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LEVY AND COLLECTION OF TAX

The incidence of tax is the foundation stone of any taxation system. It determines the point at which tax would be levied,
i.e. the taxable event.
Under the old regime, taxable events for various taxes were different. For example, for excise, the taxable event was
manufacture or production of goods in India, for service, the taxable event was provision of service and under VAT/
CST it was sale of goods. To replace such multiplicity, GST has brought a single and unified taxable event which is
supply, i.e., tax would be payable on the supply of goods or services.
Provisions regarding above are contained in

CGST Act
Chapter III - Levy and Collection of Tax
Section 7 Scope of supply
Section 8 Tax liability on composite and mixed supplies
Schedules
I Activities to be treated as supply even if made without consideration
II Activities to be treated as supply of goods or supply of services
III Activities or transactions which shall be treated neither as a supply of goods nor a supply of services
Bare Text of Section 7

(1) For the purposes of this Act, the expression “supply” 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;
(b) import of services for a consideration whether or not in the course or furtherance of business;
(c) the activities specified in Schedule I, made or agreed to be made without a consideration; and
(d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II.
(2) Notwithstanding anything contained in sub-section (1),–
(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, shall be
treated neither as a supply of goods nor a supply of services.
(3) Subject to the provisions of sub-sections (1) 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.
Basics…
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
Distortion of above parameters

✓ There are certain transactions which are deemed to be supply even without consideration.
✓ Import of services for a consideration is treated as supply, whether or not in the course or furtherance of business.
✓ There are certain transactions which are not considered supply despite the existence of the above parameters, i.e. they are
outside the scope of GST.
✓ Also, few activities are to be treated either as supply of goods or as supply of services. Government is also empowered to
CA Rahul Garg B.Com, FCA, LCS, ACMA, CFA (ICFAI), DISA (ICAI), MBA, Adv Dip Mgt.
Gold Medalist All India Rankholder in CA, CS, CMA (incl Rank 1) +91-9876932270
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notify transactions that are to be treated as a supply of goods and not as a supply of services, or as a supply of services and
not as a supply of goods.
Analysis of Section 7(1)(a)
Provision Supply includes 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.
Modes of Supply
Sale Meaning The term sale was defined under various state VAT laws. Sale means
a sale of goods made within the State for cash or deferred payment
or other valuable consideration but does not include a mortgage,
hypothecation, charge or pledge.
Sale involves transfer of property in goods from one person to
another person for consideration. Under CGST Law sale is treated as
supply leviable to GST. However, the definition of Sale has not been
provided under the GST Law.
Note : Mortgage, hypothecation, charge or pledge is not supply and hence GST will not be levied.
Example Mr. Rahul sold laptop worth Rs. 1,00,000 and issued invoice in favour of
Mr. Swapnil. Now ownership in laptop is transferred to Mr. Swapnil. Such
transaction shall be covered in sale. It is a supply of goods leviable to GST.
Transfer Meaning The definition of Transfer has not been provided under the GST Law.
The term transfer means, where the ownership may not be
transferred but the right in the goods is transferred.
Example Mr. Asaram is the owner of Xerox machine. He transferred the right to
operate the Xerox machine to Mr. Salman for a consideration of Rs.
10,000 per month for four months. Hence, ownership of the machine is
not transferred but the right in the machine is transferred. It is supply of
service leviable to GST.
Barter Meaning Barter means the exchange of goods and productive services for other
goods and productive services, without the use of money.
Example Mr. Rahul, a practicing Chartered Accountant provided services to M/s

Lenovo Ltd., dealer of laptops. In return M/s Lenovo Ltd. gave a laptop to
Mr. Rahul. Here, two-way supply takes place. Mr. Rahul is making taxable
supply of service and M/s Lenovo Ltd., is making taxable supply of goods.
Hence, tax is payable by both.
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Exchange Meaning When two persons mutually transfer the ownership of one thing for
the ownership of another, neither thing nor both things being money
only, the transaction is called an exchange. Exchange offers on
products such as televisions, mobile phones and refrigerators are
leviable under GST.
Example Mr. Kukku is a dealer of new cars. He sells new cars for Rs. 8,25,000 but
agrees to reduce Rs. 1,25,000 on surrendering of old car. Mr. Pukku who
intends to buy new car worth Rs. 8,25,000 agreed to exchange his old
car with new car. Under GST law, it will be treated as Mr. Pukku has made
supply of old car to dealer Mr. Kukku and Mr. Kukku has made supply of
new car to Mr. Pukku. If Mr. Pukku is registered person, he will be liable
to pay GST on Rs. 1,25,000. Mr. Kukku will be liable to pay GST on Rs.
8,25,000 whether Mr. Pukku is a registered person or not.
Licence Meaning Where one person grants to another, or to a definite number of

other persons, a right to do or continue to do in or upon the
immovable property of the granter, the right is called a licence.
Example Mr. Zaheer is a developer of information technology software and holder of

