Supply as per GST(Transfer)

Under the Goods and Services Tax (GST) regime in India, the term “Supply” holds paramount importance. GST is a supply-based tax, meaning it is levied on the supply of goods or services or both. As per Section 7 of the CGST Act, 2017, “supply” includes all forms of supply such as sale, transfer, barter, exchange, license, rental, lease, or disposal made for a consideration in the course or furtherance of business.

Among these, “Transfer” is one of the recognized forms of supply, and it has specific implications under GST.

✅ Meaning of Transfer under GST

Transfer under GST refers to a situation where ownership or possession of goods is passed from one person to another with or without consideration. It may be permanent or temporary, and in the context of GST, it is relevant when done in the course or furtherance of business.

The GST law identifies “transfer” as one of the actionable events on which GST is applicable, provided other conditions of “supply” are fulfilled.

✅ Types of Transfers Considered as Supply under GST

Here are some common types of transfers that are treated as supply under GST:

1. Transfer of Title in Goods (With Consideration)

When ownership in goods is transferred for a price or consideration, such a transaction is a taxable supply.

Example: A manufacturer selling machinery to a dealer.

2. Transfer of Right in Goods Without Transfer of Title

Sometimes, the right to use goods is transferred without transferring ownership. This is also treated as supply.

Example: Leasing of equipment where the ownership stays with the lessor.

3. Transfer Without Consideration (Deemed Supply)

Schedule I of the CGST Act lists situations where transfer without consideration is also treated as supply. These include:

• Permanent transfer/disposal of business assets where ITC has been claimed.

• Supply between related persons or between distinct persons (e.g., branches of the same company in different states), even without consideration.

Example: Head office sending goods to a branch in another state.

4. Transfer of Business Assets

When a business transfers assets permanently or temporarily (e.g., donating old computers to a school), and ITC was availed on those assets, such transfers are treated as supply and attract GST.

✅ Taxability of Transfer under GST

The following conditions must be satisfied for a transfer to be taxable under GST:

1. There must be a supply of goods/services or both.

2. The transfer must be in the course or furtherance of business.

3. It must be made by a taxable person.

4. It must occur for consideration (except in Schedule I cases).

✅ Transfer Between Branches or Units (Distinct Persons)

As per Section 25(4) of the CGST Act, establishments of the same entity in different states are treated as distinct persons. Hence, transfers of goods or services between them are considered supply even without consideration, and GST is applicable.

Example:

A company has a factory in Maharashtra and a depot in Delhi. The transfer of stock from the factory to the depot is treated as interstate supply and is liable to IGST, even though the transfer is internal and without consideration.

✅ Exceptions – Not Treated as Supply

Not all transfers are treated as supply. Certain transfers not in the course of business or without intention of commercial gain are not covered under GST. For example:

• Gifts below ₹50,000 in a financial year to an employee.

• Transfers of personal assets not related to business.

✅ Input Tax Credit (ITC) on Transfers

When a taxable person transfers goods/services as part of a supply (including inter-branch transfers), they can claim ITC on the tax paid, subject to eligibility. However, if assets are disposed of without consideration and ITC has been claimed earlier, GST is payable on such transfer.

✅ Documentation for Transfers

For tax compliance and audit purposes, the following documents must be maintained:

• Tax invoice or delivery challan for branch transfers.

• Accounting entries reflecting the transfer.

• E-way bill for goods movement, where applicable.