TOPIC 2–SUPPLY UNDER GST

Contents:

1. Introduction
2. Taxable event
3. Important Definitions
4. Meaning of supply
5. Taxability of Mixed and Composite
Supply
6. Practice Problems

1. INTRODUCTION
GST is a destination-based tax that replaces the earlier Central and State
taxes.
It is a dual levy with State/Union territory GST and Central GST. Moreover,
inter–state supplies would attract an Integrated GST, which would be the sum
total of CGST and SGST/UTGST.
Petroleum products, i.e., petroleum crude, high speed diesel, motor spirit,
aviation turbine fuel, natural gas will be brought under the ambit of GST from
such date as may be notified by the Government on recommendation of the
Council. Alcohol for human consumption has been kept outside the purview of
GST.
A well-designed GST in India is expected to simplify and rationalize the current
indirect tax regime, eliminate tax cascading and put the Indian economy on
high-growth trajectory. The GST levy may potentially impact both
manufacturing and services sector for the entire value chain of operations,
namely procurement, manufacturing, distribution, warehousing, sales, and
pricing.

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Supply under GST

2. TAXABLE EVENT
In earlier taxation system, there were multiple taxable events which are now
subsumed into single act of “SUPPLY OF GOODS OR SERVICES OR BOTH”.
Earlier excise duty used to be levied on the event of manufacture, VAT was
levied on sale of goods, CST was levied on interstate supply of goods and
Service tax was levied on providing services. In GST however, the taxable
event is act of SUPPLY.

Sales

Provision of
Manufacture
Services

Supply

3. IMPORTANT DEFINATIONS

a) Goods [Section 2(52)]

“Goods” means every kind of movable property other than money and
securities but includes actionable claim, 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.

b) Service [Section 2(102)]

“Services’’ means anything other than goods money and securities but
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.

Explanation–For the removal of doubts, it is hereby clarified that the

expression “services” includes facilitating or arranging transactions in
securities or facilitating or arranging transactions in securities.

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 Supply under GST

c) Money [Section 2(75)]

Money means the Indian legal tender or any foreign currency, cheque,
promissory note, bill of exchange, letter of credit, draft, pay order, traveller
cheque, money order, postal or electronic remittance or any other instrument
recognised by the Reserve Bank of India when used as a consideration to
settle an obligation or exchange with Indian legal tender of another
denomination but shall not include any currency that is held for its numismatic
value

d) Actionable claim [Section 2(1)]

As per section 3 of the Transfer of Property Act, 1882, actionable claim means
a claim to any debt, other than a debt secured by mortgage of immovable
property or by hypothecation or pledge of movable property, or to any
beneficial interest in movable property not in the possession, either actual or
constructive, of the claimant, which the civil courts recognise as affording
grounds for relief, whether such debt or beneficial interest be existent,
accruing, conditional or contingent.

e) Business
“Business” includes
a. any trade, commerce, manufacture, profession, vocation, adventure,
wager or any other similar activity, whether or not it is for a pecuniary
benefit;
b. any activity or transaction in connection with or incidental or ancillary to
sub-clause (a);
c. any activity or transaction in the nature of sub-clause (a), whether or not
there is volume, frequency, continuity or regularity of such transaction;
d. supply or acquisition of goods including capital goods and services in
connection with commencement or closure of business;
e. provision by a club, association, society, or any such body (for a
subscription or any other consideration) of the facilities or benefits to its
members;
f. admission, for a consideration, of persons to any premises;
g. services supplied by a person as the holder of an office which has been
accepted by him in the course or furtherance of his trade, profession or
vocation;
h. activities of a race club including by way of totalisator or a license to
bookmaker or activities of a licensed bookmaker in such club; and
i. any activity or transaction undertaken by the Central Government, a State
Government or any local authority in which they are engaged as public
authorities.

f) Place of business [Section 2(85)]

“Place of business” includes

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Supply under GST

a. a place from where the business is ordinarily carried on, and includes a
warehouse, a godown or any other place where a taxable person stores
his goods, provides or receives goods and/or services; or
b. a place where a taxable person maintains his books of account; or
c. a place where a taxable person is engaged in business through an agent,
by whatever name called

Note: Section 2(89) - Principal place of business will be the one mentioned in
the certificate of registration.

