Supply under GST

Goods & Services Tax and Customs Laws

Contents

🞇 Key terms to understand the provisions related to supply

🞇 Scope of Supply
🞇 Inclusive list of supply
🞇 Negative list of supply of Goods or services
🞇 Government notification on the recommendation of
council
🞇 Intra and inter-state supply
🞇 Composite and mixed supply
🞇 Zero rated supply
 Key terms to understand the
provisions related to supply
🞇 Business
“Business” includes––
(a) Any trade, commerce, manufacture, profession, vocation, adventure, wager or any
other similar activity, whether or not it is for a pecuniary benefit
(b) Any activity or transaction in connection with or incidental or ancillary to point (a)
mentioned above
(c) Any activity or transaction in the nature of mentioned in point (a) above, whether or not
there is volume, frequency, continuity or regularity of such transaction
(d) Supply or acquisition of goods including capital goods and services in connection with
commencement or closure of business
(e) Provision by a club, association, society, or any such body (for a subscription or any
other consideration) of the facilities or benefits to its members
(f) Admission, for a consideration, of persons to any premises
(g) Services supplied by a person as the holder of an office which has been accepted by
him in the course or furtherance of his trade, profession or vocation
(h) Services provided by a race club by way of totalisator or a licence to book maker in
such club, and
(i) Any activity or transaction undertaken by the Central Government, a State Government
or any local authority in which they are engaged as public authorities.
Key terms to understand the
provisions related to supply...
🞇 Goods: “Goods” means every kind of movable property
other than money and securities but includes actionable
claim, growing crops, grass and things attached to or forming
part of the land which are agreed to be severed before supply
or under a contract of supply.
Actionable claim is unsecured money debt and the claimant has
beneficial interest(i.e. right of possession) in that property.
Example 1:A owes Rs. 1000 to B. B’s claim is an actionable claim.
Example 2:A borrows Rs. 1000000 from B and mortgages his
house to him. The mortgage debt is not actionable claim.
Example 3:A has sold fifty bags of wheat to B. The bags of wheat
are in the godown of A. B’s right to take possession of the bags
of wheat from the godown of A is his (B’s) Actionable claim.
 Key terms to understand the
provisions related to supply...
🞇 Services: “Services” means anything other than goods, money and
securities but includes activities relating to the use of money or its
conversion by cash or by any other mode, from one form, currency or
denomination, to another form, currency or denomination for which a
separate consideration is charged.
🞇 Consideration: “Consideration” in relation to the supply of goods or
services or both includes––
(a) Any payment, whether in money or otherwise, in respect of, in
response to, or for the inducement of, the supply of goods or services or
both, whether by the recipient or by any other person but shall
not include any subsidy given by the Central Government or a
State Government;
(b) Monetary value of any act or forbearance, in respect of, in
response to, or for the inducement of, the supply of goods or
services or both, whether by the recipient or by any other person but
shall not include any subsidy given by the Central Government or a
State Government.
Key terms to understand the
provisions related to supply...
🞇 “Supplier” in relation to any goods or services or both, shall
mean the person supplying the said goods or services or both
and shall include an agent acting as such on behalf of such
supplier in relation to the goods or services or both supplied.
🞇 “Taxable supply” means a supply of goods or services or
both which is leviable to tax under this Act.
🞇 “Non-taxable supply” means a supply of goods or services
or both which is not leviable to GST.
🞇 “Exempt supply” means supply of any goods or services or
both which attracts nil rate of tax or which may be wholly
exempt from tax, and includes non-taxable supply.
🞇 “Inward supply” in relation to a person, shall mean receipt
of goods or services or both whether by purchase, acquisition
or any other means with or without consideration.
Key terms to understand the
provisions related to supply...
🞇 “Continuous supply of goods” means a supply of goods which is
provided, or agreed to be provided, continuously or on recurrent basis,
under a contract, whether or not by means of a wire, cable, pipeline or
other conduit, and for which the supplier invoices the recipient on a
regular or periodic basis and includes supply of such goods as the
Government may, specify.
🞇 “Continuous supply of services” means a supply of services which
is provided, or agreed to be provided, continuously or on recurrent
basis, under a contract, for a period exceeding three months with
periodic payment obligations and includes supply of such services as
the Government may, specify.
🞇 “Output tax” in relation to a taxable person, means the tax
chargeable under this Act on taxable supply of goods or services or
both made by him or by his agent but excludes tax payable by him on
reverse charge basis.
🞇 “Outward supply” in relation to a taxable person, means supply of
goods or services or both, whether by sale, transfer, barter, exchange,
licence, rental, lease or disposal or any other mode, made or agreed to
be made by such person in the course or furtherance of business.
Key terms to understand the
provisions related to supply...
🞇 “Recipient” of supply of goods or services or both,
means—
(a) The person who is liable to pay that consideration, where a
consideration is payable for the supply of goods or services or
both
(b) The person to whom the goods are delivered or made
available, or to whom possession or use of the goods is given
or made available, where no consideration is payable for the
supply of goods, and
(c) Where no consideration is payable for the supply of a service,
the person to whom the service is rendered, and any
reference to a person to whom a supply is made shall be
construed as a reference to the recipient of the supply and
shall include an agent acting as such on behalf of the
recipient in relation to the goods or services or both supplied.
 SCOPE OF SUPPLY
• Scope of Supply (Section 7)
• Section 7(1)
• Inclusive list of supply consist of:
1. All forms of supply of goods or service made for a consideration in the course or
furtherance of business
2.Import of services for a consideration may or may not be in the course or furtherance of
business
3. Schedule I activities (supply without consideration)
4. Schedule II activities

