UNIT-II NOTES

24BPA6C10 Core XVII Goods and Services Tax

Uni
Course contents
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GST and supply of goods and services Supply - Characteristic of Supply -
Schedule I under CGST - Schedule II under CGST- Activities which are not Supply
II - Composite and Mixed Supply - Composition levy – Meaning - Condition &
Restriction - Time of Supply of Goods - Time of Supply of Services - Time of
Supply in case of change in rate of tax - Value of Supply.

TOPICS
NO. TOPICS
1 GST and supply of goods and services
2 Supply - Characteristic of Supply
3 Schedule I under CGST- Schedule II under CGST
4 Activities which are not Supply
5 Composite Supply
6 Mixed Supply
7 Composition levy – Meaning
8 Condition & Restriction
9 Time of Supply of Goods
10 Time of Supply of Services
11 Time of Supply in case of change in rate of tax
12 Value of Supply

1. Meaning of Supply (Sec. 7 of CGST Act)

Supply includes:

 All forms of supply made for a consideration in the course or furtherance of business:
o Sale
o Transfer
o Barter
o Exchange
o License
o Rental
o Lease
o Disposal
 Import of services for consideration whether or not in the course of business.
 Certain activities specified in Schedule I even without consideration.

B. Com (Professional Accounting)

Characteristics of Supply

1. Involves goods or services

2. For a consideration (except Schedule I)
3. By a taxable person
4. In the course or furtherance of business
5. Taxable event under GST

2. Schedule I – Activities treated as Supply even without Consideration

1. Permanent transfer/disposal of business assets on which ITC was taken.

2. Supply between related persons or distinct persons, when made in course of business.
3. Supply of goods by principal to agent or agent to principal.
4. Import of services from related party or establishment outside India for business.

3. Schedule II – Classification of Activities as Supply of Goods or Services

A. Treated as Supply of Goods

 Transfer of title in goods

 Transfer of goods on hire purchase / instalments
 Transfer of business assets
 Renting/leasing goods without transferring right to use? (With transfer of right = service)

B. Treated as Supply of Services

 Renting of immovable property

 Construction services where consideration received before completion
 Temporary transfer of IPR
 Works contract
 Restaurant and catering services
 Agreeing to refrain from an act / tolerate an act
 Transfer of right to use goods without transfer of title

4. Activities Which Are NOT Supply (Sec. 7(2))

A. As per Schedule III

1. Services by employee to employer

2. Court / tribunal services
3. Duties performed by MPs/MLAs
4. Services of funeral, burial, crematorium
5. Sale of land
6. Sale of building after completion certificate
7. Actionable claims (except lottery, betting, gambling)

B. Com (Professional Accounting)

B. Activities of Government which are notified

5. Composite and Mixed Supply

A. Composite Supply (Sec. 2(30))

 Two or more goods/services supplied together,

 Naturally bundled,
 One is principal supply.

Tax Rate: GST rate of the principal supply applies.

Example:

 Air travel + in-flight meals → principal supply = transport → GST on transport.

B. Mixed Supply (Sec. 2(74))

 Combination of goods/services supplied together for a single price,

 Not naturally bundled.

Tax Rate: Highest GST rate among the items applies.

Example:

 Diwali gift box (chocolates + perfume + juice) sold for one price → highest rate applies.

6. Composition Levy (Sec. 10)

Meaning

A simplified scheme for small taxpayers to pay GST at a lower fixed rate and avoid detailed
records.

Conditions

 Turnover limit:
o Goods traders/manufacturers: up to ₹1.5 crore
o Service providers (or mixed): up to ₹50 lakh (under 10(2A))
 Should not be:
o Engaged in inter-state outward supply
o Supplying through e-commerce operator
o Manufacturer of ice-cream, pan masala, tobacco
o Supplier of non-taxable goods (like alcohol)

B. Com (Professional Accounting)

Restrictions

 Cannot collect GST from customers

 Cannot claim Input Tax Credit (ITC)
 Must mention “Composition taxable person” on invoice
 Must pay tax on reverse charge where applicable

7. Time of Supply of Goods (Sec. 12)

Time of supply = earlier of:

1. Date of invoice
2. Date of receipt of payment
3. Date goods are delivered, if invoice not issued within time

For RCM cases → date of payment or 30 days from supplier invoice.

