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(PDF) Supply under GST Notes

Download PDF Notes on Supply under GST

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Supply under GST

Supply includes all forms of supply (goods and / or services) and includes agreeing to supply when the supply is for a consideration and in the course or furtherance of business. It specifically provides for the inclusion of the following 8 classes of transactions:

  1. Sale
  2. Transfer
  3. Barter
  4. Exchange
  5. License
  6. Rental
  7. Lease
  8. Disposal

Please follow the brief discussion of the 8 forms of supply:

  • Sale is a lawful, permanent and absolute transfer of ownership of property in goods for money consideration under a valid contract such that no rights are left behind with the transferor;
  • Transfer is to lawfully convey property from one person to another. Here, consent of transferor and capacity of transferee need not be present although all other ingredients of a lawful contract are incumbent;
  • Barter is where the consideration is in the form of goods or services (and not in money) for a sale or transfer. So in general, barter is itself not a supply but the form that consideration takes. But, when barter is called one of the forms of supply, it covers other forms of supply whose consideration is non-monetary. Therefore, barter will involve two supplies and not one. Each of these supplies would need to be examined for its respective taxability;
  • Exchange is where consideration is still not in money but in form of immovable property (CIT v. Motors and General Stores Pvt Ltd AIR 1968 SC 200). Similar to barter, exchange also involves two supplies. Given that land and (completed) building is excluded from supply, exchange would be the supply whose consideration is immovable property. And the object of supply itself may be of goods or of services;
  • Lease is where possession is transferred along with the right to use immovable property with a duty to care, protect and return subject to normal wear and tear along for consideration in the form of non-recurring premium only or along with recurring rent. Essence of lease being delivery of possession along with user rights is the reason lease is also used in the context of movable property (under the earlier laws). Supplier of a lease does not have possession hence not enjoy the right to use but retains right to repossess after term of lease. Lease is discussed first to contrast it with rental and license;
  • License is similar to lease except that possession is not transferred but mere permission to enter and use the property (movable or immovable) is allowed along with all other ingredients of a lease. Supplier of a license retains possession of the property during the term of license without right to use (if license precludes joint use). And after expiry of the term of license or on termination of license, the licensee will be a trespasser;
  • Rental is lease in respect of movable property. And since recurring payment in lease (of immovable property) is called rental, transfer of possession with user rights for recurring payment of consideration is interchangeably applied for movable and immovable property; and
  • Disposal is sale or transfer but property that does not possess merchantable warranty. Articles that are not merchantable are not ‘fit for sale’ but trade does take place for the reason that the supplier disposes the article without ascribing any worth but the recipient accepts the article for some intrinsic worth that he is able to extract or obtain. Article that does not answer to its description cannot normally bring a valid contract into existence but due to the respective motivation of each party, such articles are lawfully disposed off. In other words, although there is no consensus as to the object of supply, the parties are consenting to enter into such a contract for the respective reasons and considerations.

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