any activity undertaken by the Central Govt. or a State Govt. or any local authority in which they are engaged as public authority shall also be construed as business. From the above, it may be noted that any activity undertaken included in the definition for furtherance or promoting of a business could constitute a supply under GST law.

Q 10. An individual buys a car for personal use and after a year sells it to a car dealer. Will the transaction be a supply in terms of CGST/SGST Act?   Give reasons for the answer.

Ans.   No, because supply is not made by the individual in the course or furtherance of business. Further, no input tax credit was admissible on such car at the time of its acquisition as it was meant for non-business use.

Q 11. A dealer of air-conditioners permanently transfers an air conditioner from his stock in trade, for personal use at his residence. Will the transaction constitute a supply?

Ans.   Yes.  As per Sl. No.1 of Schedule-I, permanent transfer or disposal of business assets where input tax credit has been availed on such assets shall constitute a supply under GST even where no consideration is involved. 

Q 12. Whether provision of service or goods by a club or association or society to its members will be treated as supply or not?

Ans.  Yes.   Provision of facilities by a club, association, society or any such body to its members shall be treated as supply. This is included in the definition of ‘business’ in section 2(17) of CGST/SGST Act.

Q 13. What are the different types of supplies under the GST law?

Ans. (i) Taxable and exempt supplies. (ii) Inter-State and Intra-State supplies, (iii) Composite and mixed supplies and (iv) Zero rated supplies.         

Q 14. What are inter-state supplies and intra-state supplies?

Ans.  Inter-state and intra-state supplies have specifically been defined in Section 7(1), 7(2) and 8(1), 8(2) of the IGST Act respectively. Broadly, where the location of the supplier and the place of supply are in same state it will be intrastate and where it is in different states it will be inter-state supplies.

Q 15. Whether transfer of right to use goods will be treated as supply of goods or supply of service? Why?

Ans.  Transfer of right to use goods shall be treated as supply of service because there is no transfer of title in such supplies. Such transactions are specifically treated as supply of service in Schedule-II of CGST/SGST Act.

Q 16. Whether    Works    contracts    and    Catering services will be treated as supply of goods or supply of services? Why?

Ans.   Works contracts and catering services shall be treated as supply of services as both are specified under Sl. No. 6 (a) and (b) in Schedule-II of the model GST law.

Q 17. Whether supply of software would be treated as supply of goods or supply of services under GST law?

Ans. Development, design, programming, customization, adaptation, upgradation, enhancement, implementation of information technology software shall be treated as supply of services as listed in Sl. No. 5 (2)(d) of Schedule –II of the model GST law.

Q 18. Whether goods supplied on hire purchase basis will be treated as supply of goods or supply of services? Why?

Ans.   Supply of goods on hire purchase shall be treated as supply of goods as there is transfer of title, albeit at a future date.

Q 19. What is a Composite Supply under CGST/ SGST/UTGST Act?

Ans. Composite Supply means a supply made by a taxable person to a recipient comprising two or more supplies of goods or services, 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.  For example, 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 the principal supply.

Q 20. How will tax liability on a composite supply be determined under GST?

Ans. A composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply.

Q 21. What is a mixed supply?

Ans. 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.  For example, a supply of package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drink and fruit juice when supplied for a single price is a mixed supply.   Each of these items can be supplied separately and it is not dependent on any other.  It shall not be a mixed supply if these items are supplied separately.

Q 22. How will tax liability on a mixed supply be determined under GST?

Ans. A mixed supply comprising two or more supplies shall be treated as supply of that particular supply which attracts the highest rate of tax.

Q 23. Are there any activities which are treated as neither a supply of goods nor a supply of services?

Ans. Yes. Schedule-III of the model GST law lists certain activities such as (i) services by an employee to the employer in the course of or in relation to his employment, (ii) services by any Court or Tribunal established under any law, (iii) functions performed by members of Parliament, State Legislatures, members of the local authorities, Constitutional functionaries (iv)  services of funeral, burial, crematorium or mortuary and (v) sale of land and (vi), actionable claims other than lottery, betting and gambling shall be treated neither a supply of goods or supply of services. 

Q 24. What is meant by zero rated supply under GST?

Ans. Zero rated supply means export of goods and/or services or supply of goods and/or services to a SEZ developer or a SEZ Unit.

Q 25. Will import of services without consideration be taxable under GST?

Ans. As a general principle, import of services without consideration will not be considered as supply under GST

in terms of Section 7.  However, 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, even without consideration will be treated as supply in terms of Sl. No.4 of Schedule I.

 

Time of Supply

Q 1. What is time of supply?

Ans.   The time of supply fixes the point when the liability to charge GST arises.  It also indicates when a supply is deemed to have been made.  The CGST/SGST Act provides separate time of supply for goods and services.