8. Time of Supply of Services (Sec. 13)

Time of supply = earlier of:

1. Date of invoice, if issued within 30 days

2. Date of provision of service, if invoice not issued
3. Date of payment received

Under RCM → payment date or 60 days from invoice.

9. Time of Supply in Case of Change in Rate of Tax (Sec. 14)

Three events:

1. Date of supply of goods/services

2. Date of invoice
3. Date of payment

Rules:

If supply is before rate change

→ old rate applies if invoice/payment also before

→ new rate applies if invoice/payment after

B. Com (Professional Accounting)

If supply is after rate change

→ new rate applies if invoice/payment after

→ old rate applies if invoice/payment before

10. Value of Supply (Sec. 15)

Value of supply = transaction value, i.e., price actually paid or payable, when parties are
unrelated and price is sole consideration.

Includes

 Taxes other than GST

 Expenses charged by supplier
 Incidental expenses
 Interest/late fees/penalty
 Subsidies (except Govt. subsidies)

Excludes

 Discounts given before or at time of supply

 Post-supply discounts (if pre-agreed and ITC reversed by recipient)

GST – MCQs Based on Bloom’s Taxonomy

1. Supply – Characteristics
1. “Supply” under GST includes:

A. Sale only
B. Barter only
C. Lease only
D. All forms of supply for a consideration in the course or furtherance of business

Answer: D
Supply is a wide term covering sale, transfer, barter, exchange, license, rental, lease, or
disposal.

2. Which of the following is NOT a characteristic of supply?

A. Must be for a consideration

B. Must be in the course or furtherance of business
C. Must involve goods only
D. Must be taxable supply

B. Com (Professional Accounting)

Answer: C
Supply can be of goods or services.

2. Schedule I – Activities Treated as Supply Even Without Consideration

3. Which of the following is covered under Schedule I?

A. Sale of goods to customer

B. Services to employees for free (permanent employees)
C. Permanent transfer of business assets
D. Export of goods

Answer: C
Permanent transfer of business assets is supply even without consideration.

4. Supply between related persons without consideration is:

A. Not a supply
B. Supply only if value exceeds ₹50,000
C. Supply under Schedule I
D. Exempt supply

Answer: C

3. Schedule II – Classification of Supply

5. Schedule II deals with:

A. Exempt supplies
B. Activities treated as supply of goods or services
C. Non-taxable supplies
D. Reverse charge services

Answer: B

6. Transfer of right to use goods without transfer of title is treated as:

A. Supply of goods
B. Supply of services
C. Either goods or services
D. Not a supply

Answer: B

B. Com (Professional Accounting)

4. Activities Which Are NOT Supply
7. Which of the following is NOT considered supply under GST?

A. Sale of goods
B. Services by employee to employer in course of employment
C. Import of services with consideration
D. Renting of immovable property

