Goods supply without consideration under GSTHemlata Khandelwal / 2021-03-17 03:08:55
Goods supply without consideration under GST
If a person supplies goods or services, then that person will be charged GST, if he is registered with GST. Whether or not GST will be imposed depends on whether the goods or services are supplied by a person.
If a transaction is not considered a supply in GST, then that transaction cannot be imposed on GST, so it is very important to know about what is the supply according to GST?
Along with this, we will also discuss the mandatory rules related to supply in today's article (supply without consideration under GST).
What is the supply in GST?
Whether or not any transaction will come in the definition of supply, it is important to have 3 things in that transaction,
- Supply of goods or services is being done only.
- Supply is being made in exchange for consideration,
- Supply is being made in relation to business.
If none of these three things happens in any transaction, then that transaction will not be considered a supply, due to which no GST will be charged on it.
For example, transactions in money and securities are not included in the definition of goods, so transactions in money or securities are not following the rules before supply, which is said to supply goods or services only. Are you going? Therefore, such transactions will not come under the purview of GST.
However, some exceptions were also mentioned in the GST law, in which if there is no element of the above-mentioned supply in a transaction if some condition is met, then that transaction will also come under the purview of GST.
Are any transactions being done for free of cost (without consideration), then they will also be charged GST? (Supply without consideration under GST)
In GST, there is an element in the 3 important elements of the supply that the supply should be in exchange for consideration. If the supply is being done without concession then this transaction will not be considered as a transaction of supply and GST cannot be charged on this transaction due to non-supply.
However, some such transactions have been mentioned in the GST law that even if they are being done without consideration, those transactions will still be considered as supply and GST will be charged.
All the cases in which transactions are considered to be supplied without consideration are given in Schedule I of the CGST Act.
We will discuss all the cases mentioned in schedule I in detail below.
Permanent transfer/disposal of business assets (para 1 of Schedule I) -
If any person is transferring or disposing of his business assets to another person as "free of cost". So, such a transaction will be considered as supply without consideration and GST will be charged.
For example, if a laptop used by a registered person in GST is transferred to a friend without any consideration, it will be treated as a transaction supply and will be liable for GST.
Permanent transfer or disposal of business assets will be liable to GST only if the transaction is “free of cost”. In that, the input tax credit on such business assets has been claimed.
Permanent transfer or disposal of such business assets will not come under the purview of GST law if the input tax credit of any business assets is denied by the GST law or if the ITC is not claimed by the registered person.
GST will be charged on permanent transfer or disposal only when these 3 conditions are fulfilled, -
- There should be transfer or disposal of business assets,
- The nature of transfer or disposal should be permanent
- The input tax credit is claimed on these business assets.
If not a single condition is met in these three conditions then this transaction will not be liable for GST.
Supply between the related or distinct person (para 2 of Schedule I) -
As per schedule I of the CGST Act, if there is a supply of goods or services between any related person and a distinct person and this supply is without consideration, then such transactions would also come under the purview of GST.
However, such transactions should only be in relation to business.
Who is involved in the definition of a related person?
According to GST law, the following persons will be included in the definition of related person -
- Officers / Directors in each other's business
- Legally Recognized Partners,
- Control over one another
- Control of both persons by the third person
- Both the person should have control over any third person
- Family members,
- One of the two should be the sole agent / sole distributor / sole concessionaire of the other.
Who is included in the definition of a distinct person?
PAN-based GST registration online is done under GST law, so any person who does business with the same PAN, whether in a state or in a different state, will be considered as a different person.
It is not necessary that all distinct persons be registered by taking GST registration online, because many times a person supplies only non-taxable goods at someplace. Therefore, it is not mandatory to take registration at that location.
Principal - agent (para 3 of Schedule I)
According to GST law, when an agent supplies goods on behalf of the principal, then even if the transaction is done without any consideration, this transaction will be considered a supply.
Similarly, when an agent receives goods on behalf of his principal, such a transaction will also be considered a supply even if it is done without consideration.
However, Schedule I only covers the transaction of goods made between the principal and the agent.
If there are transactions of services between the principal-agent and there is no return, then such transaction will not be considered as supply and will not be liable for GST.
Importation of services (para 4 of Schedule I)
If a person imports any services and this import is done without consideration, such transactions are also included in Schedule I of the CGST Act and will be liable for GST.
However, importation of services without consideration will be deemed to be supplied in the same case when the transaction is done in related parties or by a person from any of its other establishments, which are located outside India. Also, such a transaction should be in relation to business.