licence thereon. License to use software was given to different clients and
total considerations was Rs. 18 lakhs; hence, Mr. Zaheer is liable to pay
GST.
Rental Meaning Rental means a periodical payment for use of another’s property.
Example Mr. Sehwag owns a large vacant land in prime commercial locality. He gives
it on rent of Rs. 1,80,000 per month to a parking contractor, Mr. Afridi
who has set up a parking facility on the said land. It is a taxable supply of
service and hence, Mr. Sehwag is liable to pay GST.
Lease Meaning A lease is an agreement whereby the lessor conveys to the lessee,
the right to use an asset for an agreed period of time in return for
a payment or series of payments. A lease may be financial lease or
operating lease.
Example M/s Karma Ltd. gives an asset worth Rs. 5,00,000 on lease to M/s
Dharma Ltd. The total payments by Dharma Ltd. over the time of lease
amount to Rs. 6,50,000. Thus, it’s a finance lease and GST is payable.
Licenses, leases and rentals of goods were earlier treated as services where the goods were transferred without transfer of right
to use (effective possession and control over the goods) and were treated as sales where the goods were transferred with
transfer of right to use. Under the GST regime, such licenses, leases and rentals of goods with or without transfer of right to
use are covered under the supply of service because there is no transfer of title in such supplies.
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Disposal Meaning Disposal consists of selling the assets when the organization is about
to close down. Such transactions will also be considered as supply and
liable to tax under GST Law.
Example Smart Ltd. wants to shut down its business owing to depression phase. It
is selling various assets at Rs. 60,00,000. GST will be payable.
Consideration
Insights One of the essential conditions for the supply of goods and/ or services to fall
within the ambit of GST is that a supply is made for a consideration.
However, consideration does not always mean money. It covers anything which
might be possibly done, given or made in exchange for something else. Thus,
consideration includes non-monetary consideration.
Further, a consideration need not always flow from the recipient of the supply. It
can also be made by a third person.
Example Alia Travels Pvt. Ltd., a travel agent books ticket for a customer Mr. Ranvir. Travel
agent raises invoice on customer Mr. Ranvir for transportation of passenger by air of Rs.
10,000 and his commission of Rs. 500. The entire amount of Rs. 10,500 is not his
consideration. The amount of Rs. 500 retained by the air travel is to be considered as
his consideration.
A Sports Club agrees to hire services of cricket player Mr. Dravid for a consideration of
Rs. 2 crores. In addition to this, the agreement provides that the player shall be
provided with the car valued for Rs. 20 lakhs. The entire value of Rs. 2.20 crores will
be considered as consideration and subject to tax.
Exclusions The following generally not considered as consideration:

• Grant of pocket money
• Gift or reward (which has not been given in terms of reciprocity) or
• Amount paid on alimony for divorce
In Course or Furtherance Of Business

In course of Meaning Every person carries out certain activities regularly for running trade
business or commerce, such activities undertaken are considered to be in
course of business.
Example CA Ankita, a practicing CA in Pune carries out the activity of Accounting,

Auditing, Filing returns, Certifying documents and so on. These activities
can be considered as performed in the course of business.
Furtherance Meaning Every business person takes steps to develop his business or carrying
of business out new activities. Such activities may be termed as furtherance of
business.
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Example CA Ankita wants to open a new office in Mumbai for which she appointed
Mr. Patni as a consultant for searching, evaluting and shortlisting places for
prospective office. Amount paid by Yamini to Mr. Y shall be liable to GST.
Insights 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.
Refer Business under section 2(17).
Sale in Meaning Any supplies made by an individual in his personal capacity do not
Personal come under the ambit of GST unless they fall within the definition
Capacity of business as defined in the Act.
Example Ishant Sharma buys a car for his personal use and after a year sells it to a
car dealer. Sale of car by Ishant to car dealer is not a supply under GST
because supply is not made by Ishant in the course or furtherance of
business.
Sale as Meaning Sale of goods or service even as a vocation is a supply under GST.
Vocation
Example If a famous politician paints paintings for charity and sells the paintings
even as a one-time occurrence, the sale would constitute supply.
Service by Meaning Services provided by the club/association to its members for

Club consideration is a supply.
Example A Resident Welfare Association provides the service of depositing the

electricity bills of the residents in lieu of some nominal charges. Provision
of service by a club or association or society to its members is treated as
supply as this is included in the definition of ‘business’.
Supply by a taxable person

