{"id":997,"date":"2021-01-07T11:19:19","date_gmt":"2021-01-07T11:19:19","guid":{"rendered":"https:\/\/swaritadvisors.com\/blog\/?p=997"},"modified":"2021-01-07T11:19:21","modified_gmt":"2021-01-07T11:19:21","slug":"what-activities-to-be-treated-as-supply-under-gst","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/blog\/what-activities-to-be-treated-as-supply-under-gst\/","title":{"rendered":"What Activities to be Treated as Supply under GST?"},"content":{"rendered":"\n<p class=\"has-drop-cap\">GST means Goods and Service Tax. The Transactions between related persons and other such activities is Treated as \u201cSupply\u201d under GST even if it is made without consideration. GST is relevant or will apply on these transactions. It is listed in Schedule I of Central Goods and Services Tax 2017 (CGST) Act. The transactions are done between parties which are relation or between a principal and an agent. Parties pay GST and later can claim it as input tax credit. This article will provide you with information relating to what activities to be treated as supply under GST. <\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a4dc8244666f\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a4dc8244666f\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/blog\/what-activities-to-be-treated-as-supply-under-gst\/#What_is_Supply_under_GST\" title=\"What is Supply under GST?\">What is Supply under GST?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/blog\/what-activities-to-be-treated-as-supply-under-gst\/#Supply_of_Goods_and_Services_before_GST\" title=\"Supply of Goods and Services\nbefore GST\">Supply of Goods and Services\nbefore GST<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/blog\/what-activities-to-be-treated-as-supply-under-gst\/#Transactions_between_related_persons\" title=\"Transactions between related\npersons\">Transactions between related\npersons<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/blog\/what-activities-to-be-treated-as-supply-under-gst\/#Related_Person_under_GST\" title=\"Related Person under GST\">Related Person under GST<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/blog\/what-activities-to-be-treated-as-supply-under-gst\/#What_is_the_Taxability_of_Supply_made_between_related_persons\" title=\"What is the Taxability of\nSupply made between related persons?\">What is the Taxability of\nSupply made between related persons?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/blog\/what-activities-to-be-treated-as-supply-under-gst\/#Transactions_Valuation_between_related_persons\" title=\"Transactions Valuation between\nrelated persons\">Transactions Valuation between\nrelated persons<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/blog\/what-activities-to-be-treated-as-supply-under-gst\/#Goods_Supplied_via_Agent\" title=\"Goods Supplied via Agent\">Goods Supplied via Agent<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/swaritadvisors.com\/blog\/what-activities-to-be-treated-as-supply-under-gst\/#Services_Imported_from_a_related_person_by_a_Taxable_Person\" title=\"Services Imported from a\nrelated person by a Taxable Person\">Services Imported from a\nrelated person by a Taxable Person<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/swaritadvisors.com\/blog\/what-activities-to-be-treated-as-supply-under-gst\/#Permanent_Transfer_of_Business_Assets_where_Input_Tax_Credit_has_been_utilized_on_such_assets\" title=\"Permanent Transfer of Business\nAssets where Input Tax Credit has been utilized on such assets\">Permanent Transfer of Business\nAssets where Input Tax Credit has been utilized on such assets<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/swaritadvisors.com\/blog\/what-activities-to-be-treated-as-supply-under-gst\/#Conclusion\" title=\"Conclusion \">Conclusion <\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_Supply_under_GST\"><\/span>What is Supply under GST?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>A taxable event\nfor charging tax is considered as supply under GST. The liability to pay the\ntax arises at the time of supply of goods and services. It is necessary to\ndecide the applicability of GST to determine whether a transaction falls or\ncomes under the meaning of supply or not. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Supply_of_Goods_and_Services_before_GST\"><\/span>Supply of Goods and Services\nbefore GST<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Under the old\nIndirect Tax Regime, there was no specification of supply of goods and\nservices. The stage at which indirect tax were levied were wide ranging under\ndifferent laws. The excise duty was charged on the goods that were produced\nwhen they were taken out of the workshop. Service tax was imposed based on\nrules known as \u201cpoint of taxation\u201d rules, for reduced services. Vat was imposed\non the value of the sale of goods and the provision of services. <\/p>\n\n\n\n<p>However, now the present system merged and combined all the taxes to maintain a single tax