Impact of GST on Supply without Consideration & Importation of Services

By Registrationwala

25th April 2017

 

Supply of goods and services with consideration predominantly deals with business operational activities like sales, transfers and a lot more. The upcoming stanzas will deal with some exceptional cases forming a part of supply and are taxable.

Supply without consideration

The below enumerated activities are contemplated as supply without consideration and hence chargeable to tax.

  •  Permanent transfer/disposal of business assets on which Input Tax Credit has been sufficed

In the event of sale or transfer of business assets i.e. capital goods on which Input Tax Credit was availed – the transaction shall be treated as supply even when these are cleared or transferred without consideration, and the business is liable to pay GST.

For instance, Ibex Motors purchased 15 computers worth Rs.3, 00,000 and paid GST of Rs.54, 000.

In the given hypothetical situation, Ibex Motors availed Input Tax Credit of Rs.54, 000. These computers were used to maintain the accounts and other records maintaining the records of the business.

After years of usage, Ibex Motors decided to give these computers to its employees without any cost. Though the computers were disposed without any consideration, Ibex Motors is still liable to pay GST.

  • Supply of goods between Principal and his Agent

Supply of goods as outlined below is considered to be a taxable supply even without consideration.

Supply of goods between Principal and his Agent

Ibex Motors appoints Robust Agency as an agent, who will store the spare parts supplied byIbex Motors. When an order is received by Ibex Motors from its dealers, instruction will be sent to Robust Agency to supply the consignment.

Also, Robust Agency is entrusted to receive the supply of raw material from manufacturers on behalf of Ibex Motors.

As per the above narrated illustration,

  •   Ibex Motors is the principal and Robust Agency is the agent.
  •  Supply of spare parts by Ibex Motors to Robust Agency is a taxable supply.
  •  The receipt of raw material by Robust Agency on behalf of Ibex Motors and the subsequent supply by Robust Agency to Ibex Motors is a taxable supply.

The liability on the above will be either shared jointly by Super Ibex Motors and Robust Agency, or individually borne by either of them.

  •  Importation of services by a taxable person from a related person or from any of his other establishments outside India, in the course of or for furtherance of business.

This entails that a service imported without consideration from a related person situated outside India will be subject to levy of GST only if it is in the course of or for furtherance of business.

Illustration: Interior design service received by a branch from its Head office, located in Singapore. The interior service is taxable and liable for GST on reverse charge.

Hence, service imported without consideration from unrelated persons for the furtherance of business, and import of service without consideration for personal use is not a supply, and thereupon, not subject to GST.

Illustration: Interior design service from its head office, located in Singapore for personal residence without any consideration.  Since the service is free and for personal use, it is not subject to GST.

Supplies made for a consideration whether or not in the course or for furtherance of business 

The import of service for a consideration whether or not in the course or for furtherance of business is contemplated as a taxable supply. This denotes that if the services are imported for a consideration, either for business purpose or for personal use, one is liable to pay GST.

Illustration:

Ibex Motors imported navigation design services from a vendor in Singapore for a consideration of SGD (Singapore Dollars) 20,000. In this case,Ibex Motors is liable pay GST on the above mentioned import of service on reverse 

 

Impact of GST on Supply without Consideration & Importation of Services

2017-04-25