Classification of Supply- Whether a supply is a supply of goods or a supply of services 1


Schedule- II to CGST Act, 2017 provides a list of activities and transactions to determine whether it is a supply of Goods or a supply of Services. 

Such determination is very much important to select appropriate category while applying for registration, selection of HSN Codes, selection of rate of tax, determination of place of Supply, determination of time of Supply, invoicing, returns, tax payments, etc.

In this article, we will go through the specific list of goods/services provided under law along with their nature of supply.

 

Nature of Activity or Transactions

Supply of Good or Service ??

Transfer of Goods

1) Any transfer in the title of Goods It will be considered as Supply of Goods
2) Any transfer of right in goods without transferring title of Goods It will be considered as Supply of Services
3) Any transfer of right in undivided share in goods without transferring title of Goods It will be considered as Supply of Services
4) Any transfer of title in goods under an agreement which stipulates that property in goods shall pass at a future date upon payment of full consideration as agreed It will be considered as Supply of Goods

Supply of Land and Building

1) 

 

 

In case of supply of Land on:-
  • Lease, or
  • Tenancy, or
  • Easement, or
  • License
It will be considered as Supply of Services

2)

 

 

Supply of Any Building (commercial, industrial, residential)
  • on Lease or let out either wholly or partly

(residential complex should be used for business or commerce)

It will be considered as Supply of Services

 

 

Treatment or Process

  Any treatment or process which is applied to another person’s goods It will be considered as Supply of Services

Treatment of Business Assets

1)

 

 

Where goods forming part of assets of business:
  • transferred or disposed off,
  • by or under directions of person carrying business,
  • so as no longer to form part of those assets,
  • with or without consideration.

Such transfer or disposal will be considered as Supply of Goods

2)

 

 

Where goods forming part of assets of business:-

  • put to use for private purpose or made available to any person to use for non-business purpose,
  • by or under directions of person carrying business,
  • with or without consideration.

Such private usage or made available for non-business use will be considered as Supply of Service

 

3)

 

 

 

Where taxable person ceases to be a taxable person.

Any goods forming part of assets of business shall be deemed to be supplied by him in the course or furtherance of his business immediately before ceases to be taxable person, except in case of following situations: –

  • Where a business is transferred as a going concern to another person; or
  • Where taxable person ceases to be a taxable person and his business is carried on by a personal representative who is deemed to be a taxable person.

Such activity will be considered as supply of Goods

 

 

 

Supply of Services

1)

Renting of Immovable property

It will be considered as Supply of service
2)

Service by way of Construction of a complex, building, civil structure or part thereof

It will be considered as Supply of service

3)

 

 

 

Construction of complex or building intended for sale to a buyer wholly or partly Except where entire consideration has been received after

  • issuance of completion  certificate from a competent authority (where such certificate required); or
  • after its first occupation, whichever is earlier

It will be considered as Supply of service

 

 

Competent Authority means :

> Government or any authority,

>  authorized to issue completion certificate,

>  under the law for the time being in force.

 In case, certificate is not required from Government or any authority, then competent authority will be considered out of followings:-

I.     an architect registered with the Council of Architecture constituted under the Architects Act, 1972; or

II.     a chartered engineer registered with the Institution of Engineers (India); or

III.     a licensed surveyor of the respective local body of the city or town or village or development or planning authority;

Expression “construction” includes additions, alterations, replacements or re-modelling of any existing civil structures

 

4) Temporary transfer or permitting the use or enjoyment of any intellectual property right It will be considered as supply of service

5)

 

 

 

Supply of following services for Information technology software in form of:

  • Development
  • Design
  • Programming
  • Customization
  • Adaptation
  • Up gradation
  • Enhancement
  • Implementation

It will be considered as supply of service

 

6)

Agreeing to the obligation:

I.    to refrain from an act, or

II.   to tolerate an act or a situation,  or

III.  to do an act;

It will be considered as supply of service

7)

 

Transfer of the right to use any goods for any purpose

(whether or not for a specified period)

for cash, deferred payment or other valuable  consideration

It will be considered as supply of service

Supply of Goods

  Supply of goods by any unincorporated association or body of persons to a member thereof

for cash, deferred payment or other valuable consideration

It will be treated as supply of goods

Composite Supply

1)

 

 

 

 

 

 

 

 

 

 

 

Works Contract

Works Contract means a Contract for:-

  • Building
  • Construction
  • Fabrication
  • Completion
  • Erection
  • Installation
  • Fitting out
  • Improvement
  • Modification
  • Repair
  • Maintenance
  • Renovation
  • Alteration
  • Commissioning

of any Immovable property, wherein transfer of property in goods (whether as goods or in some other form) is involved in the execution of such property

It will be considered as supply of service

 

 

 

 

 

 

 

 

2) Supply, by way of or as part of any service or in any manner whatsoever, of goods, being food or any other article for human consumption or any drink (other than alcoholic liquor for human consumption)

and such supply is for cash, deferred payment or other valuable consideration

It will be considered as supply of service

Earlier, above-mentioned listed activities were covered under “Scope of Supply” as prescribed under section 7 of CGST Act 2017. However, pursuance to CGST Amendment Act, 2018, such list is excluded from “Scope of Supply” and hence only used for classification of nature of supply. 


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