Basic A supply to attract GST should be made by a taxable person. Hence, a supply
between two non-taxable persons does not constitute taxable supply under GST.
Supplier vs. The restriction of being a taxable person is only on the supplier whereas the
Recipient recipient can be either taxable or non-taxable. Thus, supply can be made to a
non-taxable person also.
Further, there is no condition that supply needs to be made to another person, i.e. supplies made to self are also
taxable.
Taxable A “taxable person” is a person who is registered or liable to be registered under

person section 22 or section 24. Hence, even an unregistered person who is liable to be
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registered is a taxable person. Similarly, a person not liable to be registered, but

has taken voluntary registration and got himself registered is also a taxable
person.
Taxable Supply
General 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 GST Law.
Exception Exemptions may be provided to the specified goods or services or to a

specified category of persons/ entities making supply.
Analysis of Section 7(1)(b)

Provision Section 7(1)(b) brings in the ambit of supply “the importation of services for a
consideration whether or not in the course or furtherance of business”.
Exception This is the only exception to the condition of supply being in course or
furtherance of business.
Conditions 1. It is applicable only for services and not for goods.

to attract
the section 2. It should be import of service (as referred under Section 2(11) of IGST Act,
2017), where
(a) The supplier of service is located outside India.
(b) The recipient of service is located in India.
(c) The place of supply of service is in India.
3. Services shall be provided with consideration.
4. Services may be in the course or furtherance of business or not in the

course or furtherance of business.
Example Ammy, a proprietor, has received the architect services for his house from an architect
located in New York at an agreed consideration of $ 5,000. Import of services by Ammy
is supply under section 7(1)(b) though it is not in course or furtherance of business.
Import (Downloading) of a song is done for consideration for personal use by Mrs. Shikha.
It is supply of service and IGST will be levied.
Timing of Notable (1) As per the provisions contained in Section 21 of the IGST Act, 2017, all imports of services made
Imports Points on or after the appointed day (i.e. 1st July 2017) will be liable to IGST regardless of whether the
transactions for such import of services had been initiated before the appointed day.
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(2) If the tax on such import of services had been paid in full under the existing law [i.e. as per
Finance Act, 1994 (Service Tax)], no tax shall be payable on such import under the IGST Act.
(3) In case the tax on such import of services had been paid in part under the existing law, the
balance amount of tax shall be payable on such import under the IGST Act.
Example A supply of service for Rs. 1 crore was initiated prior to the introduction of
GST, a payment of Rs. 20 lacs has already been made to the supplier and
service tax has also been paid on the same, then IGST shall have to be paid
on the balance Rs. 80 lacs.
Analysis of Section 7(1)(c)

Provision Supply includes the activities specified in Schedule I, made or agreed to be made without
a consideration.
Basic In the past regime, in every tax statute, “consideration” played the most
important role for levying taxes. For eg., if any service was provided for free to a
person, such service was not subject to service tax. But, Section 7(1)(c) of CGST
Act read with Schedule I specifically provides for supplies even if made without
consideration.
Schedule I Activities To 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 Rs. 50,000/- 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) (a) by a principal to his agent where the agent undertakes to supply such goods on
behalf of the principal; or
(b) (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.
Permanent Transfer/ Disposal of Business Assets

Insights Any kind of disposal or transfer of business assets made by an entity on
permanent basis even though without consideration qualifies as supply. This clause
is wide enough to cover transfer of business assets from holding to subsidiary
company for nil consideration.
However, it is important to note that this provision would apply only if input tax credit has been availed on such
assets.
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Example Garg Ltd. donates old laptops to Charitable Schools, it will qualify as supply provided input
tax credit has been availed by XYZ & Co. on such laptops.
A cloth retailer gives clothes from his business stock to his friend free of cost. In this
case, transfer of business stock would amount to ‘supply’ if he had claimed input tax
credit on his purchase of the business asset.
Supply between related person or distinct persons

Insights Supply of goods or services or both between related persons or between distinct
persons as specified in section 25, will qualify as supply provided it is made in the
course or furtherance of business.
Related As per explanation to section 15, related persons have been defined as follows:
Persons
Example M/s Amitabh Ltd., holds 30,000 shares in M/s Abhishek Ltd. and 25,000
shares in Aishwarya Ltd. Share Capital of M/s Abhishek Ltd. is 1,00,000
Equity Shares of Rs.10 each and Share Capital of M/s Aishwarya Ltd. is
80,000 Equity Shares of Rs.10 each. Since, M/s Amitabh Ltd., holds more
than 25% of the share in the company Abhishek Ltd. and Aishwarya Ltd.,
they will be considered as related persons.
Services by Employee to Employer
By virtue of the definition of related person given above, employer and employee
are related persons. However, services provided by an employee to the employer in
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the course of or in relation to his employment are not treated as supply of

services as per Schedule III of CGST Act.
Example Babu has received a sum of Rs. 5,00,000 from his employer on premature
termination of his contract of employment. It will not be considered as
supply.
Mr. Jaanu, an employee provides his service on contract basis to an

associate company of Dildar Enterprises, the employer. The above activity is
being carried out in lieu of specific monetary consideration. It will be
considered as supply of service.
Position of
Directors
Distinct Meaning Every place of business of a person where separate registration is

Persons obtained for output supply will be considered as distinct person.
Section 25(4),”A person who has obtained or is required to obtain
more than one registration, whether in one State or Union
Territory or more than one State or Union Territory shall, in
respect of each such registration, be treated as distinct persons for
the purposes of this Act.”
Section 25(5),”Where a person who has obtained or is required to
obtain registration in a State or Union Territory in respect of an
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establishment, has an establishment in another State or Union

Territory, then such establishments shall be treated as
establishments of distinct persons for the purposes of this Act.”
Example Rahul, a Chartered Accountant, has a registered head office in Chandigarh.