g) Agent [Section 2(5)]

Agent means a person, including a factor, broker, commission agent, arhatia,
del credere agent, an auctioneer or any other mercantile agent, by whatever
name called, who carries on the business of supply or receipt of goods or
services or both on behalf of another.

h) Principal [Section 2(88)]

Principal means a person on whose behalf an agent carries on the business of
supply or receipt of goods or services or both.

i) Manufacture [Section 2(72)]

Manufacture means processing of raw material or inputs in any manner that
results in emergence of a new product having a distinct name, character and
use and the term “manufacturer” shall be construed accordingly.

j) Supplier [Section 2(105)]

“Supplier” in relation to any goods or services or both, shall mean the person
supplying the said goods or services or both and shall include an agent acting
as such on behalf of such supplier in relation to the goods or services or both
supplied.

k) Recipient [Section 2(93)]

Recipient of supply of goods and/or services means-
a. Where a consideration is payable for the supply of goods or services or
both, the person who is liable to pay that consideration,
b. Where no consideration is payable for the supply of goods, the person
to whom the goods are delivered or made available, or to whom
possession or use of the goods is given or made available,and
c. Where no consideration is payable for the supply of a service, the
person to whom the service is rendered,
and any reference to a person to whom a supply is made shall be construed as
a reference to the recipient of the supplyand shall include an agent acting
as such on behalf of the recipient in relation to the goods or services or both
supplied.

l) Taxable supply [Section 2(108)]

Taxable supply means a supply of goods or services or both which is leviable
to tax under this Act.

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 Supply under GST

m) Taxable territory [Section 2(109)]

It means the territory to which the provisions of this Act apply.

n) India [Section 2(56)]

‘India’ means,
1. the territory of the Union as referred to in article 1 of the Constitution i.e.
the States and Union territories;
2. its territorial waters;
3. the seabed and the subsoil underlying the territorial waters;
4. the continental shelf of India and the exclusive economic zone of India
as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic
Zone and other Maritime Zones Act, 1976
5. the air space above its territory and territorial waters.

4. MEANING OF SUPPLY [SECTION 7]

Supply

Under section 7(1) of CGST Act, 2017, supply has been defined to include:
a. 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;
b. Import of services for a consideration whether or not in the course or
furtherance of business;
c. The activities specified in Schedule I, made or agreed to be made without
a consideration; and

(1A) Where activities constitute supply under section (1) they shall be treated
as either supply of goods or supply of services as referred to in Schedule
II.

(2) However, (a) activities or transactions specified in Schedule III; or (b)

such activities or transactions undertaken by the Central Government, a
State Government or any local authority in which they are engaged as
public authorities, as may be notified by the Government on the
recommendations of the Council, shall be treated neither as a supply of
goods nor a supply of services.

(3) The Government may, on the recommendations 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.

Analysis of above definition:

a. ALL FORMS OF SUPPLY:

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Supply under GST

 Sale: Transfer of title in a property for a consideration. e.g. Jay sold his
bike for `1 lakhs.
 Transfer: An act of transferring the title or possession in property. e.g.
Jignesh transfers title of his house in favour of his brother, Pankaj.
 Barter: The exchange of goods or services for goods or services without
the use of money. e.g. Yash gave a sack of rice to Puja and got a sack of
wheat in return.
 Exchange: The act of transferring interests each in consideration for the
other. e.g. Riya exchanged the new frock she bought for skirt.
 Licence: To authorize or give permission to do some act/use something.
e.g. X Ltd., a Pizza company, authorises Y to represent it while selling
Pizzas under its franchise.
 Rental: The act of permitting the use of one’s property for payment. e.g.
Mrs Sinha gave her flat on rent @ `20,000 p.m.
 Lease: To grant right of possession of any property to another in return for
rent or other consideration. e.g. Mr Arun gave equipment on lease to XYZ
for 2 years.
 Disposal: The act of relinquishing the possession or title over something.
e.g. A Ltd. hands over used computers to underprivileged children.
Act of forbearance i.e. not to do something also amounts to supply

SUPPLY
Disposal Sale

Lease Transfer

Rental Barter

License Exchange

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 Supply under GST

b. CONSIDERATION:

