Every taxation system is built on a taxable event a specific point in time when tax liability arises. Under the pre-GST regime, different taxable events like manufacture, sale, or provision of services existed, leading to endless interpretations and litigations

The Goods and Services Tax (GST) simplified this by introducing a single taxable event: “Supply”. GST law levies tax on the supply of goods and/or services, replacing multiple taxable events of the past. This article explains the concept of supply under GST, its scope, definitions, parameters, and key examples.

Supply Under GST: Meaning, Scope, and Key Concepts

What is Supply Under GST?

The concept of supply is the cornerstone of GST. It covers:

• Supply of goods or services for consideration in the course or furtherance of business
• Certain activities treated as supply even without consideration (as per Schedule I)
• Import of services for consideration, whether or not in the course of business
• Activities classified as either supply of goods or supply of services
• Exclusions activities treated as neither supply of goods nor supply of services

In simple terms, supply under GST is very broad and ensures that all commercial transactions are taxed unless specifically excluded.

Key Definitions Relevant to Supply

To understand supply under GST, let’s break down some essential definitions:

• Goods: All movable property other than money and securities, but includes crops, grass, and things attached to land agreed to be severed.
• Services: Anything other than goods, money, or securities. Includes activities relating to money conversion or facilitating transactions.
• Consideration: Payment in money, kind, or monetary value of an act/forbearance for supply, excluding government subsidies.
• Actionable Claim: A claim to debt or beneficial interest in movable property not in possession of the claimant.
• Taxable Supply: Any supply of goods or services liable to tax under GST.
• Taxable Territory: Territory where GST law applies (whole of India including territorial waters).

These definitions expand the scope of what qualifies as “supply” in practice.

Meaning and Scope of Supply (Section 7, CGST Act)

Section 7 defines supply in an inclusive manner. It covers:

1. Supply of goods or services for consideration in the course of business.
2. Transactions between entities and members, treated as supply.
3. Import of services for consideration, regardless of business purpose.
4. Activities under Schedule I deemed supply without consideration.
5. Exclusions under Schedule III activities that are neither goods nor services.

Importantly, the government can notify certain transactions to be specifically treated as supply of goods or supply of services.

Parameters of Supply

For a transaction to qualify as supply under GST, it must satisfy three key parameters:

1. It should involve goods or services (not money or securities).
2. It should be made for consideration (payment in money/kind).
3. It should be in the course or furtherance of business.

However, there are exceptions:

• Some supplies without consideration (Schedule I) are still taxable.
• Import of services for consideration is supply even if not for business.

Forms of Supply

The law mentions various illustrative forms of supply under Section 7(1)(a):

• Sale & Transfer e.g., a shopkeeper selling a pen or transfer of goods from a factory to depot.
• Barter & Exchange e.g., exchanging old goods plus cash for new ones, or services exchanged between professionals.
• Licence, Rental, Lease, Disposal e.g., renting property, licensing rights, or disposing of assets.

All these forms are considered supply if they meet the parameters of consideration and business.

Consideration in Supply

Consideration under GST is broader than just money. It includes:

• Payment in money or kind
• Value of an act or forbearance
• Paid by the recipient or even a third party

Exclusions:

• Government subsidies are not consideration.
• Deposits are not consideration unless adjusted against supply.

Examples:

• Donations without quid pro quo (like charity contributions with only name recognition) are not supply.
• Artworks in galleries without payment are not supply until sold.
• No-Claim Bonus (NCB) in insurance is not consideration, hence not supply.

Supply in the Course or Furtherance of Business

Only supplies linked to business activities are taxed under GST. Business includes:

• Trade, commerce, manufacture, profession, or vocation (even without profit motive)
• Activities incidental or ancillary to such trade/commerce
• Government/local authority activities in public capacity
• Facilities provided by clubs, associations, or societies to members

Examples:

• Selling a personal car – Not a supply
• Individual selling old jewellery to jeweller – Not a supply
• Actor selling paintings for charity – Supply, as it is part of vocation
• RWA charging residents for services – Supply
• Admission fees for cinema halls, amusement parks – Supply

Exception: Import of services for consideration is taxable even if not for business (e.g., hiring an architect for personal residence).

Why Supply is Crucial Under GST

• Supply is the foundation of GST liability.
• Unlike earlier taxes (excise, VAT, service tax), GST integrates goods and services taxation into one.
• Understanding the scope of supply ensures correct tax compliance and avoids disputes.

FAQs on Supply Under GST

1. What is supply under GST with an example?

Supply under GST means the sale, transfer, barter, exchange, license, rental, or disposal of goods/services for consideration in the course of business.
👉 Example: A shopkeeper selling a laptop is a supply.

2. What is not considered supply under GST?

Employee services to an employer, sale of land, completed buildings, funeral services, and services by constitutional authorities are not supply.

3. Is barter considered supply under GST?

Yes. Barter or exchange of goods/services without money is taxable under GST.

4. Is import of services taxable under GST?

Yes. Import of services for consideration is taxable, even if not for business.

5. Is salary taxable under GST?

No. Services provided by employees to employers in the course of employment are outside GST’s scope.

6. What is the difference between composite supply and mixed supply?

• Composite supply: Naturally bundled, taxed at the rate of the principal supply.
• Mixed supply: Artificially bundled, taxed at the highest applicable rate.

7. Is donation considered supply under GST?

Donations without any benefit in return are not supply. But if the donor gets advertising rights or promotion in exchange, it may be considered supply.