Supply without Consideration under GST

Most transaction of the supplies is done with consideration, i.e., transfer of goods or service in exchange for money. In such cases, the GST liability would be calculated based on the consideration. In some cases, however, supplies may be provided to another party without receiving any consideration. In this article, we look at the treatment of such supply without consideration under the GST Act.

Supply without Consideration

The following types of supply without consideration is taxable under GST. Hence, while undertaking any of the following types of a business transaction, it is important to consider the GST impact and ensure that the GST liability is satisfied.

Transfer or Disposal of a Business Asset where ITC was Availed

Assets both current or capital in nature may transfer at sometimes by an enterprise without any consideration by gifting, impairment, write-off etc. If the individual avail input tax credit for these transferred assets, the assets becomes "supply without consideration" under GST. Moreover, when certain goods maintained by the office and given for a private purpose for a stipulated period of time, it shall apply as supply, whether considered or not GST shall apply.

time supply gst to read on Time of Supply for GST

Supply of Goods or Services between Related Persons

A few, but not all transactions between related persons, with respect to the furtherance of business, shall apply as "Supply without consideration."

Any of the following persons can be termed related persons, making GST applicable:

Persons who are officers or directors of one other's business/businesses
Legally recognized business partners
Employer and employee relationship
Holds more than 25% of shares or voting power in each of their businesses
When one person controls, at-least in some manner, the affairs of the other enterprise
When two people controlled by a third person, or vice versa
Members of the same family
Persons related by any means to other business

Conditions Apply: Gifts from an employer to an employee will not be brought under "Supply", or for that matter under "GST" if the value of the gift is below 50,000. On the other hand, in case of a person having his operating office in multiple states, the supply of these services shall apply in the same manner as supply to another person, hence a new provision to the terminology of distinct persons.

Agent

An agent must be registered under GST, irrespective of the threshold limit. It can be a called a "Supply without consideration" if it meets the criteria given below:

Supply of goods by a principal to an agent, where the agent agrees to supply such goods on behalf of the principal.
Supply of goods by an agent to a principal, where the agent agrees to receive such goods on behalf of the principal.

Specified Imports

Any imports carried out by a registered person, who receives the same from a related person, or from any of his establishments abroad, will be charged on a

reverse charge basis, and these transactions are regarded as "supplies without consideration". gst registration for GST Registration or GST Return Filing

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Frequently Asked Questions

Common questions about Supply without Consideration under GST.

A "supply without consideration" under GST refers to transactions where goods or services are provided without receiving any payment or monetary consideration in return. Some examples include transfer or disposal of business assets for which input tax credit was availed, supply of goods or services between related persons for furtherance of business, and imports from related parties or overseas units.

The transfer or disposal of a business asset, whether current or capital in nature, attracts GST liability if input tax credit was availed on the asset earlier. Even if the asset is transferred without consideration, such as through gifting, impairment, or write-off, GST is applicable on its value.

Gifts from an employer to an employee will not be considered a "supply" and will not attract GST if the value of the gift is below Rs. 50,000. However, if the value exceeds this limit, GST will be applicable on the gift's value.

Yes, agents must be registered under GST, irrespective of the threshold limit for registration. Supplies made by a principal to an agent, or by an agent to a principal, where the agent agrees to supply or receive goods on behalf of the principal, are considered "supply without consideration" and attract GST liability.

Any imports carried out by a registered person, where the goods are received from a related person or from any of the registered person's establishments abroad, are considered "supply without consideration" and are subject to GST under the reverse charge mechanism.

"Supply without consideration" is an important concept under GST because it brings certain transactions, which were earlier not taxed, under the GST net. This ensures that GST is applicable on the value of goods or services, even when no direct consideration is involved, thereby preventing potential revenue leakages.

The GST law may provide certain exceptions or exemptions for specific types of "supply without consideration," such as gifts below a certain value limit or transactions between specific categories of related persons. However, in general, any transfer of goods or services without consideration may attract GST liability.

The value for "supply without consideration" under GST is generally determined based on the open market value of the goods or services being supplied. In cases where the open market value cannot be determined, other valuation methods specified in the GST law may be used.

Yes, it is necessary to maintain proper records and documentation for all "supply without consideration" transactions under GST. This includes details of the parties involved, the nature of the transaction, the value of the goods or services, and the GST liability incurred or discharged.