Interpretation of "Supply" under GST Act: Joint custody and goods destruction scenarios clarified by AAR

The case involved the interpretation of "Supply" under the GST Act in two scenarios: joint custody of goods without ownership rights and goods destroyed before delivery under an agreement to sell. The Authority for Advance Ruling (AAR) determined that joint custody without ownership rights does not constitute "Supply" under the GST Act. Additionally, goods destroyed before sale cannot be considered as "Supply" under the Act. The AAR emphasized that in both situations, the goods did not pass into the possession or ownership of the applicant, thus ruling in favor of the applicant in both issues.

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Issues: (i) Whether mere taking of joint custody of tendupatta without transfer of ownership amounts to supply under the GST law. (ii) Whether goods destroyed by fire before delivery under an agreement to sell can still be treated as a supply after their destruction.

Issue (i): Whether mere taking of joint custody of tendupatta without transfer of ownership amounts to supply under the GST law.

Analysis: Supply under the GST law requires, in substance, transfer of possession and completion of the transaction contemplated by the contract. On the facts, the goods were future goods under an agreement to sell, delivery was conditional on payment of instalments and interest, and the applicant's joint custody did not amount to transfer of ownership or completed delivery. The invoice for the destroyed lot was not issued and the property in goods had not passed to the applicant.

Conclusion: Mere joint custody did not amount to supply.

Issue (ii): Whether goods destroyed by fire before delivery under an agreement to sell can still be treated as a supply after their destruction.

Analysis: Where specific future goods perish before the risk and property pass to the buyer, the agreement to sell is avoided and no sale comes into existence. Since the tendupatta was destroyed before delivery and before the transaction matured into a sale, there was no completed supply capable of attracting GST after the fire.

Conclusion: The destroyed goods could not be treated as a supply after their destruction.

Final Conclusion: The questions were answered against the applicant and the ruling held that GST was not attracted merely by joint custody, but the destroyed lot, before completion of sale, was not liable to be treated as a supply after the fire.

Ratio Decidendi: In a transaction concerning future goods under an agreement to sell, supply under GST arises only when the transaction is completed by transfer of property or delivery in law; mere joint custody without such transfer, and destruction of the goods before that stage, does not create a taxable supply.

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