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Consideration for Supply - GST Ready Reckoner - GSTExtract Consideration for Supply Consideration in relation to Supply of Goods Services Consideration has specifically been defined in relation to the supply of goods or services or both in the section. 2(31) CGST Act, 2017. (a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, (b) the monetary value of any act or forbearance, in respect of, in response to, or for the inducement of, Exception of Consideration 1. Any subsidy given by the Central Government or a State Government is not considered as consideration . It is immaterial whether the payment is made by the recipient or by any other person. If subsidy directly link with supply, from by a person other than govt. shall be include in consideration. Subsidy which is not directly link with supply which not include in transaction value of supply. 2. A deposit given in respect of the supply of goods or services or both shall not be considered as payment made for such supply unless the supplier applies such deposit as consideration for the said supply. The GST payable by you on a *taxable supply for which the *consideration is a deposit that was held as security for the performance of an obligation is attributable to the tax period during which the deposit: (a) is forfeited because of a failure to perform the obligation; or (b) is applied as all or part of the consideration for a supply. 3. Donation [ Circular No. 116/5/2019-GST Dated 11.10.2019 ] In case of donation GST is not leviable, where all the three conditions are satisfied namely 1. the gift or donation is made to a charitable organization, 2. the payment has the character of gift or donation and 3. the purpose is philanthropic (i.e. it leads to no commercial gain) and not advertisement. Some examples of cases where there would be no taxable supply are as follows:- (a) Good wishes from Mr. Rajesh printed underneath a digital blackboard donated by Mr. Rajesh to a charitable Yoga institution. (b) Donated by Smt. Malati Devi in the memory of her father written on the door or floor of a room or any part of a temple complex which was constructed from such donation. 4. Clarification on issues regarding treatment of supply by an artist in various States and supply of goods by artists from galleries [ Circular No. 22/22/2017-GST Dated 21 st December, 2017 ] the art work for supply on approval basis can be moved from the place of business of the registered person (artist) to another place within the same State or to a place outside the State on a delivery challan along with the e-way bill wherever applicable and the invoice may be issued at the time of actual supply of art work. It is further clarified that in case of supply by artists through galleries, there is no consideration flowing from the gallery to the artist when the art works are sent to the gallery for exhibition and therefore, the same is not a supply. It is only when the buyer selects a particular art work displayed at the gallery, that the actual supply takes place and applicable GST would be payable at the time of such supply. Meaning of Consideration- sec. 2(d) of Indian Contract Act 1872 When, at the desire of the promisor, the promise or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consideration for the promise Type of Consideration Consideration can be in monetary form or non-monetary form or both. (a) Monetary consideration includes payment by cash, cheque or credit card, bank transfer and deduction from bank account. (b) Non-monetary consideration essentially means compensation in kind such as the following: Supply of goods and services Refraining or forbearing to do an act Tolerating an act or a situation Doing or agreeing to do an act If consideration for supply not in the money (as in the barter Transaction) or in the consideration is partly in money and partly something else (as in the Exchange offer), the value of supply is the monetary equivalent of the consideration. Explanation Term monetary value of any act aims to cover provision of services in satisfaction of payment obligation for supply of goods and vice-versa. Term Forbearance is agreeing for not doing something. it is a non-compete agreements. However, there are exceptions to the requirement of Consideration as a pre-condition for a supply to be called a supply as per GST. As per schedule I to CGST Act, 2017, activities as mentioned therein shall be treated as supply even if made without consideration. Example: - 1. The best example of consideration not entirely in the form of money is seen in the exchange offer in the retail trade of consumer durable: - when we go to buy a new mobile phone, we are offered two bargains. Firstly , we can pay money and take mobile phone home. Secondly , we may exchange our old mobile phone and pay lesser money to the extent of value determined for old mobile phone. Here money equivalent value of old mobile phone agreed between supplier and recipient will also be a part of consideration of new mobile phone on which GST will be charged by Supplier. 2. An artist performing on a street does an activity without consideration even though passersby may drop some coins in his bowl kept after feeling either rejoiced or merely out of compassion. They are, however, under no obligation to pay any amount for listening to him nor have they engaged him for his services. On the other hand, if the same person is called to perform on payment of an amount of money, then the performance becomes an activity for a consideration 3. Similarly, the developer or the builder, who is constructing apartments in exchange of land from the landowner, would be subject to the levy of tax under the GST law. given the fact that supply includes barter. 4. If a grant is given to a researcher and in return, the grantor receives research finding exclusively for his own benefit, then the person receiving the grant must account for GST on the research services on a tax inclusive basis.
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