He has also obtained registration in the State of Maharashtra in respect of
his newly opened branch office. Rahul shall be treated as distinct persons in
respect of registrations in Chandigarh and Maharashtra.
Stock transfers or branch transfers

Insights In view of the aforesaid discussion, transactions between different
locations (with separate GST registrations) of same legal entity
(eg., stock transfers or branch transfers) will qualify as ‘supply’
under GST which is in contrast to the earlier regime.
Example Ranbir Fabrics transfers 1000 shirts from his factory located in Lucknow to
his retail showroom in Delhi so that the same can be sold from there. The
factory and retail showroom of Ranbir Fabrics are registered in the States
where they are located. Although no consideration is charged, supply of
goods from factory to retail showroom constitutes supply.
Gifts by Meaning of The term ‘gift’ has not been defined in the GST law. In common
employer to gift parlance, gift is made without consideration, is voluntary in nature
employee and is made occasionally.
Relationship The services by an employee to the employer in the course of or in

of employer relation to his employment is outside the scope of GST (neither
and
supply of goods or supply of services).
employee
Position Schedule I provides that gifts not exceeding Rs. 50,000 in value in
w.r.t. gifts a financial year by an employer to an employee shall not be treated
as supply of goods or services or both.
However, gifts of value more than Rs. 50,000 made without
consideration are subject to GST, when made in the course or
furtherance of business.
Insights Supply by the employer to the employee in terms of contractual agreement entered into
between the employer and the employee, will not be subjected to GST.
It follows, therefore, that if the services (like membership of a club, health and fitness centre)
are provided free of charge to all the employees by the employer then the same will not be
subjected to GST, provided appropriate GST was paid when procured by the employer.
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The same would hold true for free housing to the employees, when the same is provided in
terms of the contract between the employer and employee and is part and parcel of the cost-to
company (C2C).
Supply to Provision Supply of goods by a principal to his agent, without consideration,

agents or where the agent undertakes to supply such goods on behalf of the
by agents principal is considered as supply.
Similarly, supply of goods by an agent to his principal, without
consideration, where the agent undertakes to receive such goods on
behalf of the principal is considered as supply.
Notable Only supply of goods is covered here.

Point
Example Rahul Ltd. engages Vishal & Sons as an agent to sell goods on its behalf.
For the purpose, Rahul Ltd. has supplied the goods to Vishal & Sons
located in Haryana. Supply of goods by Rahul Ltd. to Vishal & Sons will
qualify as supply even though Vishal & Sons has not paid any consideration
yet.
Honda Cars Ltd. engages Michael & Co. as an agent to sell cars on its
behalf. Honda Cars Ltd. has supplied 50 cars to the showroom of Michael
& Co., located in Chennai. Supply of cars by Honda Cars Ltd. to Michael &
Co., will qualify as supply and the same is leviable to GST.
Importation Provision Import of services by a taxable person from a related person or

of services from his establishments located outside India, without consideration,
in the course or furtherance of business shall be treated as
“supply”.
Example Bhansali Associates received legal consultancy services from its head office
located in Malaysia. The head office has rendered such services free of cost
to its branch office. Since Bhansali Associates and the branch office are
related persons, services received by Bhansali Associates will qualify as supply
even though the head office has not charged anything from it.
Apte Ltd. is located in India and holding 51% of shares of Akshay Ltd., a
USA based company. Akshay Ltd. provides Business Auxiliary Services to
Apte Ltd., will be treated as supply.
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Section 7(1)(b) vs Section 7(1)(c) of CGST Act, 2017
Analysis of Section 7(1)(d)

Provision Supply includes the activities to be treated as supply of goods or supply of services as
referred to in Schedule II.
Basic Schedule II appended to the CGST Act enlists the matters or transactions to be
treated as Supply of either goods or services. These matters are primarily those
which were of complex nature in the earlier regime and susceptible to double
taxation.
Schedule II Activities To Be Treated As Supply Of Goods Or Supply Of Services

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 process
Any treatment or process which is applied to another person's goods is a supply of
services.
4. Transfer of business assets

(a) where goods forming part of the assets of a business are 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
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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:—
(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; 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 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.
Type of Transaction Supply of Supply of