Section 2 (31) of CGST Act defines “consideration” in relation to the

supply of goods or services or both to include–

Monetary Non Monetary

Payment made or to be made in Monetary value of any act or
money or otherwise forbearance
In respect of/in response of/for the In respect of/in response of/for the
inducement of supply of goods or inducement of supply of goods or
services services
Whether by the recipient or any Whether by the recipient or any
other person other person
Not including any subsidy given by Not including any subsidy given by
the Central/State Government the Central/State Government

Deposit given in respect of a supply of goods or services or both,

shall not be considered as payment made for such supply unless the
supplier applies such deposit as consideration for the said supply.

c. PERSON:
Meaning of Person under section 2(81) of CGST Act
Person includes:
 an individual,
 a Hindu undivided family,
 a company,
 a firm,
 a limited liability partnership,
 an association of persons or body of individuals, whether incorporated or
not in India or outside India,
 any corporation established by or under any Central Act, State Act or
Provincial Act or a Government company as defined in clause (45) of section
2 of the Companies Act, 2013
 any body corporate incorporated by or under the laws of a country outside
India;
 a co-operative society registered under any law relating to co-operative
societies;
 a local authority,
 Government,
 society as defined under the Societies Registration Act, 1860, and
 trust

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Supply under GST

d. Meaning of in the course or furtherance of business

GST is essentially a tax only on commercial transactions. Hence, only those
supplies that are in the course or furtherance of business qualify as supply
under GST. Hence, any supplies made by an individual in his personal capacity
do not come under the ambit of GST unless they fall within the definition of
business as defined in the Act.

Sale of goods or service even as a vocation is a supply under GST. Therefore,

even if a famous politician paints paintings for charity and sells the paintings
even as a one-time occurrence, the sale would constitute supply. However,
there is one exception to this ‘Course or Furtherance of Business’ rule i.e.,
import of services for a consideration.

All forms of Supply

For consideration

By Person

In the course or
furtherance of business

e. Schedule I supply without consideration to constitute supply

As discussed above supply should be for consideration. However, there are
exceptions to the requirement of ‘Consideration’ as a pre-condition for a
supply to be called a supply as per GST. As per schedule I to CGST Act, 2017,
activities as mentioned below shall be treated as supply even if made without
consideration:

1) Permanent transfer or disposal of business assets where input tax credit

has been availed on such assets.
e.g. Disposal of obsolete plant

2) Supply of goods or services or both between related persons or

between distinct persons as specified in section 25, when made in the
course or furtherance of business:

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 Supply under GST

Provided that gifts not exceeding `50,000 in value in a financial year by an

employer to an employee shall not be treated as supply of goods or
services or both. Further, Ministry of Finance has clarified that services
such as membership of a club, health & fitness centre etc. are provided
free of charge to all employees by the employer, the same shall not be
subjected to GST.
Note:
Related Party includes
 Employer-employee
 Legally recognized partners in business
 Directors of each other’s business
 Person directly/indirectly owning, controlling or holding 25% or more of
voting stock/shares etc.
 Controlled by the same third person
 Directly/Indirectly controlling each other or any third person
 Family members. (Includes Spouse, Children, dependent parents/
grandparents/brothers/sisters)
 Sole agent/distributor

Distinct Person means

 A single company/business having places of business in multiple states
will be required to take separate registration for every such state under
the GST regime.
 Section 25(4) deems every such separate registration of a company as
distinct from each other.
e.g. XYZ Ltd has a head office in Maharashtra and Branch in Gujrat,
then even without consideration the transfer would be taxable.

3) Supply of goods- (a) by a principal to his agent where the agent

undertakes to supply such goods on behalf of the principal; or (b) by an
agent to his principal where the agent undertakes to receive such goods
on behalf of the principal. Above clause applicable only when agent
invoices in his own name.

It may be noted that supply of services is not covered here.

Example:
Anmol appoints Bholu to procure certain goods from the market. Bholu
identifies various suppliers who can provide the goods as desired by Anmol
and asks the supplier (Golu) to send the goods and issue the invoice
directly to Anmol. In this case Bholu is acting only as procurement agent
and is not invoicing in his name. Hence he is not treated as agent for the
purposes of above category. But in this case invoice is raiused by Golu on
Bholu then, further supply of goods from Bholu to Anmol would get
covered in above scenario and is supply for the purposes of GST.