• Section 7(2)
• Negative list of supply:
1. Schedule III activities
2. Activities undertaken by central government, state government or public authority

• Section 7(3)
• Government on the recommendation of the council may specify:
(a) Supply of goods and not as a supply of services; or
(b) Supply of services and not as a supply of goods
 Inclusive list of supply Section 7(1)
1. All forms of supply

S. No. Mode of supply Description

(i) Sale Transferring the property in goods from one to another, upon
valuable consideration.
(ii) Transfer Any transfer of goods or right in goods or of undivided share in
goods without transfer of title thereof.
(iii) Barter To exchange one commodity for another without use of money.
(iv) Exchange To swap, to part with, give or transfer for an equivalent with the use
of money.
(v) Licence Permission granted by competent authority to exercise certain
privileges without such authorization the activity would have
constituted as an illegal act.
(vi) Rental Periodical payment for the use of another property.
(vii) Lease Contractual agreement by which one party conveys an estate in
property to another party, for a limited period, subject to various
conditions, in exchange for something of value, but still remain
ownership.
(viii) Disposal To pass or into the control of someone else; to alienate, bestow, or
part with.
Inclusive list of supply Section 7(1)....

2. Import of services: Import of services for a consideration

whether or not in the course or furtherance of business is
included under scope of supply. Importation of service whether
for personal purpose or business purpose is subject to GST. Such
services would be liable to GST under Reverse Charge
Mechanism (RCM).
Condition for Import of Service-
a) Supplier of service is located outside India,
b) Recipient of service is located in India and
c) Place of supply of service is in India.
Illustration: Suppose Mr. A, a partner in partnership firm pays for
architect services to Ms. Y in USA for his residential house at an
agreed consideration of 5000$. Even if receipt of this service is
not for business or furtherance of business, Mr. A would be liable
to pay GST.
Inclusive list of supply Section 7(1)....

3. Activities specified in Schedule I

i. Permanent transfer or disposal of business assets
where input tax credit has been availed on such
assets.
Example 1: ABC Ltd. donated its old laptops to a school without
consideration will be considered as supply provided input
tax credit was availed on such laptops.
Inclusive list of supply Section 7(1)....

ii. Supply of goods or services or both between related

persons or between distinct persons, when made in
the course or furtherance of business:
In addition, the 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.
Example :Holding company provides corporate guarantee to
subsidiary company for enabling them to raise loan from banks.
Generally no amount is charged for providing this guarantee but
such transaction will be considered as supply.
Inter-state self-supplies such as stock transfers, branch transfers or
consignment sales are also taxable under this provision.
Example 2: Stock transfer made to a unit outside the state or to a
different business vertical of the same assessee will be
reckoned as supply.
Inclusive list of supply Section 7(1)....

iii. Supply of goods by a principal or by agent—

(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.
Example 1:X Company, having godown in Mumbai transfer
the goods to clearing and forwarding agent located in
Madhya Pradesh, who only receives the goods on behalf
of X company. This section makes deeming provision
that such activity of transfer shall be considered as
supply and accordingly GST will be payable.
(Note: Supply of service between principal and agent is not
covered here)
Inclusive list of supply Section 7(1)....