Goods Service
Transfer
Transfer of the title in goods. Yes No
Transfer of right in goods or share (undivided) in goods without the transfer of No Yes
title.
Transfer of title in goods under an agreement which stipulates that property in Yes No
goods shall pass at a future date upon payment of full consideration as agreed.
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Land and Building

Lease, tenancy, easement, licence to occupy land No Yes
Lease or letting of any building including for business or commerce. (Building No Yes
might be a commercial, industrial or residential complex rent out wholly or
partly)
Treatment or process
Any treatment or process which is applied to another person’s goods No Yes
Transfer of business assets
Goods forming part of business assets are transferred or disposed off by/ Yes No
under directions of person carrying on the business so as no longer to form part
of those assets, whether or not for consideration
Goods held/ used for business are put to private use or are made No Yes
available to any person for use for any purpose other than business,
by/ under directions of person carrying on the business, whether or not for
consideration
Goods forming part of assets of any business carried on by a person who ceases Yes No
to be a taxable person, 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.
This is not applicable when:-

(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.
Supply of Services
Renting of immovable property (however, residential dwelling is exempted from No Yes
GST)
Construction of a complex, building, civil structure or a part thereof, including a No Yes
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.
Temporary transfer or permitting the use or enjoyment of any intellectual No Yes
property right;
Development, design, programming, customization, adaptation, upgradation, No Yes
enhancement, implementation of information technology software;
Agreeing to the obligation to refrain from an act, or to tolerate an act or a No Yes
situation, or to do an act
Transfer of the right to use any goods for any purpose (whether or not for a No Yes
specified period) for cash, deferred payment or other valuable consideration.
Composite Supply
Works contract services No Yes
Supply by way of or as part of any other service or in any other manner No Yes
whatsoever, of goods being food or any other article for human consumption or
any drink (other than alcoholic liquor for human consumption)
Supply of Goods
Supply of goods by any unincorporated association or body of persons to a Yes No
member thereof for cash, deferred payment or other valuable consideration.
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Analysis of Section 7(2)(a)

Provision Activities or transactions specified in Schedule III shall be treated neither as a supply of
goods nor a supply of services.
Activities specified under Schedule III can be termed “Negative list” under the
GST regime.
Schedule Activities or transactions which shall be treated neither as a supply of goods nor a
III supply of services
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.
Explanation – The term "Court" includes District Court, High Court and Supreme Court.
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.
Analysis of Section 7(2)(b)

Provision Such activities/ 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 shall be treated neither as a
supply of goods nor a supply of services.
Notified Notification No. 14/2017 CT (R) dated 28.06.2017 has notified the “services by
Service way of any activity in relation to a function entrusted to a Panchayat under
article 243G of the Constitution” for the said purpose.
Bare Text of Section 8

The tax liability on a composite or a mixed supply shall be determined in the following manner, namely:—
(a) 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; and
(b) a mixed supply comprising two or more supplies shall
P a g e | 62
Basics…
GST is payable on individual goods or services or both at the notified rates. The application of rates poses no problem if
the supply is of individual goods or individual services, which is clearly identifiable and such goods or services are subject
to a particular rate of tax.
However, in certain cases, supplies are not such simple and clearly identifiable supplies. Some of the supplies are a
combination of goods or combination of services or combination of goods and services both and each individual
component of such supplies may attract a different rate of tax.
In such a case, the rate of tax to be levied on such supplies may be a challenge. It is for this reason, that the GST Law
identifies composite supplies and mixed supplies and provides certainty in respect of tax treatment under GST for such
supplies.
In order to determine whether the supplies are ‘composite supplies’ or ‘mixed supplies’, one needs to determine whether
the supplies are naturally bundled or not naturally bundled in ordinary course of business.
Analysis of Section 8(a)

Provision The tax liability on a composite supply shall be determined as ,” 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”.
Composite Supply
Meaning Composite supply means a supply made by a taxable person to a recipient and:
of ✓ comprises two or more taxable supplies of goods or services or both, or any
Composite combination thereof.
Supply ✓ are naturally bundled and supplied in conjunction with each other, in the
[Section
ordinary course of business
2(30)]
✓ one of which is a principal supply.
This means that in a composite supply, goods or services or both are bundled owing
to natural necessities. The elements in a composite supply are dependent on the
‘principal supply’.
Meaning Principal supply means the supply of goods or services which constitutes the
of predominant element of a composite supply and to which any other supply forming
Principal part of that composite supply is ancillary.
Supply
[Section
2(90)]
How to A composite supply comprising of two or more supplies, one of which is a principal
determine supply, shall be treated as a supply of such principal supply.
the tax
liability
on
composite
supplies?
Example Sridevi Ltd. entered into a contract with Madhuri Ltd. for supply of goods, 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.
P a g e | 63
When a consumer buys a television set and he also gets warranty and a maintenance
contract with the TV, this supply is a composite supply. In this example, supply of TV is
the principal supply, warranty and maintenance services are ancillary.
How to Whether the services are bundled in the ordinary course of business, would depend
determine upon the normal or frequent practices followed in the area of business to which
whether the services relate. Such normal and frequent practices adopted in a business can be
services are ascertained from several indicators some of which are listed below:
bundled in
the
The If large number of service receivers of such bundle of services
ordinary perception of
course of reasonably expect such services to be provided as a package, then
the consumer
business? such a package could be treated as naturally bundled in the ordinary
or the service
receiver course of business.
Practice For example, bundle of catering on board and transport by air is a