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Supply under GST

Clarification for Del-Credere Agent (DCA)

The factor that differentiates a DCA from other agents is that the DCA
guarantees the payment to the supplier. In such scenarios where the
buyer fails to make payment to the principal by the due date, DCA makes
the payment to the principal on behalf of the buyer (effectively providing
an insurance against default by the buyer), and for this reason the
commission paid to the DCA may be relatively higher than that paid to a
normal agent.

Sr Issue Clarification
No
1 Whether DCA falls in the If Invoice is issued by supplier then
ambit of agent under point – No
3 of Schedule I If invoice is issued by DCA then -Yes
2 Whether interest charge by If DCA is considered as agent
DCA to buyer for short under point 3 of schedule I due to
term finance to be included separate invoicing then interest
in the value of supply? would be for delayed payment
consideration for supply of goods and
hence the same shall be added to
the value of goods supply.
However, if DCA is not an agent
under point 3 of Schedule I then
interest would be a consideration for
supply of service and would not be
added in the value of goods

4) Import of services by a person from a related person or from any of

his other establishments outside India, in the course or furtherance of
business. Note: Import of services means any supply of service where
Supplier is located outside India, Recipient of supply is in India, and Place
of supply of such service is in India
e.g. ABC Inc. is incorporated in the US by A Ltd. along with B Ltd. in
India. Services are imported by B Ltd from ABC Inc. without any
consideration, the import will be deemed to be a supply.

f. Schedule II activities or transactions treated as supply of goods or

supply of service

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 Supply under GST

1 Transfer Title in goods Goods

Title in goods under an agreement that property Goods
shall pass at a future date.
Rights/ undivided share in goods without Services
transfer of title in them
2 Land and Lease, tenancy, easement, license to occupy Services
Building land
Lease/letting out of building including a Services
commercial/ industrial/ residential complex for
business/ commerce, wholly/ party.
3 Treatment Applied to another person’s goods (e.g. job Services
or Process work)
4 Transfer Goods forming part of business assets are Goods
of transferred/ disposed off by/ under directions of
Business person carrying on business so as no longer to
Assets form part of those assets, whether or not for
consideration
Goods held/ used for business are put to private Services
use or are made available to any person for use
for any purpose other than business, by/under
directions of person carrying on the business,
whether or not for consideration
Goods forming part of assets of any business Goods
carried on by a person who ceases to be a
taxable person, shall be deemed to be supplied
by him, in the course or furtherance of his
business, immediately before he ceases to be a
taxable person unless
 Business transferred as a going concern.
 Business carried on by a personal
representative who is deemed to be a taxable
person.
5 Renting of immovable property
Construction of complex, building, civil
structure, etc except where consideration is
received post completion Services
Temporary transfer or permitting use or
enjoyment of any intellectual property right
Development, design, programming,
customization, adaptation, up gradation,

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enhancement, implementation of IT software

Agreeing to obligation to refrain from an act, or
to tolerate an act or tolerate an act or situation,
or to do an act.
Transfer of right to use any goods for any
purpose
6 Following composite supplies Services
 Works contract services.
 Supply by way of or as a part of any service
or in any other manner of goods, being food
or any other articles for human consumption
or any drink.
7 Supply of goods by an unincorporated Goods
association or body of persons to a member
thereof for cash, deferred payment or other
valuable consideration.

Clarification on tenancy right against consideration (Tenancy premium)

It has been clarified that the activity of transfer of tenancy right against
consideration i.e., tenancy premium is covered as supply of service liable to GST.

g. Exclusions from supply

Schedule III: Activities neither supply of goods or supply of services

1. Service by employee to employer in the course of employment1
2. Services by any court or tribunal established under law for the time being
in force.
3. Following actvities
a. Functions performed by an MP, MLA, members of panchayats,
municipalities and local authorities
b. Person who holds a post under the constitution
c. Duty by any person as chairman/member/director in a body
established by CG/SG or local authorities
4. Services of funeral, burial, crematorium or mortuary including
transportation of the deceased.
5. Sale of Land an building other that clasue b of para 5 of shedule II
6. Actionable claims, other than lottery, betting and gambling
7. Supply of goods from a place in the non-taxable territory to another place in
the non-taxable territory without such goods entering into India. [Will be
delt with in CA Final]

