Concept Of Supply Of Goods And Services Under GST Explained


Date: 21 Sep 2022

Supply Of Goods and Services Under GST Explained


A provision of goods, services, or both are taxable in terms of GST. One taxable event, namely supply, has replaced several others, including manufacture, sale, delivery of services, purchase, admission into a state territory, etc. The central and state government will have simultaneous powers to levy the GST on intra-state supply. Under the GST Act, the term "supply" has an inclusive definition. The following six criteria, which can be used to classify a transaction as a supply, are to understand the meaning and scope of supply under GST:

  • Supply of goods or services. The supply of anything other than goods or services does not attract GST.

  • Supply should be made for consideration.

  • Make a supply in exchange for consideration.

  • The supply must be made in the course of conducting business.

  • A taxable person should supply.

  • Supply must occur within the taxable area. 

Even though these requirements define the concept of supply, there are a few exceptions to the norm that a supply must be made for consideration and in the course of advancing the business. A trade is regarded as a supply when it involves the supply of products or services without consideration. Further, import of services or a consideration. Additionally, the import of services for consideration, whether or not in the course or furtherance of business, is treated as supply. 


Supply for Consideration

Consideration has been defined in the CGST Act, 2017. It can be in money or kind. The central or state government giving any subsidy is not considered a Consideration. Whether the recipient or any other person makes the payment is immaterial. If a deposit is made in exchange for the supply of products, services, or both, it is not considered payment until the supplier uses the deposit as payment for the supply. The same activity constitutes supply and consideration when there is a barter of goods or services. 

The criterion of "consideration" as a prerequisite for a supply to be referred to as a supply under the GST has certain exceptions. As per the schedule of the CGST Act, 2017, activities mentioned below shall be treated as supply even if made without consideration:

  • A business asset that has received an input tax credit may not be permanently transferred or sold.

  • When delivered in the course or advancement of business, products or services must be supplied to connected parties or distinct parties as defined in section 25; however, gifts from an employer to an employee that do not exceed a value of Rs. 50,000 in a financial year are not considered to be such supply.

  • Supply of goods - (a) by a principal to his agent, in which case the agent agrees to furnish such goods on the principal's behalf, or (b) by an agent to his principal, in which case the agent agrees to receive such goods on the principal's behalf.

  • Import services by a taxable person from a related person or any of his other establishments outside India during furtherance of business. 


Supply by Taxable Person

A taxable person must make a supply for it to qualify for GST. Consequently, a supply between two non-taxable persons does not qualify as a supply for GST purposes. As per the law, a" taxable person" is one who is registered or liable to be registered under section 22 or 24. A person not responsible for registering but taking a voluntary registration is also taxable.

The GST system in India is state-centric; therefore, anyone making supplies from another state must register separately in each state. Additionally, a person with many company verticals may register with more than one state. A person who must obtain more than one registration, whether in one state/union territory or multiple states/union territories, shall be treated as a distinct person for all purposes under GST. 


Inter/Intra State Supply

Whether a supply is considered an interstate or intrastate supply depends on the supplier's location and the products' location. The supply type must be determined to determine whether the integrated tax or central plus state tax must be paid. A supply of products between two states or union territories is referred to as an interstate supply of goods. Intra-state supply of goods means a supply of goods where the location of the supplier and site of supply is in a different state/union territory. Supplies and imports into and out of SEZs are regarded as inter-state supplies.


Composite Mixed Supply

A composite supply is one that a taxable person makes to a receipt and consists of two or more supplies of goods or services, or any combination of the two, that are naturally combined and provided alongside one another in the regular course of business, with one of the supplies being the principal supply. The tax obligation on a composite or mixed supply is defined in the following ways by the GST law:

  • If a composite supply consists of two or more supplies, and one is a primary supply, that composite supply will be treated as the supply of that principal supply. 

  • A supply that combines two or more different supplies is considered a specific supply and is subject to a higher tax rate.


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