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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.

Click here 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”.

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