1
As clarified in a Press Release on 10.07.2018 by Ministry of Finance, anything that forms
part of cost to the company under employment contract should not be subjected to GST

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 Supply under GST

8. (a) Supply of warehoused goods to any person before clearance for home
consumption;
(b) Supply of goods by the consignee to any other person, by endorsement
of documents of title to the goods, after the goods have been
dispatched from the port of origin located outside India but before
clearance for home consumption. [Will be delt with in CA Final]

Specific exclusions

Notified activities of public authority e.g. Panchayat/Municipality

Functions

Clarification

 Artist work to art galleries for exhibition not a supply untill buyer selects
 Interstate movement of various modes of conveyance between distinct
persons for transportation of goods or passengers or for repairs &
maintenance neither supply of goods nor supply of services except in cases
where such movement is for further supply of the same conveyance. Please
note CGST/SGST would be applicable on repairs maintenance work done on
such conveyance.
 Inter-state movement of rigs, tools and spares, and all goods on wheels
[like cranes]neither supply of goods nor supply of services except in cases
where such movement is for further supply
Example:
Gagan Engineering Pvt Ltd registered in Haryana, is engaged in providing
maintenance and repair services for heavy steel machinery. For carrying
out the repair work, Gagan Engineering Pvt Ltd sends the container trucks
equipped with items like repair equipments, consumables, tools, parts etc.
from Haryana workshop to its ownrepairing centres where client’s
machinery is brought and is repaired.
 the grant of alcoholic liquor licence neither a supply of goods nor a
supply of service
 the service of display of name or placing of name plates of the
donor in the premises of charitable organisations receiving donation
or gifts by individual donors.
Individual donors provide financial help or any other support in the form of
donation or gift to institutions such as religious institutions, charitable
organisations, schools, hospitals, orphanages, old age homes etc. The
recipient institutions place a name plate or similar such acknowledgement in
their premises to express the gratitude. When the name of the donor is
displayed in recipient institution premises, in such a manner, which can be
said to be an expression of gratitude and public recognition of donor’s act of
philanthropy and is not aimed at giving publicity to the donor in such
manner that it would be an advertising or promotion of his business, then it
can be said that there is no supply of service for a consideration (in the

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Supply under GST

form of donation). There is no obligation (quid pro quo) on part of recipient

of the donation or gift to do anything (supply a service). Therefore, there is
no GST liability on such consideration.

Some examples of cases where there would be no taxable supply are as

follows:-

(a) “Good wishes from Mr. Rajesh” printed underneath a digital blackboard
donated by Mr. Rajesh to a charitable Yoga institution.

(b) “Donated by Smt. Malati Devi in the memory of her father” written on
the door or floor of a room or any part of a temple complex which was
constructed from such donation.

In each of these examples, it may be noticed that there is no reference or

mention of any business activity of the donor which otherwise would have
got advertised. Thus where all the three conditions are satisfied namely the
gift or donation is made to a charitable organization, the payment has the
character of gift or donation and the purpose is philanthropic (i.e. it leads to
no commercial gain) and not advertisement, GST is not leviable.

Gift/Donation

No GST

Philanthropic To Charitable
purpose organisation

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 Supply under GST

Discuss whether the following would amount to Supply

Example 1
Sale of old gold bangles and earrings by Manikarnika to Kalyan Jewellers

Example 2
Rishabh selles his old personal car to Cars 24.

Example 3
Imagica Theme Park provides various adventure rides against the entry tickect
of `1000.

Example 4
Renting of building.

Example 5
Supply of goods or service by A Ltd to it’s employee Mr C of `45,000 not
covered under the employment contract

Example 6
Supply of goods or service by A Ltd to it’s employee Mr. C of `75,000 not
covered under employment contract

Example 7
Rishabh Enterprises, a registered supplier owns and Ac restaurant in Virar,
Maharashtra. It has opened a liquor shop in Raipur, Uttarakhand for trading
alcoholic liquor for human consumption. Since supply of alcoholic liquor for
human consumption in Uttarakhand is a non taxable supply, Rishabh
Enterprises is not required to obtain registration with respect to the same in
Uttarakhand. During the month of September Maharashtra Restaurant
supplied alcoholic liquor to Uttarakhand shop.

