Correct Nature of Supply under IGST : ICAI Suggestion

Suggestions on GST Acts (July 2017) by Institute of Chartered Accountants of India

52. Nature of Supply under IGST – Correct nomenclature to be used

Section 7(1) & (2) of the IGST Act, 2017 provides that subject to the provisions of section 10, supply of goods, where the location of the supplier and the place of supply are in––

(a) two different States;

(b) two different Union territories; or

(c) a State and a Union territory,

shall be treated as a supply of goods in the course of inter-State trade or commerce.

Supply of goods imported into the territory of India, till they cross the customs frontiers of India, shall be treated to be a supply of goods in the course of inter-State trade or commerce

Issue:

In both sections a phrase used is “in the course of inter-state trade or commerce”. Which has been borrowed from various entries of the Constitution. However, the same has not been defined in the GST law but the definition of supply has been given. This creates a confusion since it is not necessary that a trade or commerce constitute a supply.

For Example- In case of clause 4(b) of schedule II where business assets are used for personal purpose outside the state of registration then such transaction is not one which is in the course of interstate trade or commerce. However, it is an interstate supply.

Suggestion:

It is suggested that in order to avoid the confusion the phrase “in the course of interstate trade or commerce” be replaced with “in the course of interstate supply”.

Read ICAI Suggestions on GST Act to Govt : July 2017

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