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CMA Intermediate · Direct and Indirect Taxation · Concept of Supply including Composite and Mixed Supplies

A Pune trader, Mehta Traders, gives a consignment of goods free of cost to a friend, with no consideration. Which analysis follows from Section 7(1)(a) and (c) of the CGST Act, 2017, taken alone?

A free transfer is not a supply under clause (a) because that clause requires consideration. It is a supply only if the activity is specified in Schedule I under Section 7(1)(c). Clauses (b) and (aa) deal with imports and members, so they do not apply.

  1. AIt is a supply under clause (a) because goods were transferred in the course of business
  2. BIt is not a supply under clause (a) as there is no consideration, and it is a supply only if it is an activity specified in Schedule ICorrect
  3. CIt is a supply under clause (b) as an import of services
  4. DIt is always a supply under clause (aa) because it is made to a person

Explanation

Clause (a) needs consideration, so a free gift fails it. Clause (c) brings in only activities specified in Schedule I made without consideration. Hence the transfer is a supply only if it falls in Schedule I. Clauses (b) and (aa) deal with imports and members, so they do not apply.

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