Artists may have to visit other states (where they have not taken registration) and carry their artwork along for supply on approval basis. In scenario such this, when an artwork is selected by a buyer, then the supplier issues a tax invoice at the time of actual supply of the artwork. Further, artists also give their artwork to various galleries who in turn exhibit the same for supply. In this regard, question may arise whether this activity is taxable in the hands of the artists when the artworks are given to the art gallery or at the time of actual supply by the gallery.
Relevant Provisions
In terms of section 7(1) of the CGST Act, 2017, the expression supply includes all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business.
Rule 55 of the CGST Rules, 2017 which deals with the transportation of goods without issue of invoice stipulates that in the case of transportation of goods for reasons other than by way of supply, the supplier may issue a delivery challan, in lieu of invoice at the time of removal of goods for transportation.
Further, rule 3 of the CGST Rules provides that where goods are being transported on a delivery challan in lieu of invoice, the same shall be declared as specified in rule 138. [E-way bill provisions]
As per rule 4 of the CGST Rules where the goods being transported are for the purpose of supply to the recipient but the tax invoice could not be issued at the time of removal of goods for the purpose of supply, the supplier shall issue a tax invoice after delivery of goods.
Treatment under GST
The CBIC has issued clarification on issues regarding treatment of supply by an artist in various states and supply of goods by artists from galleries vide circular no. 22/22/2017-GST dated 21/12/2017.
Para 3 of the said circular clarified that the art work for supply on approval basis can be moved from the place of business of the registered person (artist) to another place within the same State or to a place outside the State on a delivery challan along with the e-way bill wherever applicable and the invoice may be issued at the time of actual supply of art work.
Para 4 of the said circular clarified that the supplies of the art work from one State to another State will be inter-State supplies and attract integrated tax in terms of section 5 of the Integrated Goods and Services Tax Act, 2017.
Para 5 of the said circular clarified that in case of supply by artists through galleries, there is no consideration flowing from the gallery to the artist when the art works are sent to the gallery for exhibition and therefore, the same is not a supply. It is only when the buyer selects a particular art work displayed at the gallery, then the actual supply takes place and applicable GST would be payable at the time of such supply.
Conclusion
When artists sent their artworks to the gallery for exhibition, artists do not receive any consideration from the art gallery. As such, this activity is not treated as supply. When the buyer selects a particular piece of art displayed at the gallery then only it would be treated as supply and applicable GST would be payable at the time of such supply.