Supply Under the Goods and Services Tax (GST)
The concept of "supply" is central to determining when and how GST is applicable. Understanding what
constitutes a supply is crucial for businesses and taxpayers subject to GST. The GST Act, 2017, provides a
comprehensive definition of supply, which includes various types of transactions. Here's an overview of
the concept of supply under GST:
Definition of Supply: Supply under GST is defined very broadly and encompasses all forms of supply of
goods or services or both, including:
1. Sale: The transfer of ownership of goods in exchange for money or consideration.
2. Transfer: The disposal of goods by one person to another in the course of business, such as
branch transfers.
3. Barter: Exchange of goods or services for other goods or services.
4. Lease: Transfer of the right to use any goods for a consideration, typically through a lease or
rental agreement.
5. Rental: Provision of services, where the supplier allows the recipient to use services for a fee.
6. Exchange: Exchange of goods or services with or without money.
7. Supply of Services: The provision of any services for a consideration, whether or not in the
course of business.
8. Importation of Services: Services provided by a supplier located outside India to a recipient in
India.
9. Activities Deemed to be Supply: Certain activities are deemed to be a supply even if there is no
actual consideration, such as the transfer of business assets, services provided by an employee
to the employer, etc.
10. Composite and Mixed Supplies: A composite supply involves a principal supply of goods or
services, with other ancillary supplies. A mixed supply involves two or more individual supplies
that are made in conjunction but not naturally bundled together.
11. Continuous Supply: In cases where the supply of goods or services is made on a recurring basis,
and the supplier issues invoices periodically, it's considered a continuous supply.
12. Supply of Goods by Unincorporated Associations or Body of Persons to Members: Certain
supplies made by unincorporated associations or bodies of persons to their members can be
considered supplies under GST.
Exclusions from Supply: While the definition of supply under GST is broad, there are some exclusions:
1. Activities that do not constitute a supply as per Schedule III of the GST Act, such as the transfer
of goods from a private individual to another private individual for personal use.
2. Gifts where the value does not exceed the prescribed limit.
3. Services provided by an employee to the employer in the course of employment.
4. Services provided by a court or tribunal.
5. Services provided by a person as a member of a statutory body or a local authority.
Understanding the concept of supply is crucial for determining when GST is applicable, the GST rates
applicable, and for fulfilling compliance requirements,
Under the Goods and Services Tax (GST) regime in India, the concept of "supply" is central to
determining when and how GST is applicable. Understanding what constitutes a supply is crucial for
businesses and taxpayers subject to GST. The GST Act, 2017, provides a comprehensive definition of
supply, which includes various types of transactions. Here's an overview of the concept of supply under
GST:
Definition of Supply: Supply under GST is defined very broadly and encompasses all forms of supply of
goods or services or both, including:
1. Sale: The transfer of ownership of goods in exchange for money or consideration.
2. Transfer: The disposal of goods by one person to another in the course of business, such as
branch transfers.
3. Barter: Exchange of goods or services for other goods or services.
4. Lease: Transfer of the right to use any goods for a consideration, typically through a lease or
rental agreement.
5. Rental: Provision of services, where the supplier allows the recipient to use services for a fee.
6. Exchange: Exchange of goods or services with or without money.
7. Supply of Services: The provision of any services for a consideration, whether or not in the
course of business.
8. Importation of Services: Services provided by a supplier located outside India to a recipient in
India.
9. Activities Deemed to be Supply: Certain activities are deemed to be a supply even if there is no
actual consideration, such as the transfer of business assets, services provided by an employee
to the employer, etc.
10. Composite and Mixed Supplies: A composite supply involves a principal supply of goods or
services, with other ancillary supplies. A mixed supply involves two or more individual supplies
that are made in conjunction but not naturally bundled together.
11. Continuous Supply: In cases where the supply of goods or services is made on a recurring basis,
and the supplier issues invoices periodically, it's considered a continuous supply.
12. Supply of Goods by Unincorporated Associations or Body of Persons to Members: Certain
supplies made by unincorporated associations or bodies of persons to their members can be
considered supplies under GST.
Exclusions from Supply: While the definition of supply under GST is broad, there are some exclusions:
1. Activities that do not constitute a supply as per Schedule III of the GST Act, such as the transfer
of goods from a private individual to another private individual for personal use.
