Monday, March 20, 2017

services and supply under gst

 (Supply u/s 3)

Section 3: Meaning and Scope of supply

(1) Supply includes
        > Inclusive definition with wider meaning (like section 2(f) of Excise Act)
(a) all forms of supply of goods and/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,
  • Natural Meaning
  • Captive consumptions, Theft, Pilferage, Stock transfers, Free supplies are not covered in this part
(b) importation of services, for a consideration whether or not in the course or furtherance of business, and
  • Import for personal use is now also liable to GST – Recent Service Tax Amendments
(c) a supply specified in Schedule I, made or agreed to be made without a consideration.

(2) Schedule II, in respect of matters mentioned therein, shall apply for determining what is, or is to be treated as a supply of goods or a supply of services.
  • - For transactions like works contract, lease etc.

(3) Notwithstanding anything contained in sub-section (1),
  • (a) activities or transactions specified in schedule III; or
  • (b) activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities as specified in Schedule IV,
shall be treated neither as a supply of goods nor a supply of services.

(4) Subject to sub-section (2) and sub-section (3), the Central or a State Government may, upon recommendation 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; or
  • (c) neither a supply of goods nor a supply of services.

(5) The tax liability on a composite or a mixed supply shall be determined in the following manner —
  • (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;
  • (b) a mixed supply comprising two or more supplies shall be treated as supply of that particular supply which attracts the highest rate of tax.

 SECTION 3(1)(a

Supply includes:
  1. all forms of supply
  2. of goods and/or services
  3. such as (Sale, Transfer, Barter/Exchange, License/Rental, Lease, Disposal)
  4. made or agreed to be made
  5. for a consideration
  6. by a person
  7. in the course or furtherance of business
  1. Transfer of title or ownership in goods from seller to buyer for a price
  1. Legal movement of something (e.g. Property, shares etc.) from one owner to another.
  2. Common use of word ‘transfer’, is to denote the passing of title in the property or an interest therein from one person to another with the intent of passing therights which he had in it to the latter.
  1. Exchange of goods and services without intervention of money – Valuation might be an issue
  1. Meaning is wider than Barter and includes immovable property
  2. When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both things being money only, the transaction is calledan "exchange". (Section 118 of Transfer of Property Act, 1882)
  3. An exchange involves the transfer of property by one person to another and reciprocally the transfer of property by that other person to the first person. There must be a mutual transfer of ownership of one thing for the ownership of another. (I.T. Commissioner Bombay v. Rasiklal Moneklal, AIR 1989 SC 1333)
  1. Only a permission or an authority to do a particular thing – cannot be equated with lease or transfer of right to use
  2. Right to enjoy only
  1. A transfer of a right to enjoy immovable property to the exclusion of all others on payment of consideration
  2. Right to possess and enjoy but excludes title
  1. Right to use movable or immovable property for particular period
  2. Cover both license and lease
  1. Action or process of getting rid of something – discarding of waste
  2. Very wide meaning and includes sale etc. as well


 Section 3(2)

Section 3(2) – Treatment of certain Supplies - Transfer

Section 3(2) – Treatment of certain Supplies - Land & Buildings

Section 3(2) – Treatment of certain Supplies - Transfer of Business Assets

Section 3(2) – Treatment of certain Supplies - Transaction treated as Supply of Service


Relates to services provided by
  1. Government - u/s 2(50): Central Government, State Government, Union Territory or their departments – provides books of accounts are required to be kept in accordance with Article 150
  2. Local Authority - u/s 2(62): Panchayat, Municipality, Municipal Committee, Cantonment Board, Regional Council or District Council, Development Board etc.
  3. Governmental Authority (Explanation 1 in Sch. IV): A board or an authority or any other body established with 90% or more participation (equity or control) by Government and setup under an Act of the Parliament or State Legislature to carry out any functions entrusted under Article 243W (Municipality) or Article 243G (Panchayat)

Adv. Nikhil Gupta (CA)
Ph.: 9891950868


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