Q 2. When does the liability to pay GST arise in respect of supply of goods and Services?

Ans.   Section12 & 13 of the CGST/SGST Act provides for time of supply of goods.  The time of supply of goods shall be the earlier of the following namely, (i)  the date of issue of invoice by the supplier or the last date on which he is required under Section 31, to issue the invoice with respect to the supply; or (ii) the date on which the supplier receives the payment with respect to the supply.

Q 3. What is time of supply in case of supply of vouchers in respect of goods and services?

Ans.  The time of supply of voucher in respect of goods and services shall be; a) the date of issue of voucher, if the supply is identifiable at that point; or b) the date of redemption of voucher in all other cases.

Q 4. Where it is not possible to determine the time of supply in terms of sub-section 2, 3, 4of Section 12 or that of Section 13 of CGST/SGST Act, how will time of supply be determined?

Ans. There is a residual entry in Section 12(5) as well as 13 (5) which says that if periodical return has to be filed, then the due date of filing of such periodical return shall

be the time of supply. In other cases, it will be the date on which the CGST/SGST/IGST is actually paid.

Q 5. What does “date of receipt of payment” mean?

Ans.   It is the earliest of the date on which the payment is entered in the books of accounts of the supplier or the date on which the payment is credited to his bank account.

Q 6. Suppose, part advance payment is made or invoice issued is for part payment, whether the time of supply will cover the full supply?

Ans. No. The supply shall be deemed to have been made to the extent it is covered by the invoice or the part payment.

Q 7. What is the time of supply of goods in case of tax payable under reverse charge?

Ans.  The time of supply will be the earliest of the following dates:

  1. a) date of receipt of goods; or
  2. b) date on which payment is made; or
  3. c) the date immediately following 30 days from the date of issue of invoice by the supplier.

 Q 8. What is the time of supply of service in case of tax payable under reverse charge?

 Ans.  The time of supply will be the earlier of the following dates: a) date on which payment is made; or

 

  1. b) the date immediately following sixty days from the date of issue of invoice by the supplier.

Q 9. What is the time of supply applicable with regard to addition in the value by way of interest, late fee or penalty or any delayed payment of consideration? 

Ans. The time of supply with regard to an addition in value on account of interest, late fee or penalty or delayed consideration shall be the date on which the supplier received such additional consideration.

Q 10. Is there any change in time of supply, where supply is completed prior to or after change in rate of tax?

Ans. Yes.  In such cases provisions of Section 14 will apply.

Q 11. What is the time of supply, where supply is completed prior to change in rate of tax?

Ans. In such cases time of supply will be 

(i) where the invoice for the same has been issued and the payment is also received after the change in rate of tax, the time of supply shall be the date of receipt of payment or the date of issue of invoice, whichever is earlier; or (ii) where the invoice has been issued prior to change in rate of tax but the payment is received after the change in rate of tax, the time of supply shall be the date of issue of invoice; or

(iii) where the payment is received before the change in rate of tax, but the invoice for the same has been issued after the change in rate of tax, the time of supply shall be the date of receipt of payment;

 

Q 12. What is the time of supply, where supply is completed after to change in rate of tax?

Ans. In such cases time of supply will be

(i) where the payment is received after the change in rate of tax but the invoice has been issued prior to the change in rate of tax, the time of supply shall be the date of receipt of payment; or (ii) where the invoice has been issued and the payment is received before the change in rate of tax, the time of supply shall be the date of receipt of payment or date of issue of invoice, whichever is earlier; or (iii) where the invoice has been issued after the change in rate of tax but the payment is received before the change in rate of tax, the time of supply shall be the date of issue of invoice

Q 13. Let’s say there was increase in tax rate from 18% to 20% w.e.f.1.6.2017. What is the tax rate applicable when services provided and invoice issued before change in rate in April 2017, but payment received after change in rate in June2017?

Ans.   The old rate of 18% shall be applicable as services are provided prior to 1.6.2017.

Q 14. Let’s say there was increase in tax rate from 18% to 20% w.e.f. 1.6.2017. What is the tax rate applicable when goods are supplied and invoice issued after change in rate in June 2017, but full advance payment was already received in April 2017?

Ans.   The new rate of 20% shall be applicable as goods are supplied and invoice issued after 1.6.2017

Q 15. What is the time period within which invoice has to be issued for supply of Goods?

Ans.   As per Section 31 of CGST/SGST Act a registered taxable person shall issue a tax invoice showing description, quantity and value of goods, tax charged thereon and other prescribed particulars, before or at the time of (a) removal of goods for supply to the recipient, where supply involves movement of goods or (b) delivery of goods or making available thereof to the recipient in other cases.

Q 16. What is the time period within which invoice has to be issued for supply of Services?

Ans.   As per Section 31 of CGST/SGST Act a registered taxable person shall, before or after the provision of service, but within a period prescribed in this behalf, issue a tax invoice showing description, value of goods, tax payable thereon and other prescribed particulars.

