SALE AND TRANSFER – SUPPLY IN GST


Supply is a taxable event in GST. An inclusive definition of Supply has been provided in Section 3 of Revised Model law of GST. ‘Supply’ has been defined to include all forms of supply of goods and services such as Sale, Transfer, Barter, Exchange, License, Rental, Lease or Disposal made or agreed to be made. The interesting part is that none of these words have been defined in the Model law. The law relating to time of supply as contained in Section 12 and 13 of Model law has been made in reference to invoicing and payment of consideration. The law relating to invoicing as contained in Section 28 of Model law has been made in reference to removal of goods or provision of services. Interestingly, the word ‘Removal’ has been defined in Section 2(85) of Model law. Would it have not served the purpose, had the words Sale and Removal only mentioned as forms of supply? In this article an effort has been made to analyse the use of these terms and its rational.   

Before we analyse the rationale of these terms, let us first consider the legal provisions in this regard in Revised model law of GST.

Section 2(85) “removal’’, in relation to goods, means –

(a) despatch of the goods for delivery by the supplier thereof or by any other person acting on behalf of such supplier, or
(b) collection of the goods by the recipient thereof or by any other person acting on behalf of such recipient;

Section 3(1) 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,

Section 12. Time of supply of goods

(1) The liability to pay CGST / SGST on the goods shall arise at the time of supply as determined in terms of the provisions of this section.
(2) The time of supply of goods shall be the earlier of the following dates, namely,-
(a) the date of issue of invoice by the supplier or the last date on which he is required, under section 28, to issue the invoice with respect to the supply; or
(b) the date on which the supplier receives the payment with respect to the supply:

Section 13. Time of supply of services

(1) The liability to pay CGST/SGST on services shall arise at the time of supply, as determined in terms of the provisions of this section.
(2) The time of supply of services shall be the earlier of the following dates, namely:-
(a) the date of issue of invoice by the supplier or the last date on which he is required, under section 28, to issue the invoice with respect to the supply; or
(b) the date on which the supplier receives the payment with respect to the supply:

Section 28. Tax invoice

(1) A registered taxable person supplying taxable goods shall, before or at the time of,-
(a) removal of goods for supply to the recipient, where the supply involves movement of goods, or
(b) delivery of goods or making available thereof to the recipient, in any other case,

(2) A registered taxable person supplying taxable services shall, before or after the
provision of service but within a period prescribed in this behalf, issue a tax invoice, showing the description, value, the tax payable thereon and such other particulars as may be prescribed:

SALE AND REMOVAL

Sale means transfer of property in goods by one person to another for a consideration. The word Removal has been defined in Section 2(85) of the revised model law. Till today the word Sale has been understood only in the context of goods. But in the context of Services, it would mean provision of services. The transaction of sale of goods may or may not involve removal. Example : The moulds manufactured by a manufacturer A are sold to another person B. The sale invoice of such moulds is made by A in the name of B. B desires A to keep such moulds with him for manufacture of components to be supplied to B. In this case though moulds have been sold by A to B but there is no removal of such moulds.

Similarly Removal of goods may or may not involve Sale of such goods. Goods may be removed for other purposes such as sending these for repairs, job work, approval etc. Tax invoice needs to be raised in case of removal of goods for Supply only.

SUPPLY WITHOUT SALE OR REMOVAL

On the basis of above understanding of meaning of the words Sale and Removal. Let us now consider the other words provided in the definition of Supply in Section 3 to analyse whether those transactions are possible without Sale or Removal.

  1. TRANSFER – The word transfer has been defined in various dictionaries to mean Movement of something or someone from one place to another. The word transfer has also been used as transfer of property in goods. Thus, any transfer can not be visualized without the involvement of Sale or Removal.
  2. BARTER OR EXCHANGE – Similarly the transaction of barter or exchange also can not be visualized without the involvement of Sale or Removal.
  3. LICENSE, RENTAL, LEASE OR DISPOSAL – On the similar lines, the transaction of license, Rental, lease or disposal of goods can not be completed without sale or removal. However the transaction of renting of immovable property could be termed as arrangement of renting or leasing. The transactions of intangibles could involve the arrangement of licensing without there being an element of Sale or Removal.

Thus use of word ‘ Removal’ in Section 3 instead of word ‘ transfer’ would have been more logical and comprehensive.