iv. Import of services from a related person: 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.
Example: If a registered Person Mr. A (India) import
consultancy service from a related person Mr. B (USA) in the
course or furtherance of business then it shall be deemed to
be supply of service under this clause and hence taxable
under the GST.
 Inclusive list of supply Section 7(1)....
4. Activities specified in Schedule II
i. Transfer
(a) any transfer of the title in goods is a supply of goods;
Example: Sale of goods by one taxable person to another.
(b) any transfer of right in goods or of undivided share in goods without the
transfer of title thereof, is a supply of services;
Example: Machinery given on rent for specified period along with operator.
(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.
Example: Hire Purchase Agreement
ii. Land and Building
(a) any lease, tenancy, easement, licence to occupy land is a supply of
services;
Example: Lease agreement to give land on lease for specified period.
(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.
Example: Rent Agreements.
Inclusive list of supply Section 7(1)....

iii. Treatment or process

Any treatment or process which is applied to another person's
goods is a supply of services.
Example: A Ltd. is a manufacturer and sends his goods for the
purpose of packaging to B Ltd., then, the packaging done by
B Ltd. will be treated as supply of service.
iv. 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;
Example: Free distributions of products for advertising.
Inclusive list of supply Section 7(1)....

iv. Transfer of business assets

(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, the usage or making available of such goods is a
supply of services;
Example: Use of company vehicle for arranging picnic for employee.
(c) Ceases to be a taxable person: 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.
Example: Dissolution of partnership firm
Inclusive list of supply Section 7(1)....

v. Supply of services
(a) renting of immovable property;
Example: Renting of factory
(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.
Example :Construction of commercial or residential complex except
where the entire consideration has been received after issuance of
completion certificate, where required, by the competent authority or
before its first occupation, whichever is earlier.
c) temporary transfer or permitting the use or enjoyment of any
intellectual property right;
Example :Franchise
Inclusive list of supply Section 7(1)....

v. Supply of services
(d) development, design, programming, customisation, adaptation,
upgradation, enhancement, implementation of information
technology software;
Example: Programming or development of IT Software will now be a
service only. (i.e. ERP)
(e) agreeing to the obligation to refrain from an act, or to tolerate an
act or a situation, or to do an act; and
Example: Damages for in-efficient services
Example: Penalty imposed for late completion of agreed contract.
Example: Notice pay
(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.
Inclusive list of supply Section 7(1)....

vi. Composite supply

(a) works contract
(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.
Example: Entire works contract will be treated as supply of
service.
Example: Restaurant Services
Inclusive list of supply Section 7(1)....

vii. Supply of Goods

Supply of goods by any unincorporated association or body
of persons to a member thereof for cash, deferred
payment or other valuable consideration.
Example: Goods sold by a body of persons to its member
for cash or on deferred payment.
Example: Supply of food, gaming tools, books etc. by any
club to its members.
Question:
Q. State whether the following supplies be treated as supply of goods or
supply of services as per CGST Act:
(i) S, the owner of specific piece of land in Delhi, leases the same to G for
one year for an agreed transaction in November, 2023.
(ii) X is carrying on the business of consumer durable products. He
disposed off a defective TV for Rs. 40,000 to G whereas its normal
price is Rs. 2,00,000.
(iii) P is a scientist. He owns a patent to manufacturer designer art
papers using tea leaves. The patent right is transferred on temporary
basis to R Ltd.
(iv) Y is engaged in the supply of certain goods. He wishes to transfer
goods worth Rs. 1,00,000 to his branch in Haryana.
(v) A dealer of machines who has availed input tax credit on his
machines, permanently transfers a machine from his stock in trade,
for personal use at his residence.

Ans: i) Supply of service (ii) Supply of goods (iii) Supply of

service (iv) Supply of goods (v) Supply of goods)
Negative list of supply of Goods or services Section
7(2)

(a) Activities or transactions specified in Schedule III; or

(b) such activities or transactions undertaken by the Central
Government, a State Government or any local authority
in which they are engaged as public authorities, as may
be notified by the Government on the recommendations
of the Council,
shall be treated neither as a supply of goods nor a
supply of services.
Schedule III activities or transactions
1. Services by an employee to the employer in the course of or in relation to his
employment.
2. Services by any court (i.e. District Court, High Court and Supreme Court) or Tribunal
established under any law for the time being in force.
3.
(a) Functions performed by the Members of Parliament, Members of State Legislature,
Members of Panchayats, Members of Municipalities and Members of other local authorities;
(b) Duties performed by any person who holds any post in pursuance of the provisions of the
Constitution in that capacity; or
(c) 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 sale of building, subject to construction activities as mentioned in
supply of services.
6. Actionable claims, other than lottery, betting, horse racing, and gambling etc.
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.
8. Supply of warehoused goods to any person before clearance for home consumption.
9. Activity of apportionment of co-insurance premium
10. Services by insurer to reinsurer
11. Supply by way of grant of liquor license by a state government
Government notification on the
recommendation of council Section 7(3)