followed by bundle offered by a majority of airlines.
Majority of
service
providers in
a particular
area of
business
Nature of the If the nature of services is such that one of the services is the main
various service and the other services combined with such service are in the
services in a
nature of incidental or ancillary services which help in better
bundle of
services enjoyment of a main service.
For example, service of stay in a hotel is often combined with a
service or laundering of 3-4 items of clothing free of cost per day.
Such service is an ancillary service to the provision of hotel
accommodation and the resultant package would be treated as
services naturally bundled in the ordinary course of business.
Other The following are not determinative but indicative of bundling of

illustrative services in the ordinary course of business :
indicators
✓ There is a single price or the customer pays the same amount,
no matter how much package they actually receive or use.
✓ The elements are normally advertised as a package.
✓ The different elements are not available separately.
✓ The different elements are integral to one overall supply. If one
or more is removed, the nature of the supply would be
affected.
P a g e | 64
Conclusion No straight formula can be laid down to determine whether a service is naturally bundled in the ordinary course of
business. Each case has to be individually examined in the backdrop of several factors some of which are outlined
above.
Analysis of Section 8(b)

Provision The tax liability on a mixed supply shall be determined as,” a mixed supply comprising two
or more supplies shall be treated as a supply of that particular supply which attracts the
highest rate of tax”.
Mixed Supply
Meaning Mixed supply means:
of Mixed ✓ two or more individual supplies of goods or services, or any combination
Supply thereof, made in conjunction with each other by a taxable person
[Section ✓ for a single price where such supply does not constitute a composite supply.
2(74)]
In other words, the combination of goods or services are not bundled due to
natural necessities, and they can be supplied individually in the ordinary course of
business.
Example Diwali gift hamper which consist of different Items like sweets, chocolates, cakes, dry fruits
packed in one pack is Mixed supply as these items can be sold separately and it shall be
treated as a supply of that particular item which attracts the highest rate of tax.
Smart Bazar offers a free bucket with detergent purchased. This is a mixed supply as these
items can be sold separately.
How to A mixed supply comprising of two or more supplies shall be treated as supply of
determine that particular supply that attracts highest rate of tax.
the tax
liability
on mixed
supplies?
How to In order to identify if the particular supply is a mixed supply, the first requisite is
determine to rule out that the supply is a composite supply.
if a A supply can be a mixed supply only if it is not a composite supply. As a corollary
particular it can be said that if the transaction consists of supplies not naturally bundled in
supply is a
the ordinary course of business then it would be a mixed supply.
mixed
Once the amenability of the transaction as a composite supply is ruled out, it
supply?
would be a mixed supply, classified in terms of supply of goods or services
attracting highest rate of tax.
P a g e | 65
Theory Questions
Question 1
What is the taxable event under GST?
Question 2
What is composite supply?
Question 3
Supply of all goods and/or services is taxable under GST. Discuss the validity of the statement.
Question 4
Whether transfer of title and/or possession is necessary for a transaction to constitute supply of goods?
Question 5
Examine whether the following activities would amount to supply under section 7 of the CGST Act:
(a) Damodar Charitable Trust, a trust who gets the eye treatment of needy people done free of cost, donates clothes
and toys to children living in slum area.
(b) Sulekha Manufacturers have a factory in Delhi and a depot in Mumbai. Both these establishments are registered in
respective States. Finished goods are sent from factory in Delhi to the Mumbai depot without consideration so that the
same can be sold.
(c) Raman is an Electronic Commerce Operator in Chennai. His brother who is settled in London is a well-known lawyer.
Raman has taken legal advice from him free of cost with regard to his family dispute.
(d) Would your answer be different if in the above case, Raman has taken advice in respect of his business unit in
Chennai?
Question 6
State whether the following supplies would be treated as supply of goods or supply of services as per Schedule II of
the CGST Act:
(a) Renting of immovable property
(b) Goods forming part of business assets are transferred or disposed of by/ under directions of person carrying on
the business, whether or not for consideration.
(c) Transfer of right in goods without transfer of title in goods.
(d) Transfer of title in goods under an agreement which stipulates that property shall pass at a future date.
Question 7
Determine whether the following supplies amount to composite supplies:
(a) A hotel provides 4 days-3 nights package wherein the facility of breakfast and dinner is provided alongwith the
room accommodation.
(b) A toothpaste company has offered the scheme of free toothbrush alongwith the toothpaste.
Question 8
Whether goods supplied on hire purchase basis will be treated as supply of goods or supply of services? Give reason.
Question 9
What will be the relatable transaction as per Schedule II?
A shopping complex owned by M/s X Ltd and M/s Y Ltd. At a later date M/s X
Ltd. sold his share in shopping complex to M/s Z Ltd. and hence, ownership is not
transferred to M/s Z Ltd., but only share in property is transferred to M/s Z Ltd. It
is a supply of service.
If a residential premise is used for residential purposes as well as for some
business purpose, the said activity of leasing of residential complex would be
covered in the definition of supply and eligible to GST.
Such activities could be:
• coaching by teacher at his residence or
• carrying out professional activities from the residence of an Advocate or
Chartered Accountant or Cost Accountant etc.
Mr. A a trader of steel articles purchases steel bars of 10 meters for Rs. 1,00,000.
He gave these steel bars to Mr. B (job worker) for cutting the bars. Mr. B charged
Rs. 20,000 as his job work charges. Mr. B being a job worker is liable to pay GST.
P a g e | 66
