ANALYSIS OF SCHEDULE I MENTIONING SUPPLY WITHOUT CONSIDERATION LEVIABLE TO GST

GST Update 07.09.2016

GST DAILY DOSE OF UPDATION:-

ANALYSIS OF SCHEDULE I MENTIONING SUPPLY WITHOUT CONSIDERATION LEVIABLE TO GST:-The term supply is of immense importance in the GST regime. The definition of supply given in section 2(92) states that supply shall have meaning assigned to it under section 3. The meaning of supply under section 3 is very wide and inclusive. Not only this, supply also includes supply specified in Schedule-I without consideration. If we observe Schedule-I, the following matters are treated as supply without consideration:-

1.     Permanent transfer/disposal of business assets.

2.     Temporary application of business assets to private or non-business use.

3.     Services put to private or non-business use.

4.     Assets retained after deregistration.

5.     Supply of goods and/or services by a taxable person to another taxable or non-taxable person in the course or furtherance of business.

The impact of above Schedule-I is that the specified activities, even without consideration will be leviable to GST. It is pertinent to note that use of business assets for private purpose without consideration is also covered thereby meaning that GST will be leviable even if assets, say for example motor car is used for personal purpose. Moreover, even if one person supplies goods/services to another in course of business without consideration, then too, GST will be leviable. Hence, the scope of Schedule-I is far reaching.

Furthermore, if the provisions of Input Tax Credit contained in section 16 of Chapter-V are pursued, it will be observed that the credit is restricted only to inputs/input services attributable for business use. The sub-section (5) and (6) of section 16 of Model GST Law clearly state that where goods /services are used by registered taxable person partly for the purpose of business use and partly for other purposes, credit shall be restricted to input tax attributable to business use.

On harmoniously analyzing the above provisions, it is found that on one hand, use of business assets for private use/non-business use without consideration is specified in Schedule-I as treated as supply and leviable to GST while on the other hand, the input tax credit is available only to the extent of goods/services used for business use thereby meaning double loss and cascading effect. When use of business assets for other purpose is leviable to GST, then there should be no restriction as regards availment of input tax credit. This dual policy clearly reflects the departure of the GST regime from seamless flow of credit and removal of cascading effect of taxes.

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GST Update 07.09.2016

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