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The Value of Supply of Goods vs Services under GST

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The model GST laws have shed clarity on determining supply as the supply of goods vs services by way of Schedule II. The reason for this clarification is because the current indirect tax regime is conflicted when it comes to understanding things like for example, the implication of service tax and VAT on a works contract, at a restaurant, in terms of software etc.

Thus, businesses, dealers, traders are all required to know and understand how supply under the GST amounts to a supply of goods or a supply of services and then treat the supply as per the Schedule. Under the law, transactions relating to supply have been classified as transactions pertaining to transfers, treatment of immovable property, treatment of process on a third party’s goods and transactions that involve construction, works contracts, renting etc.

We have provided a brief snapshot of the various kinds of supplies, along with supporting examples as follows –

Supply – Form Treatment Illustration
Transfer of title in goods Good Mr. Bob bought a table from JB Furniture and the transaction was treated as a supply of goods as upon sale being effected, there is a transfer of the title of the good, in this case, the table.
Transferring goods without transferring the title Service Mr. Bob was supplied with furniture for a period of 6 months from JB Furniture and the transaction was treated as a supply of service because the furniture has been supplied to Mr. Bob without the actual transfer of the title of such furniture. Therefore, even though the possession of the furniture is with Mr. Bob, the ownership remains with JB Furniture.
Transferring the title of goods pursuant to an agreement stating that the goods shall pass in the future date conditional on payment of the entire consideration Good Mr. Bob purchased furniture from JB Furniture and agreed to make the payment in 3 installments of INR 10,000 each payable per month. This transaction was treated as a supply of goods as the furniture shall be passed onto Mr. Bob at the end of 3 months of having made the full payment. Any kind of hire purchase transaction falls under this bracket.
Lease, easement, tenancy, license to occupy land Service A transaction involving leasing land out to a construction company is considered to be covered under this kind of service.
Lease, letting outbuilding for business or commerce purposes either in whole or in part (including commercial, residential, industrial complex) Service Mr. Bob lets out a portion of a residential building to be used by XYZ Cement as part of their commercial operations and this transaction was treated as the supply of a service falling under this category.
Treatment or process being applied to another person’s goods – job work Service JB Furniture supplies furniture as its primary business, however, it also undertakes maintenance, repair, polishing and refurbishing of the furniture. All these services when availed are treated as a transaction under this category.
Disposing business assets or permanently transferring business assets with or without a consideration Good JB Furniture decided to dispose of its office computers to its employees at no consideration and this transaction was treated as a supply under this category.
Business assets when put to private use or any other use other than for business purposes, with or without a consideration Service When a vehicle meant for a commercial purpose is used for private use, it is treated as a supply of service under this category.
Renting immovable property Service JB Furniture renting some premises to Mr Bob is treated as a transaction under this category.
Any kind of development, design, programme, customisation, adaptation, up-grade, enhancement, implementation pertaining to information technology software Service Techno Kart Limited developed a human resource software for JB Furniture and this transaction was treated as a supply of services under this category.
Any kind of a works contract which may include a transfer of property in goods (either as goods or in any other form) involved in the execution of a works contract of immovable property Service When labour and raw materials are used to construct a residential complex, the transaction is treated as a supply of service falling under this category.

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