Value of job work charges is Rs. 20,000. It is called as supply of service.
A director using car provided by the company for personal travels. It is supply of
service.
A, a trader, is winding up his business. Any goods
left in stock shall be deemed to be supplied by him.
Sale of office computers or furniture is supply of goods.
M/s Ravan & Co a partnership firm decided to dissolve the partnership firm.
Goods left in stock taken over by partners. Taking over of goods by partners will
be considered as a supply of goods. Since, business is not continued further.
Leasing of vacant land to a poultry farm for Rs. 76,000. It is a supply of service.
A builder has entered into agreement to sale a flat (carpet area 1900 sq ft) to
customer. The additional information is as follows: (a) Price of flat (including
apportioned value of cost of land): Rs. 42,00,000 (includes Prime Location Charges
namely charges for getting sea view Rs. 2,00,000). (b) Charges for providing
space for covered parking: Rs. 1,25,000. The builder received part payment
before construction was completed and balance amount was received after
obtaining completion certificate from the Corporation. It is supply of service.
Supply of GST related software to businesses for smooth processing of returns and
accounts is supply of service.
Ram has given his tempos on hire to Gupta Brothers for transportation of foodstuff
for Rs. 40,00,000. He has also transferred the right to use such tempos to Gupta
Brothers. It is supply of service.
A local club supplies snacks etc. to its members during its monthly meeting for a
nominal payment. It is supply of goods.
Question 10
M/s C Ltd. has 3 branches A, B & Z in different states. A in Telangana has run out of stock and B from Andhra Pradesh
transfers its excess stock. Is it supply of goods? GST will be levied?
Question 11
M/s M Ltd. being a garment manufacturer appoints Mr. Ram as an agent, who stores garments manufactured by M Ltd.
and sends to dealers whenever M Ltd. asks Mr. Ram to do so. Is it a supply?
Question 12
Sparsh Ltd. of Mumbai imports business support services from its head office located in USA. The head office has
rendered such services free of cost to its branch office. Will it qualify as supply?
Question 13
Mr. Rajni of Chennai paid fees for online coaching obtained from a teacher located in USA for coaching of
Accountancy course for his son. Is it supply of service?
Question 14
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 supply?
Question 15
M/s Cool Ltd., is in the business of Hotel. It purchased AC for business purpose, availed the ITC and after 2 years,
transferred it to director without consideration. Will the transaction constitute supply?
Question 16
Reliable group has three companies namely M/s Reena Ltd., M/s Leena Ltd., and M/s Beena Ltd., as group companies
and M/s Reliable Ltd., as a parent company. M/s Reliable Ltd., holds 25% of the shares in each group company. Will
the three companies be related persons?
Question 17
Sanam, a proprietor registered in Delhi, has sought architect services from his brother located in US, with respect to his
newly constructed house in Delhi. Will the transaction constitute supply?
P a g e | 67
Question 18
A Five-star hotel provides four days and three-night package, with breakfast. Is this a composite supply?
Question 19
A travel ticket from Mumbai to Delhi includes service of food being served on board, free insurance, and the use of
airport lounge. Is this a composite supply?
Question 20
A shopkeeper is selling storage water bottles along with refrigerator. Is this a composite supply?
Question 21
Bipasha Ltd. a dealer offers combo packs of shirt, watch, wallet, book and they are bundled as a kit and this kit is
supplied for a single price. Is this a composite supply?
Question 22
A dealer sells a washing machine for Rs 30,000 to earn a profit. Does it qualify as a supply?
Question 23
Mr. Ram (an unregistered person) wants to do MBA abroad. He takes Education consultancy services from a UK based
consultant for Rs 10,000. Does it qualify as a supply?
Question 24
ABC Ltd. a manufacturing company scraps old plant and machinery without consideration due to renovation of
manufacturing facility. The company has taken input tax credit on plant and machinery so scrapped. Does it qualify as
a supply?
Question 25
Big Ltd. provides management technical services without consideration to Small Ltd in which Big Ltd. has controlling
rights. These technical services have been provided for benefit of entire group. Does it qualify as a supply?
Question 26
American Express Pvt. Ltd. makes gifts to an employee worth Rs. 75,000 during the year. Does such gifts qualify as a
supply? Would your answer be different if gifts of Rs. 45,000 have been given to employee?
Question 27
Honda Motors Ltd. engages DD Motors as an agent to sell motorcycle on its behalf. For the purpose, Honda Motors Ltd.
has supplied 500 cars to the showroom of DD Motors located in Punjab. Does it qualify as supply?
Question 28
Raheja Builders (a registered taxable person) receives architectural design supplied by a foreign architect to design a
residential complex to be built in Faridabad for a consideration of Rs. 1 crore. Does it qualify as supply?
Question 29
What is the scope of the term ‘supply’ as defined in the CGST Act, 2017?
Question 30
How to distinguish whether a particular supply involves supply of goods or services or both?
Question 31
Whether supply of goods or services without consideration is liable to tax?
Question 32
Whether transfer of goods to another branch located outside the State is taxable?
Question 33
Whether gifts given by employer to employee will also qualify as supply?
Question 34
Whether supply of goods by principal to his agent or by agent to his principal is taxable in the absence of
consideration?
P a g e | 68
Question 35
Whether import of services will be liable to tax under GST regime?
Question 36
How would the tax liability be determined in case of Composite supply?
Question 37
What is Mixed Supply?
Question 38
How would the tax liability be determined in case of Mixed supply?
Question 39
Modest Ltd. registered in Delhi dealing in supply of electrical items transferred some of its stock to its another unit
located in Haryana. Whether such self-supplies are chargeable under GST?
Question 40
How would the tax liability be determined in case of Mixed supply?
Question 41
What are the various modes of supply u/s 7(1)(a)?
Question 42
Define Sale in personal capacity. Support with example.
Question 43
Define Barter. Support with example.