Example 8
Raghubir Fabrics transfers 1000 shirts from his factory located and registtered
in Lucknow to his retail showroom in Kanpur. A single registration is obtained
in Uttar Pradesh declaring Lucknow factory as Principle place of business and
Kanpur showroom as additional place of business.

Example 9
M/s Tintin, a banking company, appoints Mandaar (Auctioneer) to auction
certain goods. The auctioneer arranges for the auction and identifies the

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Supply under GST

potential bidders. The highest bid is accepted and the goods are sold to the
highest bidder by M/s Tintin and invoice is issued by M/s Tintin.

Example 10
Gautham, an artist appoints Gambhir (auctioneer) to auction his painting.
Gambhir arranges for the auction and identifies the potential bidders. The
highest bid is accepted and the paiting is sold to the highets biddr. Invoice in
this case is issued Gambhir in his own name and paiting is delivered to the
successful bidder.

Example 11
Jhumroo Associates recived legal consultancy services from its head office
located in Malaysia free of cost.

Example 12
XYZ Ltd paid Mr A its employee an amount of `1 lakh for not joining competing
business on leaving XYZ Ltd.

5. TAXABILITY OF MIXED AND COMPOSITE SUPPLY [SECTION 8]

a. Composite Supply [Section 2(30)]: Supply of two or more taxable supplies

of goods or services or both, or any combination thereof, naturally bundled
and supplied in conjunction with each other, one of which is a principal supply.

Section 2(90) “Principal supply” means the supply of goods or services which
constitutes the predominant element of a composite supply and to which any
other supply forming part of that composite supply is ancillary.

e.g. Where goods are packed and transported with insurance, the supply of
goods, packing materials, transport and insurance is a composite supply and
supply of goods is a principal supply.

For GST purposes, composite Supply comprising two or more supplies one of
which, is a principal supply, shall be treated as supply of such principal supply.
Accordingly, the rate and regulations applicable to such principal
supply shall apply [Section 8(a)].

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 Supply under GST

Two or One
more Principal
Goods and Supply
Services

Naturally
bundled

b. Mixed Supply [Section 2(74)]: Supply of two or more individual goods or

services, or any combination thereof, made in conjunction with each other by
a taxable person for a single price.

e.g. A supply of a package consisting of canned foods, sweets, chocolates,

cakes, dry fruits, aerated drinks and fruit juices when supplied for a single
price is a mixed supply. Each of these items can be supplied separately and is
not dependent on any other. It shall not be a mixed supply if these items are
supplied separately.

Mixed Supply comprising two or more supplies, shall be treated as

supply of that particular supply which attracts the highest rate of
tax[Section 8(b)]

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Supply under GST

Two or
more Single
Goods and Price
Services

Not a
Composit
Supply

c. How to determine whether the services are bundled in the ordinary

course of business?

Whether the services are bundled in the ordinary course of business, would
depend upon the normal or frequent practices followed in the area of business
to which services relate. Such normal and frequent practices adopted in a
business can be ascertained from several indicators some of which are listed
below:
 The perception of the consumer or the service receiver – If large
number of service receivers of such bundle of services reasonably expect
such services to be provided as a package, then such a package could be
treated as naturally bundled in the ordinary course of business.
 Majority of service providers in a particular area of business
provide similar bundle of services. For example, bundle of catering on
board and transport by air is a bundle offered by a majority of airlines.
 The nature of the various services in a bundle of services will also
help in determining whether the services are bundled in the
ordinary course of business. If the nature of services is such that one of
the services is the main service and the other services combined with such
service are in the nature of incidental or ancillary services which help in
better enjoyment of a main service.
For example, service of stay in a hotel is often combined with a service or
laundering of 3-4 items of clothing free of cost per day. Such service is an
ancillary service to the provision of hotel accommodation and the resultant
package would be treated as services naturally bundled in the ordinary
course of business.

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 Other illustrative indicators, not determinative but indicative of

bundling of services in the ordinary course of business are:

 There is a single price or the customer pays the same amount,

no matter how much package they actually receive or use.
 The elements are normally advertised as a package. The
different elements are not available separately.
 The different elements are integral to one overall supply.
 If one or more is removed, the nature of the supply would be
affected.

