Supply without consideration under GST

 Goods & Services Tax (GST) in India has brought about significant changes in country's taxation landscape. One such change pertains to concept of 'Supply without consideration'. As per Schedule 1 of GST Act, certain transactions between related persons, even without consideration, are treated as supply under GST. These transactions are subject to usual GST provisions. supply is generally between related persons in GST, which could be between principal & agent or vice versa. These transactions are treated as supply, & taxpayer is required to pay tax on them. However, they can claim input tax credit depending on criteria under supply with consideration under GST. Free samples distributed by company are considered "supply without consideration" under GST. GST applies to value of supply to related person even if price is discounted. Types of supply under GST include selling furniture, offering consulting services, & renting office space.

Transfer or Disposal of Business Asset where ITC was Availed

When business asset on which Input Tax Credit (ITC) has been availed is transferred or disposed of, it is considered supply under GST. This is because asset, for which business has already claimed tax benefit, is moving out of business. Therefore, GST is applicable on such transactions. value of supply will be transaction value or residual value of asset, whichever is higher. It's important to note that this rule applies even if asset is transferred without consideration. "Supply without consideration under GST" is concept that delineates transactions without any monetary exchange, such as gifts or transfers, which are subject to specific tax regulations. Understanding implications of "supply without consideration under GST in India" is crucial for compliance & valuation purposes.

Transactions between related persons & distinct person

Transactions between related persons or distinct persons hold significant importance under GST. prices of goods or services in these transactions can be unfair when compared with transactions between unrelated parties. As per GST, all transactions are not deemed as supply without consideration between related parties until it is for furtherance of business. term "related persons" includes persons who are directors or officers of same business, legally recognized business partners, employer & employee, persons who own, control, or hold 25% share or voting power of both of them, either directly or indirectly, & members of same family. Transactions between distinct persons are treated similarly. As per Schedule 1, transfer of goods or services or both between distinct persons without consideration is treated as supply.

Transactions between related persons

Transactions between connected persons are essential because prices of products or services, or both, might be unjust when compared to transactions between unrelated people. According to GST, all transactions between related parties are not considered to be supply without consideration in terms of tax unless they are for purpose of furthering business.

According to explanation for Section 15 of CGST Act, following list comprises of people who are regarded to be related persons under GST:

1-When directors or officers of one business/businesses are also directors or officers of another business/business.
2-Any individuals officially recognized as business partners.
3-When such individual has employer & employee relationship.
4-Any individual who owns, controls, or has 25% stake or voting power in both of them, directly or indirectly. (for example, receiver controls 25% of shares in supplier's firm.)
5-When one individual has direct or indirect control over affairs of firm.
6-If third party has direct or indirect influence over both parties participating in transaction.
7-If both parties engaged in transaction control third party, either directly or indirectly.
 

Transactions between distinct persons

Transactions between unique individuals are equally important, & costs of products or services, or both, might be unjust when contrasted to transactions between unrelated people. According to GST, all transactions between separate individuals are not considered supply without consideration unless they are for purpose of furthering business. According to Supply Without Consideration Schedule 1, transfer of commodities or services, or both, between different people as described in Section 25 without consideration is considered as supply.

Specified Imports

Specified imports by taxable person from related person or from any of his other establishments outside India, whether or not in course or furtherance of business, are treated as supply. supply of such goods or services or both is taxable under GST. This provision ensures that goods or services imported into Indi are taxed, thereby maintaining level playing field with domestic supplies.

Supply by/to Agent

Supply of goods by principal to his agent or by agent to his principal, where agent undertakes to supply such goods on behalf of principal, is considered supply. This is true even if transactions are made without consideration. agent & principal relationship under GST is unique, & tax implications are based on whether agent is deemed to receive goods on behalf of principal. agent can avail ITC on tax paid by principal if agent is registered under GST.

Concept of "Supply Without Consideration" under GST encompasses various scenarios where goods or services are transferred without monetary exchange. It includes transactions between related persons, specified imports, supply by/to agents, & transfers of business assets. Valuing such supplies requires consideration of open market value or similar goods/services in certain cases.

1. Which transaction is not considered as supply under GST?  
Under GST, certain transactions are not deemed as supply, such as those without consideration, gifts up to INR 50,000 between employer & employee, & transfers of business assets where input tax credit (ITC) was previously claimed.

2. Is supply without consideration taxable?  
Yes, supply without consideration is taxable under GST in specific scenarios, including transactions between related persons, specified imports, supply by/to agents, & transfers of business assets where ITC was claimed.

3. What is consideration & without consideration?  
   Consideration refers to payment made in exchange for goods or services, while without consideration denotes transactions where no payment is involved, such as gifts, transfers between related persons, or transfers of business assets where ITC was claimed.