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P a g e | 47

LEVY AND COLLECTION OF TAX

Provisions regarding above are contained in

Bare Text of Section 7

Distortion of above parameters

Analysis of Section 7(1)(a)

Example Mr. Rahul, a practicing Chartered Accountant provided services to M/s

Licence Meaning Where one person grants to another, or to a definite number of

Example Mr. Zaheer is a developer of information technology software and holder of

Exclusions The following generally not considered as consideration:

In Course or Furtherance Of Business

Example CA Ankita, a practicing CA in Pune carries out the activity of Accounting,

Service by Meaning Services provided by the club/association to its members for

Example A Resident Welfare Association provides the service of depositing the

Supply by a taxable person

Taxable A “taxable person” is a person who is registered or liable to be registered under

registered is a taxable person. Similarly, a person not liable to be registered, but

Exception Exemptions may be provided to the specified goods or services or to a

Analysis of Section 7(1)(b)

Conditions 1. It is applicable only for services and not for goods.

3. Services shall be provided with consideration.

4. Services may be in the course or furtherance of business or not in the

Analysis of Section 7(1)(c)

Schedule I Activities To Be Treated As Supply Even If Made Without Consideration

2. Supply of goods or services or both between related persons or between distinct

Permanent Transfer/ Disposal of Business Assets

Supply between related person or distinct persons

the course of or in relation to his employment are not treated as supply of

Mr. Jaanu, an employee provides his service on contract basis to an

Distinct Meaning Every place of business of a person where separate registration is

establishment, has an establishment in another State or Union

Example Rahul, a Chartered Accountant, has a registered head office in Chandigarh.

Stock transfers or branch transfers

Relationship The services by an employee to the employer in the course of or in

Supply to Provision Supply of goods by a principal to his agent, without consideration,

Notable Only supply of goods is covered here.

Importation Provision Import of services by a taxable person from a related person or

Section 7(1)(b) vs Section 7(1)(c) of CGST Act, 2017

Analysis of Section 7(1)(d)

Schedule II Activities To Be Treated As Supply Of Goods Or Supply Of Services

2. Land and Building

4. Transfer of business assets

Type of Transaction Supply of Supply of

Land and Building

This is not applicable when:-

Analysis of Section 7(2)(a)

4. Services of funeral, burial, crematorium or mortuary including transportation of the

6. Actionable claims, other than lottery, betting and gambling.

Analysis of Section 7(2)(b)

Bare Text of Section 8

Analysis of Section 8(a)

Practice For example, bundle of catering on board and transport by air is a

Other The following are not determinative but indicative of bundling of

Analysis of Section 8(b)

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