Introduction to Supply of Goods and Services
Introduction to Supply of Goods and Services under GST
The concept of "supply" is fundamental to the Goods and Services Tax (GST) law in India. It's the taxable event that triggers the levy of GST. Understanding what constitutes "supply" and the distinction between "goods" and "services" is crucial for businesses to determine their GST liability and comply with the law.
Definition of "Supply" under GST
According to the GST law, "supply" includes all forms of supply of goods or services or both, 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.
This definition is intentionally broad to encompass various types of transactions. It essentially means that any provision of goods or services made in the course of a business, in exchange for consideration (payment), is considered a supply and is subject to GST.
Key aspects of the definition:
- Consideration: There must be some form of payment or exchange of value involved for a transaction to be considered a supply. This could be in the form of money, goods, or services.
- Business activity: The supply must be made in the course or furtherance of a business. This excludes personal transactions or activities not related to a business.
- Includes a wide range of transactions: The definition is not limited to just sale. It includes various forms of transfers, such as barter, exchange, lease, and disposal.
Explanation of "Goods" and "Services" in the context of GST
The GST law provides specific definitions for "goods" and "services":
Goods:
- Movable property: Goods are defined as every kind of movable property other than money and securities.
- Includes: Actionable claims, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before supply or under a contract of supply.
Services:
- Anything other than goods: Services are defined as anything other than goods, money and securities.
- Includes: Activities relating to the use of money or its conversion by cash or by any other mode, from one form, currency or denomination, to another form, currency or denomination for which a separate consideration is charged.
Distinguishing between goods and services:
- Tangibility: Goods are tangible, meaning they have a physical form and can be touched or seen. Services are intangible, meaning they do not have a physical form.
- Transfer of ownership: In the supply of goods, ownership of the goods is transferred from the supplier to the recipient. In the supply of services, there is no transfer of ownership of any tangible thing.
Why is this distinction important?
- Tax rates: Different GST rates may apply to goods and services.
- Place of supply: The rules for determining the place of supply may differ for goods and services.
- Invoicing: Tax invoices for goods and services may have different requirements.