know as <strong><a href=\"https:\/\/swaritadvisors.com\/gst-registration\" class=\"text-primary\">Goods and Service Tax Registration<\/a><\/strong> (GST). <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Transactions_between_related_persons\"><\/span>Transactions between related\npersons<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Since the pricing\nmethodologies for the transactions between related persons are challenging\nalong with the manner in which to arrive at it, the transactions between\nrelated parties are notably important under any law. In the circumstances where\nthe persons are related, the prices are controlled and would not sometimes be\nprices that would have been charged in circumstances where the transactions are\ndone between unrelated persons. <\/p>\n\n\n\n<p>Let us now understand that when activities to be treated as supply under GST will be taxable then how to treat transactions between related persons and how to calculate under GST laws. The definition of related persons is stated under section 2(84) of the Goods and Service Tax Act (GST).<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Related_Person_under_GST\"><\/span>Related Person under GST<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The persons\nshall be deemed to be related if they fall under any of the categories below: &#8211;<\/p>\n\n\n\n<ul><li>An employee or an employer.<\/li><li>Director\/ Officer of one business is also the\ndirector\/ officer of another business.<\/li><li>The businesses are recognised as partners of the\nfirm legally. <\/li><li>A person holding at least 25% of the shares in\nanother company either indirectly or directly. <\/li><li>One of the persons controls the activity of the\nother indirectly or directly. <\/li><li>The related persons are under common management\nor control. <\/li><li>The entities together control another entity. <\/li><li>The related persons are members of the same\nfamily. <\/li><\/ul>\n\n\n\n<p>A person means a legal person who can be a company, firm, individuals, <strong>Hindu Undivided Family<sup><a href=\"https:\/\/www.incometaxindia.gov.in\/pages\/i-am\/huf.aspx\" class=\"text-primary\"><strong><em>[1]<\/em><\/strong><\/a><\/sup><\/strong> (HUF), cooperative society, local authority, LLP, government etc or an artificial juridical person. It also includes the entities incorporated outside India. <\/p>\n\n\n\n<p>The persons who\nare associated with one another\u2019s business or is a sole concessionaire or sole\ndistributor or sole agent shall be deemed to be related. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"What_is_the_Taxability_of_Supply_made_between_related_persons\"><\/span>What is the Taxability of\nSupply made between related persons?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The supply\nbetween the related persons with consideration shall constitute as \u201csupply\u201d\nlike any other transaction. However, supply made between related persons for no\nconsideration or inadequate consideration comes under Schedule I of the Goods\nand Services Tax Act (GST). And such transactions shall be considered as\n\u201csupply\u201d only if takes place in course of furtherance of business. <\/p>\n\n\n\n<p>Also, when the import of service from an establishment or a related person outside India is done by an entity for the furtherance of business, it shall be treated as supply. <\/p>\n\n\n\n<p>Exception: Relief is given in a case where an employee is gifted something by an employer and the value of the gift is less than Rs. 50,000. This shall not be considered as supply. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Transactions_Valuation_between_related_persons\"><\/span>Transactions Valuation between\nrelated persons<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The value of\nsupply between the related persons other than where the supply is made through\nan agent is determined as below: &#8211; <\/p>\n\n\n\n<ul><li>Open Market valuation of supply- it is the value\nof supply between the two entities which are not related. When a supply is\nbetween the entities which are related, there is a much possibility that the\nprices will be influenced by their relationship. <\/li><\/ul>\n\n\n\n<p><strong><em>Example<\/em><\/strong>:\n&#8211; goods are sold by \u201cA\u201d Ltd to \u201cB\u201d Ltd which are related entities at Rs. 1000\nand to \u201cC\u201d Ltd which is an unrelated entity, the goods are sold for Rs. 1500.