FAQs on GST – supply and time of supply

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Meaning and scope of supply

  1. What is a taxable event under the Goods and Services Tax (GST)?

The taxable event under GST shall be the supply of goods, services, or both made for consideration in the course of business. The taxable events under the existing indirect tax laws, such as for manufacturing, sales, and services, shall be subsumed in the taxable event known as ‘supply’.

  1. What is the scope of supply under the GST law?

The term ‘supply’ covers all forms of supply of goods, services, or both that include sale, transfer, barter, exchange, license, rental, lease, or disposal made or agreed to be made for consideration by a person in the course of business — including imports. Likewise, the model GST law supports certain transactions carried out without consideration within the scope of supply.

  1. What is a taxable supply?

A taxable supply is a supply of goods, services, or both that is chargeable to goods and services tax under the GST Act.

  1. What are interstate supplies and intrastate supplies?

Interstate and intrastate supplies have specifically been defined in Section 7 (1), 7 (2) and 8 (1), 8 (2), respectively, of the Integrated GST (IGST) Act. When the location of the supplier and the place of supply are in the same state, it will be intrastate. When they are in different states, it will be interstate supply.

  1. What are the necessary components that constitute supply under the Central GST (CGST)/State GST (SGST) Act?

To constitute a supply, the following elements must be satisfied:

  • The activity involves the supply of goods, services, or both
  • Supply is for consideration unless otherwise expressly provided for
  • Supply is made in the course of business
  • Supply is made in a taxable territory
  • Supply is a taxable supply
  • A taxable person makes the supply
  1. Are self-supplies taxable under GST?

Interstate self-supplies such as stock transfers, branch transfers, or consignment sales shall be taxable under IGST even though such transactions may not involve the payment of consideration. However, intrastate self-supplies are not taxable subject to not opting for registration as a business vertical.

  1. Is the transfer of title and/or possession necessary for a transaction to constitute supply?

Title as well as possession both must be transferred in a transaction to be considered a supply of goods. If the title is not transferred, the transaction will be treated as a supply of services, per Schedule II (1) (b). If possession is transferred immediately but the title is to be transferred at a future date, as in the case of a hire-purchase arrangement, it would be a supply of goods.

  1. Will works contracts and catering services be treated as a supply of goods or services?

Works contracts and catering services shall be treated as a supply of services, as specified under Sl. No. 6 (a) and (b) in Schedule II of the model GST law.

  1. Will supply of software be treated as a supply of goods or services?

Development, design, programming, customization, adaptation, upgrades, enhancement, and implementation of information technology software shall be treated as a supply of services as listed in Sl. No. 5 (2) (d) of Schedule II of the model GST law.

  1. Are any activities treated as neither a supply of goods nor a supply of services?

Yes, Schedule III of the model GST law lists certain activities, such as:

  • Services by an employee to the employer in the course of or in relation to his employment
  • Services by any court or tribunal established under any law
  • Functions performed by members of parliament, state legislatures, local authorities, and constitutional functionaries
  • Funeral, burial, crematorium, or mortuary services
  • Sale of land
  • Actionable claims other than a lottery, betting, and gambling
  1. What is a composite supply under the CGST/SGST/Union Territory (UTGST) Act?

Composite supply means a supply, made by a taxable person to a recipient, comprising two or more supplies of commodities or services, or any combination thereof, that are naturally bundled together and provided in conjunction with each other in the ordinary course of business, one of which is a principal supply. For instance, when goods are bundled and transported with insurance, the provision of goods, carrying materials, transport, and insurance is a composite supply, and the supply of commodities is the primary supply.

  1. What is a mixed supply?

Mixed supply means two or more individual supplies of goods or services, or any combination thereof, produced in conjunction with each other by a taxable person for a single price where such provision does not comprise a composite supply. For example, a supply consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drink, and fruit juice at a single price is a mixed supply, as each of these items can be supplied separately and is not dependent on any other.

  1. How will tax liability on a mixed supply be determined under GST?

A mixed supply comprising two or more supplies shall be treated as a supply of that particular supply that attracts the highest rate of taxation.

  1. What is implied by zero-rated supply under GST?

Zero-rated supply means the export of goods and/or services or supply of goods and/or services to a Special Economic Zone (SEZ) developer or unit.

Time of supply

  1. What is time of supply?

The time of supply fixes the point when the liability to charge GST arises. It also indicates when supply is deemed to have been established.

  1. What is the time of supply in the case of supply of vouchers in respect of goods and services?

The time of supply of a voucher in respect of goods and services shall be:

  • The date of issue of a voucher, if the supply is identifiable at that point; or
  • The date of redemption of a voucher in all other instances
  1. What is the time of supply of goods for tax payable under reverse charge?

The time of supply will be the earliest of:

  • The date of receipt of goods
  • The date on which payment is made
  • The date immediately following 30 days from the date of issue of an invoice from a supplier
  1. What is the time of supply of services for tax payable under reverse charge?

The time of supply will be the earlier of:

  • The date on which payment is made
  • The date immediately following 60 days from the date of issue of an invoice from a supplier
  1. What is the time of supply when the supply is completed prior to a tax rate change?

In such cases, the time of supply will be as follows:

  • If the invoice is issued and the payment is received after the change, the time of supply shall be the date of receipt of payment or the date of issue of the invoice, whichever is earlier
  • If the invoice was issued before the rate change but the payment is received after, the time of supply shall be the date of issue of the invoice
  • If the payment was received before the change in the rate of taxation, but the invoice is issued after the change, the time of supply shall be the date of receipt of payment
  1. What is the time of supply when the supply is completed after a tax rate change?

In such cases, the time of supply will be as follows:

  • If the payment is received after the change but the invoice was issued prior to the change, the time of supply shall be the date of receipt of payment
  • If the invoice is issued and the payment is received before the rate change, the time of supply shall be the date of receipt of payment or the date of issue of the invoice, whichever is earlier
  • If the invoice is issued after the change but the payment was received before the change, the time of supply shall be the date of issue of the invoice
  1. What is the time period in which an invoice must be issued for the supply of goods?

As per Section 31 of the CGST/SGST Act, a registered taxable person shall issue a tax invoice showing the description, quantity, and value of goods, along with the tax charged and other particulars before or at the time of:

  • Removal of goods for supply to the recipient, where supply involves movement of goods; or
  • Delivering goods or making them available to the recipient in other cases
  1. What is the time period in which an invoice must be issued for the supply of services?

As per Section 31 of the CGST/SGST Act, a registered taxable person shall, before or after the provision of service but within the prescribed period, issue a tax invoice showing the description and value of the goods, the tax payable, and other particulars.

This whitepaper is authored by Vatsal Bhandari.

Avalara is an experienced application service provider (ASP) and partner of authorized GST Suvidha Providers (GSPs). To understand how our cloud-based application Avalara TrustFile GST can help you with GST compliance automation, contact us through https://www.avalara.com/in/products/gst-returns-filing.

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