Answer: B

5. Composite & Mixed Supply

8. Composite supply means:

A. Two or more supplies, naturally bundled

B. Two or more independent supplies
C. Supplies taxed separately
D. None

Answer: A

9. In a composite supply, tax rate is based on:

A. Lowest-taxed item
B. Highest-taxed item
C. Principal supply
D. Average tax rate

Answer: C

10. Mixed supply means:

A. Naturally bundled
B. Artificially bundled
C. Composite supply of goods
D. Not applicable under GST

Answer: B

11. Mixed supply is taxed at:

A. Lowest rate
B. Highest rate applicable among items
C. Average of rates
D. Zero rate

B. Com (Professional Accounting)

Answer: B

6. Composition Levy
12. Composition scheme is available for:

A. Service providers only

B. Manufacturers and traders
C. Interstate suppliers
D. E-commerce operators

Answer: B

13. Maximum turnover limit for Composition scheme (as per current law):

A. ₹20 lakh
B. ₹40 lakh
C. ₹1.5 crore
D. Unlimited

Answer: C

14. Composition scheme taxpayer:

A. Can issue tax invoice

B. Cannot collect tax from customers
C. Can avail ITC
D. Must pay GST monthly

Answer: B

7. Time of Supply of Goods

15. Time of supply of goods is earliest of:

A. Date of invoice
B. Date of payment
C. Date of delivery
D. Earliest of (A) or (B)

Answer: D

B. Com (Professional Accounting)

8. Time of Supply of Services
16. Time of supply of services is earliest of:

A. Invoice date
B. Payment date
C. Completion of service
D. Earlier of invoice or payment

Answer: D

9. Time of Supply – Change in Rate of Tax

17. If goods are supplied before rate change but invoice is raised after rate change, time of
supply will be:

A. Invoice date
B. Supply date
C. Payment date
D. Latest of all

Answer: B
Supply before rate change → old rate applies.

10. Value of Supply

18. Value of supply generally is:

A. MRP
B. Cost + 10%
C. Transaction value
D. Market value

Answer: C

19. Transaction value includes:

A. Discounts allowed post-supply without conditions

B. Subsidies from Central/State Government
C. Taxes other than GST
D. Interest or late fee

Answer: D

B. Com (Professional Accounting)

20. When consideration is not wholly in money, value is:

A. Zero
B. Market value
C. Cost of production
D. 110% of cost

Answer: B

GST – BLOOM’S TAXONOMY QUESTION BANK

I. Remembering (Level 1)

1. Define Supply as per Section 7 of the CGST Act.

2. What is meant by Composite Supply under GST?
3. State any two items covered under Schedule I of the CGST Act.
4. What is Composition Levy?
5. Define Time of Supply of Goods.
6. Mention any two activities that are not considered Supply under GST.
7. What is Value of Supply?

II. Understanding (Level 2)

1. Explain the characteristics of Supply under GST.

2. Distinguish between Composite Supply and Mixed Supply.
3. Describe the activities treated as supply even without consideration (Schedule I).
4. Explain the Classification of Supply under Schedule II.
5. Discuss the time of supply of services with an example.
6. Explain the concept of change in rate of tax and its effect on time of supply.
7. Describe how transaction value is determined under Value of Supply.

III. Applying (Level 3)

1. Determine the time of supply of goods when invoice and payment dates differ.
2. Apply the rules of Composite Supply to identify the principal supply in:
o Supply of a machine along with installation.
3. Classify the following as supply of goods or services (Schedule II rules):
o Renting of immovable property
o Works contract
4. Calculate Value of Supply when:
o Price = ₹10,000
o Discount = ₹1,000 (recorded in invoice)
o Tax = 18%
5. Apply Composition Levy rules and decide if a trader with ₹1.8 crore turnover is eligible.

B. Com (Professional Accounting)

IV. Analyzing (Level 4)

1. Analyze the differences between Schedule I and activities that are not supply.
2. Compare and contrast GST liability under the regular scheme vs Composition Scheme.
3. Examine how change in tax rate impacts businesses during supply transitions.
4. Analyze which type of supply (composite/mixed) applies to:
o A Diwali gift hamper containing chocolates, sweets, and dry fruits for one price.
5. Evaluate the significance of consideration in determining what constitutes supply.

V. Evaluating (Level 5)

1. Evaluate whether the Composition Scheme is beneficial for small businesses.

2. Critically assess the relevance of Schedule II in determining supply classification.
3. Judge whether free samples supplied by a company should be taxable under GST.
4. Evaluate the adequacy of the Time of Supply provisions in preventing tax evasion.
5. Do you think the Value of Supply provisions ensure transparency in pricing? Justify.

VI. Creating (Level 6)

1. Design a GST compliance plan for a small trader opting for the Composition Levy.
2. Construct case scenarios demonstrating composite supply and mixed supply.
3. Develop an example illustrating change in rate of tax and compute time of supply.
4. Prepare a flowchart showing the process of determining value of supply.
5. Create a real-life business situation involving Schedule I supply and justify taxation.

B. Com (Professional Accounting)