\nIn such a case, it can clearly be seen that the relationship has influenced the\npricing of \u201cA\u201d Ltd. And therefore, the purpose of valuation, Rs. 1500 will be\nconsidered. <\/p>\n\n\n\n<ul><li>If the open market value cannot be determined,\nthen the value of goods of like quality and kind shall be considered. <\/li><\/ul>\n\n\n\n<p><strong><em>Example<\/em><\/strong>: &#8211; If sales were made by \u201cA\u201d Ltd to \u201cB\u201d Ltd, then the above valuation method would not be appropriate. Then, the \u201cD\u201d Ltd would be considered, who sells similar goods as \u201cA\u201d Ltd at Rs. 1200. Therefore, the valuation for this purpose would be Rs. 1200. <\/p>\n\n\n\n<ul><li>If no appropriate value is given by both the above\nmethods, then value based on cost of production or cost or under the residual\nmethod will be considered. <\/li><\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Goods_Supplied_via_Agent\"><\/span>Goods Supplied via Agent<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<ul><li>To the agent by his principal and the agent will\nsupply them on behalf of the principal. <\/li><li>To the principal by his agent when the goods are\nreceived by the agent on behalf of the principal. <\/li><\/ul>\n\n\n\n<p>The supplies\nbetween the principal and agent shall be liable to GST. Both of them will be\nliable to pay GST severally and jointly. The person paying the GST can claim\ninput tax credit later. <\/p>\n\n\n\n<p><strong><em>The\nvalue of supply to an agent is also based on the above provisions in for\nrelated persons. <\/em><\/strong><\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Services_Imported_from_a_related_person_by_a_Taxable_Person\"><\/span>Services Imported from a\nrelated person by a Taxable Person<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Importing of\nservices by a taxable person from a related person or from any of his other\nestablishments which are outside India, for the purpose of business will be\nconsidered as supply. <\/p>\n\n\n\n<p><strong><em>Example<\/em><\/strong>:\n&#8211; \u201cA\u201d Ltd has incorporated ABC Inc. in the US, along with \u201cB\u201d Ltd in India.\nServices are from ABC Inc. By \u201cB\u201d Ltd without any consideration, the import\nwill be deemed to be a supply. The \u201cB\u201d Ltd shall pay GST on reverse charge\nbasis. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Permanent_Transfer_of_Business_Assets_where_Input_Tax_Credit_has_been_utilized_on_such_assets\"><\/span>Permanent Transfer of Business\nAssets where Input Tax Credit has been utilized on such assets<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The sale of\nbusiness assets or permanent transfer on which input tax credit has been\nutilized will also be considered as supply even if there is no consideration\nreceived. The Goods and Service Tax (GST) will be applicable to the sale of\nbusiness assets only. It is not applicable to the sale of personal building\/\nland and other person assets. <\/p>\n\n\n\n<p>The \u201cPermanent\nTransfer\u201d means the transfer of goods without any intention of receiving the\ngoods back. Goods sent for certification\/ testing or sent on job work will not\nbe considered or qualify as supply as there is no permanent transfer of goods. <\/p>\n\n\n\n<p>Scrapping or\ndisposal or donation of business assets in any other manner other than as a\nsale \u2013 that is, for a consideration, would also be considered or qualify as\n\u201cSupply\u201d where input tax credit has been claimed. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The supply under Goods and Service Tax (GST) is considered as a taxable event for charging tax. The liability to pay the tax arises at the time of supply of goods and services. The information regarding what activities to be treated as supply under GST has been explained in the above article. It deals with the transactions between related persons and other such activities to be treated as supply under GST. Hence, to decide whether the transaction falls under the meaning of supply or not, it is necessary to decide the applicability of the GST.<\/p>\n\n\n\n<p><b>Also, Read:<\/b> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/blog\/gst-department-cannot-block-import-export-code-bombay-hc\/\">GST Department Cannot Block Import Export Code: Bombay HC<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>GST means Goods and Service Tax. The Transactions between related persons and other such activities is Treated as \u201cSupply\u201d under GST even if it is made without consideration. GST is relevant or will apply on these transactions. It is listed in Schedule I of Central Goods and Services Tax 2017 (CGST) Act. The transactions are [&hellip;]<\/p>\n","protected":false},"author":3,"featured_media":998,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[39],"tags":[154],"acf":[],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/997"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/comments?post=997"}],"version-history":[{"count":3,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/997\/revisions"}],"predecessor-version":[{"id":1001,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/posts\/997\/revisions\/1001"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media\/998"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/media?parent=997"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/categories?post=997"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/blog\/wp-json\/wp\/v2\/tags?post=997"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}