2. Gifts where the value does not exceed the prescribed limit.
3. Services provided by an employee to the employer in the course of employment.
4. Services provided by a court or tribunal.
5. Services provided by a person as a member of a statutory body or a local authority.
Understanding the concept of supply is crucial for determining when GST is applicable, the GST rates
applicable, and for fulfilling compliance requirements,
Supply under GST under section 7 , 7(1) 7(1A) 7(2) 7(3)
In the Goods and Services Tax (GST) Act, 2017, Section 7 defines the scope of the term "supply," which is
fundamental in determining the applicability of GST. Here's an explanation of Section 7 and its sub-
sections (7(1), 7(1A), 7(2), and 7(3)):
Section 7 - Scope of Supply: Section 7 of the GST Act provides a comprehensive definition of the term
"supply." It includes all forms of supply of goods or services or both, made or agreed to be made for a
consideration during the course of business.
Section 7(1): This sub-section defines what constitutes a supply:
It includes all forms of supply, such as sale, transfer, barter, exchange, license, rental, lease, or
disposal.
The provision of services, in the course of business for a consideration, is also considered a
supply.
Importation of services for a consideration, whether or not in the course of business, is included.
Certain activities specified in Schedule I, even if made without consideration, are deemed to be
a supply.
Section 7(1A): This sub-section was inserted to include activities or transactions involving the supply of
goods or services between related persons or between distinct persons as specified in section 25, made
in the course or furtherance of business, even if made without consideration.
Section 7(2): This sub-section elaborates on the meaning of "supply of goods" or "supply of services":
A supply of goods includes the transfer of title or ownership in goods during the course of
business, whether or not for a consideration.
A supply of services includes the provision of services in the course of business, whether or not
for a consideration.
Section 7(3): This sub-section specifies activities or transactions that are treated as supplies, even if
there is no consideration:
Supply of goods or services between related persons or between distinct persons, when made in
the course or furtherance of business, is deemed to be a supply, even if made without
consideration.
The specified person should be liable to pay tax on such supply as if it is a supply made for a
consideration.
Understanding these sub-sections is critical for businesses to identify and appropriately account for
various transactions that fall within the ambit of supply under GST. It helps in ensuring compliance with
the GST law, including filing accurate returns and paying the correct amount of tax.
First Schedule (I) to CGST Act 2017: Activities to be treated as Supply even if made Without
Consideration
Provisions under First Schedule (I) to CGST Act 2017 regarding “Activities to be treated as Supply even
if made Without Consideration”:
Schedule I to CGST Act 2017:
Activities to be treated as Supply even if made Without Consideration section 7
1. Permanent transfer or disposal of business assets where input tax credit has been availed on such
assets.
2. Supply of goods or services or both between related persons or between distinct persons as specified
in section 25, when made in the course or furtherance of business:
Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee
shall not be treated as supply of goods or services or both.
3. Supply of goods,-
(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the
principal; or
(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the
principal.
4. Import of services by a taxable person from a related person or from any of his other establishments
outside India, in the course or furtherance of business. [Refer Note 1]
SCHEDULES TO CGST ACT 2017:
First Schedule: Activities to be treated as Supply even if made Without
Consideration
Second Schedule: Activities or Transactions to be treated as Supply of Goods or
Services
Third Schedule: Activities/ Transactions which shall not be treated as Supply of
Goods or Services
Amendments History:
1. The word ‘taxable’ omitted from sub-section (4) vide Section 30 of the CGST (Amendment) Act,
2018 (GOI Notification dated 29/08/2018), followed with Central Tax Notification 2/2019 on
commencement date of 01/02/2019. Thus, any person (not just a taxable person) importing in above
situation will have to compulsory register and pay tax on RCM basis.
Commentary on Schedule I to the CGST Act, 2017
Schedule I to the CGST Act, 2017, outlines certain activities that are treated as supplies even if they are
made without consideration. This is to ensure that transactions, which may not have a direct monetary
consideration, are still covered under the GST regime. Here is a commentary on each provision, along
with relevant examples:
Commentary on Schedule I to the CGST Act, 2017
Schedule I to the CGST Act, 2017, outlines certain activities that are treated as supplies even if they are
made without consideration. This is to ensure that transactions, which may not have a direct monetary
consideration, are still covered under the GST regime. Here is a commentary on each provision, along
with relevant examples:
Clause 1 of Schedule I to the CGST Act, 2017
Permanent transfer or disposal of business assets where input tax credit has been availed on such
assets: When a business permanently transfers or disposes of assets on which input tax credit (ITC) has
been claimed, it is considered a supply even without any consideration. This is to avoid tax evasion and
ensure proper tax recovery.
