Page 9 - Ch2_Supply

treated as supply even if made without consideration which are given under Schedule I as follows:-

Para Activity/ Transactions
1 Permanent transfer or disposal of business assets where input tax credit has been availed on such
assets

2 Supply of goods &/or services between:-
Ü related persons or

Ü distinct persons as specified in section 25,
when made in the course or furtherance of business.
However, gifts not exceeding Rs. 50000 in value in a financial year by an employer to an employee
shall not be treated as supply of goods &/or services

3 Supply of goods:-
a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the
principal or
b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the

principal
However, this para 3 is applicable only when agent issues invoice to customer in his own name.

4 Import of services by a person:-
Ü from a related person or
Ü from any of his other establishments outside India,
in the course or furtherance of business

CCP 02.05.09.00

Whether the following transactions are treated as supply?
(a) A retailer of clothes gives clothes from his business stock (on which ITC is taken) to his friend free
of cost permanently.
(b) A dealer of air conditioners (on which ITC is not taken) permanently transfers an air conditioner

from his stock in trade, for personal use at his residence.
Answer:-
Legal Provision:-
Ü As per Section 7(1)(c) read with para 1 of schedule I of CGST Act, permanent transfer or disposal of
business assets where ITC has been availed on such assets shall be treated as supply under GST even when

there is no consideration is involved.
Ü So, if no ITC is availed on such business asset, then it will not be treated as supply under this para.
Discussion and Conclusion:-
(a) Business assets also includes stock in trade. Hence, in this case, permanent transfer of business stock

free of cost shall be treated as supply under para 1 of schedule I as the retailer claimed input tax credit on
his purchase of that business stock.
(b) The transaction will not constitute a supply even though there is permanent transfer of stock in trade
(business asset) as in this case, no input tax credit is taken on such stock in trade.

CA VISHAL BHATTAD 09850850800 www.vsmartacademy.com V’Smart Academy 17