No straight jacket formula can be laid down to determine whether a

service is naturally bundled in the ordinary course of business. Each case
has to be individually examined in the backdrop of several factors some of
which are outlined above. The above principles explained in the light of
what constitutes a naturally bundled service can be gainfully adopted to
determine whether a particular supply constitutes a composite supply
under GST and if so what constitutes the principal supply so as to
determine the right classification and rate of tax of such composite supply.

From the following identify whether the supply is composite supply or

mixed supply

Example 13
Indian Airlines provides passenger transportation service. They also supply
food on board to passengers.

Example 14
Supply of wheat for which a bottle of honey is given free of cost.

Example 15
Supply of warranty services along with the fridge bought.

Example 16
A supply of a package consisting of canned foods, sweets, chocolates, cakes,
dry fruits, aerated drink and fruit juices when supplied for a single price.

d. Difference between composite and mixed supply

Composite Supply Section 8(a) Mixed Supply Section 8 (b)
Two or more goods and services Two or more goods and services not
naturally bundled for single price naturally bundled for single price
Supply in conjunction with each other Can be supplied independently but
and one of which is a principal supply supplied together
Taxable at the rate of principal supply Taxable the highest rate applicable to
supply
e.g. Mobile phone and charger e.g. Gift pack containing sweets

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Supply under GST

Clarification

 In case of servicing of car if spares and labour billed separately, separate

GST shall be applicable.
 In the case of printing of books, pamphlets, brochures, annual reports, and
the like, where only content is supplied by the publisher or the
person who owns the usage rights to the intangible inputs while the
physical inputs including paper used for printing belong to the printer,
supply of printing [of the content supplied by the recipient of supply] is
the principal supply and therefore such supplies would constitute
supply of service
 In case of supply of printed envelopes, letter cards, printed boxes,
tissues, napkins, wall paper etc. printed with design, logo etc.
supplied by the recipient of goods but made using physical inputs
including paper belonging to the printer, predominant supply is that
of goods and the supply of printing of the content [supplied by the
recipient of supply] is ancillary to the principal supply of goods and
therefore such supplies would constitute supply of goods.
 In case of activity of bus body building the principal supply may be
determined on the basis of facts.
 In retreading of tyres, which is a composite supply, the pre-dominant
element is the process of retreading which is a supply of service. Rubber
used for retreading is an ancillary supply. However, supply of retreaded
tyres, where the old tyres belong to the supplier of retreaded tyres, is a
supply of goods.

6. PRACTICE PROBLEMS

Problem 1
Smt Durga Devi donated some money to a temple in the memory of her late
father. The Temple rust constructed a room in the temple complex from such
donation and wrote “Donated by Smt. Durga Devi in the memory of her
father” on the door floor of the room. Whether the same would constitute
supply u/s 7 of CGST Act?

Problem 2
Raman is an architect in Chennnai. His brother who is settled in London is a
well-known lawyer. Raman has taken legal advice from him free of cost with
regard to his family dispute.

Would your answer be different if in the above case, Raman has taken advice
in respect of his business unit in Chennai?

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 Supply under GST

Problem 3
Examine whether the activity of import of services in following independent
cases would amount to supply u/s 7 of CGST Act:
a) Miss Shriniti Kaushik received interior decoration services for her residence
located at Bandra, Mumbai from Mr Racheal of Sydney (Australia). The
amount paid for the said service is 5000 Australian dollars.
b) Miss Shriniti Kaushik received interior decoration services for her residence
located at Bandra, Mumbai from her brother, Mr Varun residing in Sydney
(Australia) [Wholly dependent on Miss Shriniti]. Further, Miss Shriniti did
not pay any consideration for the said services.
c) Will your answer change if in the above case Miss Shriniti has taken the
interior decoration services with regards to her business premises and not
her residence?

Problem 4
A dealer of washing machines, who has availed input tax credit on washing
machines, permanently transfers a washing machine from his stock-in-
trade, for personal use at his residence. Will this transfer for personal use be
treated as supply and liable for GST?

Problem 5
Baban is engaged in supply of certain goods in Delhi and Haryana. He wishes
to transfer goods worth ` 1,40,000 from Delhi to its branch in Haryana.