Subject to the provisions of section 7(1) and section 7(2),

the Government may, on the recommendations of
the Council, specify, by notification, the transactions
that are to be treated as—
(a) a supply of goods and not as a supply of services; or
(b) a supply of services and not as a supply of goods.
Question
🞇 State with reason whether the following transactions shall be
treated as supply under GST:
(i) Mr. A, a partner in partnership firm pays for architect services
to Ms. Y in U.S.A. for his residential house at an agreed consideration of
$5000.
(ii) Holding company provides corporate guarantee to subsidiary
company for enabling them to raise loan from banks. No amount was
charged for providing this guarantee.
(iii) Company guest house given to an employee for his personal
function. No amount was charged by the company from an employee.
(iv) ABC Ltd. donated its old laptops to a school without
consideration. No input tax credit was taken by ABC Ltd. on the
purchase of such laptops.
(v) X transfers 500 bonds of A Ltd. to Y for a consideration of ₹
1,25,000. Date of transaction is July 20, 2023.
(Ans.: (i) Supply of services (ii) Supply of service (iii) Supply of service
(iv) Supply of goods (v) Not a supply (Bonds are not goods or service)
 Inter-state supply and Intra State Supply
Inter-state supply (Section 7 of IGST Act)
(1) Inter State Supply in case of goods: As per section 7 of IGST Act, subject to the
provisions of section 10 (regarding place of supply of goods or services or both), supply of
goods, where the location of the supplier and the place of supply are in––
(a) two different States;
(b) two different Union territories; or
(c)a State and a Union territory,
shall be treated as a supply of goods in the course of inter-State trade or commerce.
(2) Import of goods: Supply of goods imported into the territory of India, till they cross the
customs frontiers of India, shall be treated to be a supply of goods in the course of inter-State
trade or commerce.
(3) Supply of services: Subject to the provisions of section 12 (regarding place of supply of
services in India), supply of services, where the location of the supplier and the place of
supply are in––
(a) two different States;
(b) two different Union territories; or
(c) a State and a Union territory,
shall be treated as a supply of services in the course of inter-State trade or commerce.
(4) Import of services: Supply of services imported into the territory of India shall be treated to
be a supply of services in the course of inter-State trade or commerce.
(5)Supply of goods or services or both,––
(a) When the supplier is located in India and the place of supply is outside India;
(b) to or by a Special Economic Zone developer or a Special Economic Zone unit; or
(c) in the taxable territory, not being an intra-State supply and not covered elsewhere in this
• Inter State Supply
• In case of goods: where the location of the supplier and the place of
supply are in two different States, two different Union territories, or a State
and a Union territory
• Supply of services: where the location of the supplier and the place of
supply are in two different States, two different Union territories, or a State
and a Union territory
• Import of goods or services
• Exports
• Supply by Special Economic Zone unit or to Special Economic Zone
developer
• Intra State Supply
• Supply of Goods: Where the location of the supplier and the place of
supply of goods are in the same State or same Union territory
• Supply of Services: Where the location of the supplier and the place of
supply of services are in the same State or same Union territory.
Intra State Supply (Section 8 of IGST Act)
(1) Supply of Goods: Subject to the provisions of section 10 (regarding
place of supply of goods or services or both), supply of goods where
the location of the supplier and the place of supply of goods are in the
same State or same Union territory shall be treated as intra-State
supply:
Provided that the following supply of goods shall not be treated as
intra-State supply, namely:-
(i) Supply of goods to or by a Special Economic Zone developer or a
Special Economic Zone unit; (it shall be treated as inter-state supply)
(ii) Goods imported into the territory of India till they cross the customs
frontiers of India(it shall be treated as inter-state supply);
(iii) Supplies made to international tourist.
(2) Supply of Services: Subject to the provisions of section 12
(regarding time of supply of goods), supply of services where the
location of the supplier and the place of supply of services are in the
same State or same Union territory shall be treated as intra-State
supply:
Provided that the intra-State supply of services shall not include supply of
services to or by a Special Economic Zone developer or a Special
Economic Zone unit.
Composite and Mixed supply
🞇 “Composite supply” means a supply made by a
taxable person to a recipient consisting of two or more
taxable supplies of goods or services or both, or any
combination thereof, which are naturally bundled and
supplied in conjunction with each other in the ordinary
course of business, one of which is a principal supply.
🞇 Example: Where goods are packed and transported with
insurance, the supply of goods, packing materials,
transport and insurance is a composite supply and
supply of goods is a principal supply.
🞇 “Principal supply” means the supply of goods or
services which constitutes the predominant element of a
composite supply and to which any other supply forming
part of that composite supply is ancillary.
🞇 “Mixed supply” means two or more individual supplies
of goods or services, or any combination thereof, made
in conjunction with each other by a taxable person for a
single price where such supply does not constitute a
composite supply. In case of mixed supply, the individual
supplies are independent of each other and are not
naturally bundled.
🞇 Example: A supply of a package consisting of canned
foods, sweets, chocolates, cakes, dry fruits, aerated
drinks and fruit juices when supplied for asingle price is a
mixed supply. Each of these items can be supplied
separately and is not dependent on any other. It shall not
be a mixed supply if these items are supplied separately.
Mixed Supply
•Combination of goods or services which are not naturally
bundled
•Individual supplies are independent of each other
•Each unit can be supplied independently
•Tax liability shall be the rate applicable to the supply that
attracts the highest GST rate*

