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CA Final · Indirect Tax Laws · Supply under GST

Himalaya Traders Cooperative Society, a registered body, supplies stationery to its member, Mr. Rakesh, for a cash price of Rs 5,000. The society argues that because it and its members are one legal entity, there is no 'supply'. Under Section 7 of the CGST Act, 2017, how is this transaction treated?

The transaction is a supply. Section 7(1)(aa) covers transactions by a person other than an individual to its members for consideration, and the Explanation deems the society and its member to be separate persons, overriding any argument based on a single legal entity or on any other law or judgment.

  1. AIt is not a supply, because a person cannot supply to itself
  2. BIt is a supply, because the society and its member are deemed to be two separate personsCorrect
  3. CIt is a supply only if Mr. Rakesh is also engaged in business
  4. DIt is a supply only if the society is making a profit on the transaction

Explanation

Section 7(1)(aa) covers activities or transactions by a person, other than an individual, to its members or constituents for cash, deferred payment or other valuable consideration. The Explanation deems the person and its members to be two separate persons, notwithstanding any other law or court judgment. The society's single-entity argument therefore fails.

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