Problem 6
Employees of ABC Ltd., which is a subsidiary of G Limited, have been sent on
deputation basis to its Holding Company namely G Limited. Will such transfer
on deputation be treated as supply and liable to GST?

Problem 7
Under a scheme of finance, Maruti Ltd. gives the possession of car to the
buyer in November. It agrees to transfer the ownership of the car to the buyer
in January upon payment of full consideration of ` 9,60,000, in installments as
agreed. What will be the nature of this transaction?

Problem 8
Jayanta is an owner of specific piece of land in Delhi. He leases the same to
Ravi for one year for an agreed consideration. Whether this transaction would
amount to supply of goods or supply of service?

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Supply under GST

Problem 9
Vivek is a manufacturer of goods. He sends his goods for the purpose of
special packaging to Nitin on job work. The packaging material is provided by
Vivek. Whether this transaction would amount to supply of goods or supply of
service?

Problem 10
Bhagyashree is selling hampers consisting of canned foods, sweets,
chocolates, cakes and dry fruits on diwali and other festival. What is the kind
of supply and at which rate will GST be payable by her?

Problem 11
Sagar dispatched chocolates to Chidambar from Delhi to Panjab after getting it
packed and paying insurance charges of such goods. What is the kind of such
supply of chocolates and what rate will GST be applicable?

Problem 12
A hotel provides a 2-D/2-N package with all meals for ` 40,000. What is the
kind of such supply and which rate of GST shall be applicable.

Problem 13
Tejsing is selling certain goods comprising of set of articles at a consolidated
price of ` 80,000. He claims that the value of various articles and GST rate on
such articles are as under—
a. Article ‘X’ ` 40,000 5%
b. Article ‘Y’ ` 30,000 18%
c. Article ‘Z’ ` 10,000 Exempt

How much GST is payable by Tejsing if—

 All articles are sold separately?
 All articles are sold as one set for a consolidated price of `80,000?

Problem 14
Priya has executed a single rent deed of house which has two floors. The deed
specifies that one of the floors will be used as residence. The tenant uses
ground floor as a shop and the first floor as his residence. What is the kind of
supply?

Problem 15
Dumdum Electronics has sold the following electronic items to Akbar Retail
Store.
a) Refrigerator (500 litres) taxable @18%
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 Supply under GST

b) Stabilizer for Refrigerator taxable @12%

c) LED television (42inches) taxable @12%
d) Split air conditioner (2Tons) taxable @28%
e) Stabilizer for Ac taxable @12%

Dumdum Electronics has issued a single invoice, indication price of each of the
above items separately in the same. Akbar Retail Store has given a single
cheque of `1,00,000 for all the items as a composite discounted price. State
the type of supply and the tax rate applicable in this case.

Problem 16
Manikaran, a registered supplier of Delhi, has supplied 20,000 packages at 30
each to Mukhija Gift Shop in Punjab. Each package consists of 2 chocolates, 2
fruit juice bottles and a packet of toy balloons. Determine the rate of GST
applicable3 in the given case assuming the GST rates are as under:
Goods/Services supplied GST Rate
Chocolates 18%
Fruit juice bottles 12%
Toy balloons 5%

Problem 17
Saab Sales, an air-conditioner dealer in Janakpuri, Delhi, needs 4 air-
conditioners for his newly constructed house in Safdarjung Enclave. Therefore,
he transfers 4 air-conditioners [on which ITC has already been availed by it]
from its stock, for the said purpose. Examine whether the said activity
amounts to supply under section 7 of the CGST Act, 2017.

Further, a Janakpuri resident, Aakash, approached Saheb Sales. He sold an

air-conditioner to Saheb Sales for ` 5,000. Aakash had bought the said air-
conditioner six months before, for his residence. Does sale of the air
conditioner by Aakash to Sahab Sales amount to supply under section 7 of the
CGST Act, 2017?[RTP May 2018]

Problem 18
M H Hussain a famous painter in Delhi sends his latest work to Indian classic
gallery Delhi, for exhibition. However, no consideration is received from art
gallery when painting is sent for exhibition. MH Hussain is in dilemma
whether GST is payable on transfer of work of art by him? [RTP May 2019]

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