Composite Supply
•Naturally bundled
•Supplied in conjunction with each other
•Principal supply and other part of supply is ancillary
•Tax liability is based on rate of principal supply*
Some Examples
Example :A Diwali gift box consisting of canned foods, sweets, chocolates,
cakes, dry fruits, aerated drink and fruit juices supplied for a single price is a
mixed supply. All are also sold separately. Since aerated drinks have the
highest GST rate of 28%, aerated drinks will be treated as principal supply
and 28% will apply on the entire gift box.
Example: Mr. X has booked Rajdhani train ticket which includes meal. It is a
bundle of supplies. It is a composite supply where the products cannot be sold
separately. The transportation of passenger is, therefore, the principal supply.
Rate of tax applicable to the principal supply will be charged to the whole
composite bundle. Therefore, rate of GST applicable to transportation of
passengers by rail (5%) will be charged by IRCTC on the booking of Rajdhani
ticket.
Example: A works contract is a mixture of service and transfer of goods. For
example, construction of a new building where a combination of materials like
bricks, cement, sand along with services of labourers, engineers, architects
etc. produce a building (goods).It is a classic example of composite supply.
But to avoid the confusion under earlier tax law, GST Act clearly clarifies
works contract as a supply of service with specific tax rates. (Under point 6 of
schedule II as mentioned in chapter 4)
Question

X, a registered dealer offers a Desktop Computer (for Rs.

50,000 before tax) and a wooden table (for Rs. 5,000
before tax) for a consolidated price of Rs. 52,500. The
rates of GST applicable on desktop computer and
wooden table are 28% and 18% respectively.
(i) Determine whether the supply is a mixed supply or a
composite supply.
(ii) Is it beneficial for the consumer to avail the offer or buy
them separately?
(Ans: (i) Mixed supply (ii) Avail the offer, saving in mixed supply
Rs. 2700)
Zero rated supply
As per section 16 of IGST Act, “zero rated supply” means any of the
following supplies of goods or services or both, namely:––
(a) export of goods or services or both; or
(b) supply of goods or services or both to a Special Economic Zone
developer or a Special Economic Zone unit.
(2) Input tax credit is available: Subject to the provisions of section
17(5) of the CGST Act, credit of input tax may be availed for making
zero-rated supplies, notwithstanding that such supply may be an
exempt supply.
(3) Refund of ITC: A registered person making zero rated supply shall
be eligible to claim refund under either of the following options:
(a) S/he may supply goods or services or both under bond or Letter of
Undertaking, subject to such conditions, safeguards and
procedure as may be prescribed, without payment of integrated
tax and claim refund of unutilised input tax credit; or
(b) S/he may supply goods or services or both, subject to such conditions,
safeguards and procedure as may be prescribed, on payment of
integrated tax and claim refund of such tax paid on goods or
services or both supplied, in accordance with the provisions of
section 54 of the Central Goods and Services Tax Act.