Section - 003 - Meaning and scope of supply

MODEL GST LAW - GOODS AND SERVICES TAX ACT, 2016 - Draft June 2016

Sub Section (1)  states that:-

Supply includes

(a) all forms of supply of goods and/or services 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) importation of service, whether or not for a consideration and whether or not in the course or furtherance of business, and

(c) a supply specified in Schedule I, made or agreed to be made without a consideration.

 

Accordingly:

- Whereas clause (a) covers all transactions where consideration is there, any free supply / without consideration is not covered under the term of supply under Clause (a).

- But, As per Schedule 1, all free supply of goods and services (without consideration) will be covered within the scope of Supply.

It is not known for what purpose, supply with consideration and supply without consideration has been included within its scope in different manner. What was the need to include supply without consideration through Schedule 1 when the same could have been done directly under the main section 3 itself.

- Supply of goods and Services as per Section 3(1)(a) and 3(1)(c) does not include import of goods or services. It will be applicable for Domestic Supply only.

- Whereas as per Section 3(1)(b) importation of services for any purpose, have included.

 

 

Scope of supply under GST includes consideration-based transactions, importation of services, and specified free supplies. The statutory definition of supply under the Model GST Law comprises three categories: supplies for consideration in the course or furtherance of business (sale, transfer, barter, exchange, licence, rental, lease or disposal); importation of services regardless of consideration or business purpose; and specified supplies made without consideration as listed in Schedule I. Clause (a) targets domestic, consideration-based transactions; clause (b) treats importation of services as separately taxable; and clause (c) assimilates certain gratuitous transactions into the tax net via Schedule I.