Example: A business that has claimed ITC on a machine decides to donate the machine to a non-profit
organization. This transaction, despite being without consideration, will be treated as a supply under
GST.
Clause 2 of Schedule I to the CGST Act, 2017
Supply of goods or services or both between related persons or between distinct persons as specified
in section 25, when made in the course or furtherance of business: Transactions between related
persons (e.g., companies under common control) or distinct persons (e.g., different branches of the
same company) are considered supplies even without consideration, to prevent tax evasion and ensure
proper accounting.
However, gifts not exceeding INR 50,000 in value in a financial year by an employer to an employee are
exempt.
Example: A parent company supplies raw materials to its subsidiary without charging any amount. This
transaction will be considered as a supply under GST, even though there is no consideration involved.
Clause 3 of Schedule I to the CGST Act, 2017
Supply of goods by a principal to his agent or vice versa: Transactions where a principal supplies goods
to an agent, or an agent supplies goods to a principal, for further supply or receipt on behalf of the
principal, are treated as supplies even without consideration.
Example: A principal sends goods to an agent to be sold on their behalf. The transfer of goods from the
principal to the agent will be considered a supply under GST even though no consideration is involved in
the transaction.
Clause 4 of Schedule I to the CGST Act, 2017
Import of services by a person from a related person or from any of his other establishments outside
India, in the course or furtherance of business: Importing services from a related person or from
another establishment of the same person located outside India is considered a supply even without
consideration.
Example: A company in India receives management consultancy services from its parent company
located outside India without any charges. This transaction will be considered as a supply under GST,
even though no consideration is involved.
—–
Note: The CGST Act 2017 has been notified vide GOI Notification dt. 12/04/2017, which has
subsequently been amended through CGST (Extension to J&K) Act 2017, Finance Act 2018, CGST
Amendment Act 2018, Finance Act 2019, Finance Act 2020, Taxation and Other Laws (Relaxation of
Certain Provisions) Ordinance 2020, Finance Act 2021, Finance Act 2022 including
various Notifications issued by the Govt./ CBIC from time to time, relating to the commencement dates
of various Sections/ Provisions in the respective CGST/ Amendment Acts, wherever required.
Information on this page is a Section-wise compilation of the Amendments made by
various Notifications issued by CBIC from time to time, with best possible efforts for accuracy. In any
case, E&OE. For official/ updated information, please visit CBIC website.
Related person section 15
1. Such persons are officers directors of each other’s business
2. Such persons Are legally recognized partners
3. Such persons are Employer and employee
4. A third person controls owns or holds more than 25% of shares
5. One of them controls directly or indirectly each other
6. A third person controlling both of them
7. Such persons together control each other. A & B together controlling C
8. Family members
9. Sole agent or distributer of any company
Schedule II
Activities or Transactions” to be treated as Supply of Goods or Supply of Services
CGST ACT 2017
1) Transfer
(a) any transfer of the title in goods is a supply of goods;
(b) any transfer of right in goods or of undivided share in goods without the transfer of title
thereof, is a supply of services;
(c) any transfer of title in goods under an agreement which stipulates that property in goods
shall pass at a future date upon payment of full consideration as agreed, is a supply of goods.
Includes sale on return basis, Hire purchase system.
2) Land and Building
(a) any lease, tenancy, easement, licence to occupy land is a supply of services;
(b) any lease or letting out of the building including a commercial, industrial or residential
complex for business or commerce, either wholly or partly, is a supply of services.
3) Treatment or process any which is applied to another person’s goods is a supply of
services.
e.g laundry, die clothes, wire repair,
4) Transfer of business assets
(a) 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, whether or not for a consideration, such transfer or disposal is a supply of goods by the
person;
(b) 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, at both the places where they occur 2 the usage or making available of such goods
is a supply of services;
(c) where any person ceases to be a taxable person, any goods forming part of the assets of any
business carried on by him shall be deemed to be supplied by him in the course or furtherance of
his business immediately before he ceases to be a taxable person, unless—
(i) the business is transferred as a going concern to another person; or
(ii) the business is carried on by a personal representative who is deemed to be a taxable person.
