Concept Basics - What is Supply under GST

What is Supply under GST

Supply is the event that triggers tax . Meaning, you determine whether an item is taxable or not under GST, based on the nature of supply.
There are basically two definitions under GST law that covers the definition of supply a) Supply under Sec 7(1) of CGST Act b) Deemed supplies under Schedule I of CGST Act.

Bare Act definition of Supply under Sec 7(1) of CGST Act

Now, let us see the definition of Supply under Sec 7(1) of CGST Act. What does it say?: For the purposes of this Act, the expression “supply” includes:

1. 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
(aa) the activities or transactions by a person other than an individual, to its members or constituents or vice‑versa, for cash, deferred payment or other valuable consideration

2. import of services for a consideration whether or not in the course or furtherance of business;
   
3. the activities specified in Schedule I, made or agreed to be made without a consideration
4. [Omitted by the CGST (Amendment) Act, 2018]

So, lets analyse What are the key points in the definition under 7 (1)

1. Supply can of goods or services or both
2. All forms of supply are covered. Whether it sale or transfer or disposal of goods or even exchange or barter of goods. Includes provision of services like license or lease or rental etc
3. The supply must all be for a consideration. Meaning: settlement involves either payment of money or kind or both.
4. Supply must be in the course of business or furtherance of business. Meaning: transactions must relate to business activity (commercial or professional operations) and not personal transaction.
5. Transactions between an non-individual entity ie a club or an association and its members, for consideration are covered under scope of GST
6. the importation of services for consideration, regardless of whether it is in course of business or not. Meaning: even if they are for personal use, GST is applicable.
7. Furthermore, certain activities listed in Schedule I are treated as supply even when there is no consideration, such as:
   • Permanent transfer of business assets where input tax credit was claimed or
   • supplies between related parties.

Not considered supply

Schedule III lists activities that are specifically not considered a supply of goods or services. Meaning: they are Non-GST Supplies. They are listed below

1. services by an employee to an employer
2. functions by public authorities like MPs and MLAs
3. the sale of land and the sale of buildings under certain conditions
4. Actionable claims, except for lottery, betting, and gambling are also excluded.
5. Services related to funeral services