If you are to analyse the term ‘Supply’ under GST, you will notice it is a replacement for the term sale. Even the supply made, or agreed to be made without a consideration will also amount to sale. However, Schedule-II of the model GST law provides clarity on determining the type of supply as supply of goods or supply of services. It is very important for businesses to know whether supply amounts to supply of goods or supply of services, and treat supply accordingly.
- In case of Transfer of title in goods. For example, Cheema Furnitures sold cupboards to Mr. Prakash. This form of supply will be treated as supply of goods, as here on sale, the title of cupboards is transferred to Mr. Prakash.
- In case of Transfer of goods without transfer of title. For example, Cheema Furnitures supplied cupboards to Mr. Prakash, on rental basis, for a period of 3 months. This form of supple will be treated as supply of service because cupboards are transferred for Mr. Prakash’s usage, and the title of the furniture is still with Chema Furnitures.
- In case of Land & Building – Any lease, tenancy, easement, license to occupy land or building ( both for commercial or residential purpose, fully or partly). For example, Mr. Prakash lets out land on lease to Cheema Furnitures. The letting out of land on lease is considered as supply of services.
- Treatment or Process of work which is being applied to another person’s goods is a supply. For example, Cheema Furnitures undertakes repair works and polishing of the furniture of their customers. This job work of repair and polishing will be treated as supply of services.
- Transfer/Disposal of Business Assets – Where goods forming part of the assets of a business are transferred or disposed of without any consideration as they were no longer forming part of business. For example, Shyam Events Ltd purchased 1500 door and window curtains sets worth Rs.12,00,000 and paid GST online @18% of Rs.2,16,000. Shyam Events Ltd availed Input Tax Credit of Rs.2,16,000 on this purchase. These curtains were used for decorating corporate event parties. Following many years of using these curtains, Shyam Events Ltd chose to give these curtains away to his employees without any cost. This supply will be treated as supply of goods.
- Renting of immovable property, such as renting of shop premises is considered as supply of services.
- Business assets put to private use or non-business use, whether or not for a consideration. For example, Car used for business is put to private use. This is a supply of services.
- Development, design, programming, customisation, adaptation, up-gradation, enhancement, implementation of information technology software, such as Media Corridors Pvt Ltd, developed a payroll software for Cheema Furnitures. The development of software is a supply of services.
- Works contract, including transfer of property in goods (whether as goods or in some other form) involved in the execution of a works contract of immovable property. For example, Merlin Construction Ltd constructed a mall involving material and labour. This will be termed as supply of services.