5) Supply of services
The following shall be treated as supply of services, namely:—
(a) renting of immovable property;
(b) construction of a complex, building, civil structure or a part thereof, including a complex or
building intended for sale to a buyer, wholly or partly, except where the entire consideration has
been received after issuance of completion certificate, where required, by the competent
authority or after its first occupation, whichever is earlier.
Explanation.—For the purposes of this clause—
(1) the expression “competent authority” means the Government or any authority authorised to
issue completion certificate under any law for the time being in force and in case of non-
requirement of such certificate from such authority, from any of the following, namely:—
(i) an architect registered with the Council of Architecture constituted under the Architects Act,
1972; or
(ii) a chartered engineer registered with the Institution of Engineers (India); or
(iii) a licensed surveyor of the respective local body of the city or town or village or development
or planning authority;
(2) the expression “construction” includes additions, alterations, replacements or remodelling of
any existing civil structure;
(c) temporary transfer or permitting the use or enjoyment of any intellectual property right;
(d) development, design, programming, customisation, adaptation, upgradation, enhancement,
implementation of information technology software; eg in house software from
IT Engineer.
(e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to do
an act;
Eg: and cable operator atmaram to sakharam.
Eg. Mr pulkit agreed not to join the IT industry receives 1 CR from Shyam.
Eg: house construction from Kavin to a stipulated date and not done in time. So got comp off in
lieu of tolerating somebody’s act in supply of services.
Eg. Notice period in job suppose 2 months . payment by employer/employee in lieu of not
fulfilling notice period. So it is buyout by vice versa. Tolerated, so money received is supply.
(f) transfer of the right to use any goods for any purpose (whether or not for a specified period)
for cash, deferred payment or other valuable consideration.
.
6) Composite supply eg, Restaurant service
The following composite supplies shall be treated as a supply of services, namely:—
(a) Works contract as defined in clause (119) of section 2; and
(b) supply, by way of or as part of any service or in any other manner whatsoever, of goods,
being food or any other article for human consumption or any drink (other than alcoholic liquor
for human consumption), where such supply or service is for cash, deferred payment or other
valuable consideration.
7) Supply of Goods
The following shall be treated as supply of goods, namely:—
Supply of goods by any unincorporated association or body of persons to a member thereof for
cash, deferred payment or other valuable consideration.
Section 7(aa)
Section 7 (1)(aa) has been inserted and shall be deemed to have been inserted retrospectively
with effect from the 1st day of July 2017 and the provision has been made effective from 1st
January, 2022.
Section 7 (1)(aa) says that the person (association or club) and its members or constituents shall
be deemed to be two separate persons and the supply of activities or transactions inter se shall
be deemed to take place from one such person to another. Further, 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.
Section 7 (1)(aa) says that the person (association or club) and its members or constituents shall be
deemed to be two separate persons and the supply of activities or transactions inter se shall be
deemed to take place from one such person to another.
SCHEDULE III section 7(2)
Activities or Transactions which shall be treated neither as a Supply of Goods nor a Supply of
Services
CGST ACT 2017
1) Services by an employee to the employer in the course of or in relation to his employment.
2) Services by any court or Tribunal established under any law for the time being in force.
3)
(a) the functions performed by the Members of Parliament, Members of State Legislature,
Members of Panchayats, Members of Municipalities and Members of other local authorities;
(b) the duties performed by any person who holds any post in pursuance of the provisions of the
Constitution in that capacity; or
(c) the duties performed by any person as a Chairperson or a Member or a Director in a body
established by the Central Government or a State Government or local authority and who is not
deemed as an employee before the commencement of this clause.
4) Services of funeral, burial, crematorium or mortuary including transportation of the deceased.
5) Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.
6) Actionable claims, other than lottery, betting and gambling.
1
“Explanation 1—” For the purposes of paragraph 2, the term “court” includes District Court,
High Court and Supreme Court.
2
7) Supply of goods from a place in the non-taxable territory to another place in the non-taxable
territory without such goods entering into India.
This is the current version of The Central Goods and Services Act 2017 (CGST Act 2017)
