Transfer or disposal of business assets Under GST with Analysis of Schedule I and II

(a) Permanent transfer or disposal of goods;

Schedule-I; ACTIVITIES TO BE TREATED AS SUPPLY EVEN IF MADE WITH OR WITHOUT CONSIDERATION;

Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.

Schedule-II; ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SERVICES;

where goods forming part of the assets of a business are transferred or disposed of by or under the directions of the person carrying on the business so as no longer to form part of those assets, such transfer or disposal is a Supply of goods by the person;

1. Permanent transfer of goods;

In permanent transfer, deemed supply is restricted to goods on which the person has already claimed the input tax credit. Permanent transfer of business assets without consideration, where credit is not taken, and therefore no double taxation.

Combined ( Schedule I with Schedule II);

(i) Permanent transfer or disposal of business assets where input tax credit has been availed on such assets shall be deemed supply.

(ii) Where goods forming part of the assets of a business are transferred or disposed, whether or not for a consideration, such transfer or disposal is a supply of goods by the person.

(iii) The transfer or disposal can be made to any person including to himself. It may or may not involve a consideration.

(i) Transfer where credit is blocked;

Q. An individual buys a car for Business use and after a year transfer car for personal consumption at home. Will the transaction be a supply in terms of GST ACT?

Ans. No, because the individual made a supply under the course of business. Further, input tax credit will not be admissible on such car at the time of its acquisition and as per schedule I, it’s not be a supply under GST.

Q. An individual buys a car for Business use and after a year sells it to a car dealer for consideration. Will the transaction be a supply in terms of GST ACT?

Ans. Yes, because the individual made a supply under the course of business. Further, input tax credit will be admissible on such car at the time of its acquisition in case of further supply.

Q. An individual buys a car for Business use and after a year sells it to a car dealer for consideration. Will the transaction be a supply in terms of GST ACT?

Ans. Yes, because the individual made a supply under the course of business. Further, input tax credit will be admissible on such car at the time of its acquisition in case of further supply.

 (ii) Disposal of Goods;

An insurance company disposes its used computer by giving it to a charitable organization.

(iii) Transfer for a consideration;

ABC Ltd., a sole proprietor, is in the business of selling furniture. Its owner took a set of furniture to furnish his bedroom permanently. The transfer of the furniture by the owner, for a consideration, is a supply of goods and subject to GST.

(b) Temporary transfer or use of business assets;

Schedule II; ACTIVITIES TO BE TREATED AS SUPPLY OF GOODS OR SERVICES;

where, by or under the direction of a person carrying on a business, goods held or used for the purposes of the business are put to any private use or are used, or made available to any person for use, for any purpose other than a purpose of the business, whether or not for a consideration, the usage or making available of such goods is a supply of services;

2. Temporary transfer or use of goods;

Temporary transfer of business assets with/without consideration is deemed supply of service as per schedule II, at the same time credit has to be reverse proportionately under section 17(1). It seem double taxation under GST, the same person has to discharge GST twice on private use of business assets.

Generally, there is no supply when goods acquired by a person are used for business purposes. However, if the goods are:

(i) Put to private or personal use; or

(ii) Made available for another person for use for any purpose other than a purpose of the business of owner.

(i) Private or personal use

XYZ Enterprise, a sole proprietor, is in the business of selling furniture. Its owner took a set of furniture to furnish his house’s Delhi temporarily for 3 months. The personal use of the furniture by the owner, whether or not for a consideration, is deemed as a supply of services by the company to him.

(ii) Made available for another person’s use but not done in the course or furtherance of the business of the goods owner

ABC Ltd. bought a bulldozer to be used in its own construction business. However, it made the bulldozer available to be used in the construction business of its sister company, XYZ Ltd. In this case, the usage of bulldozer for any purpose other than its own business purpose, whether or not for a consideration, is a supply of services by ABC Ltd.

Conclusion:  Permanent transfer of supply is restricted to goods on which the person has already claimed the input tax and transfer with or without consideration. Permanent transfer for personal use without consideration will not be a deemed supply, because credit is blocked where goods or services or both used for personal consumption as per sec 17(5) (g) of CGST Act

However, temporary transfer for personal consumption is deemed supply of service as par schedule II, at the same, where the goods or services or both are used by the registered person partly for the purpose of any business and partly for other purposes, the amount of credit shall be restricted to so much of the input tax as is attributable to the purposes of his business under section 17(1) of CGST Act.