Q 17. What is the time period within which invoice has to be issued in a case involving continuous supply of goods?

Ans.   In case of continuous supply of goods, where

successive statements of accounts or successive payments are involved, the invoice shall be issued before or at the time each such statement is issued or, as the case may be, each such payment is received.

Q 18. What is the time period within which invoice has to be issued in a case involving continuous supply of services?

Ans.   In case of continuous supply of services, 

(a) where the due date of payment is ascertainable from the contract, the invoice shall be issued before or after the payment is liable to be made by the recipient but within a period prescribed in this behalf whether or not any payment has been received by the supplier of the service; (b) where the due date of payment is not ascertainable from the contract, the invoice shall be issued before or after each such time when the supplier of service receives the payment but within a period prescribed in this behalf; (c) where the payment is linked to the completion of an event, the invoice shall be issued before or after the time of completion of that event but within a period prescribed in this behalf.

Q 19. What is the time period within which invoice has to be issued where the goods being sent or taken on approval for sale?

Ans. The invoice in respect of goods sent or taken on approval for sale or return shall be issued before or at the time of supply or six months from the date of approval, whichever is earlier.

 

Valuation in GST

Q 1. What is the value of taxable supply to be adopted for the levy of GST?

Ans.  The value of taxable supply of goods and services shall ordinarily be ‘the transaction value’ which is the price paid or payable, when the parties are not related and price is the sole consideration. Section 15 of the CGST/SGST Act further elaborates various   inclusions   and exclusions from the ambit of transaction value. For example, the transaction value shall not include refundable deposit, discount allowed subject to certain conditions before or at the time of supply.

Q 2. What is transaction value?

Ans.  Transaction value refers to the price actually paid or payable for the supply of goods and or services where the supplier and the recipient are not related and price is the sole consideration for the supply. It includes any amount which the supplier is liable to pay but which has been incurred by the recipient of the supply.

Q 3. Are there separate valuation provisions for CGST, SGST and IGST and for Goods and Services?

Ans.  No, section 15 is common for all three taxes and also common for goods and services.

Q 4. Is contract price not sufficient to determine valuation of supply?

Ans.  Contract price is more specifically referred to as ‘transaction value’ and that is the basis for computing tax.  However, when the price is influenced by factors like relationship of parties or where certain transactions are deemed to be supply, which do not have a price, the value has to be determined in accordance with the GST Valuation Rules. 

 Q 5. Is reference to GST Valuation Rules required in all cases?

Ans.  No. Reference to GST Valuation Rules is required only in cases where value cannot be determined under subsection (1) of Section 15.

Q 6. Can the transaction value declared under section 15(1) be accepted?

Ans.  Yes, it can be accepted after examining for inclusions in section 15(2). Furthermore, the transaction value can be accepted even where the supplier and recipient are related, provided the relationship has not influenced the price. 

Q 7. Whether post-supply discounts or incentives are to be included in the transaction value?

Ans.  Yes. where the post-supply discount is established as per the agreement which is known at or before the time of supply and where such discount specifically linked to the relevant invoice and the recipient has reversed input tax credit attributable to such discount, the discount is allowed as admissible deduction under Section 15 of the model GST law.

 Q 8. Whether    pre-supply    discounts    allowed before or at the time of supply are includible in the transaction value?

 Ans.  No, provided it is allowed in the course of normal trade practice and has been duly recorded in the invoice.

Q 9. When are the provisions of the Valuation Rules applicable?

Ans.  Valuation Rules are applicable when (i) consideration either wholly or in part not in money terms; (ii) parties are related or supply by any specified category of supplier; and

(iii) transaction value declared is not reliable.

 

Q 10. What are the inclusions specified in Section 15(2) which could be added to Transaction Value?

 Ans.  The inclusions specified in Section15 (2) which could be added to transaction value are as follows: a) Any taxes, duties, cesses, fees and charges levied under any statute, other than the SGST/CGST Act and the Goods and Services Tax (Compensation to the States for Loss of Revenue) Act, 2016, if charged separately by the supplier to the recipient; b) Any amount that the supplier is liable to pay in relation to such supply but which has been incurred by the recipient of the supply and not included in the price actually paid or payable for the goods and/or services; c) Incidental expenses, such as commission and packing, charged by the supplier to the recipient of a supply, including any amount charged for anything done by the supplier in respect of the supply of goods and/or services at the time of, or before delivery of the goods or as the case may be supply of the services; d) Interest or late fee or penalty for delayed payment of any consideration for any supply; and

  1. e) Subsidies directly linked to the price excluding subsidies provided by the Central and State Government.

 

New Source CBEC

The information is available on CBEC GST portal http://cbec-gst.gov.in under Services section.



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