What Is Supply In GST: Types & Concepts Explained

Do you want to know about the concept of supply in GST? If yes, then this article can prove to be a game changer for you. Additionally, this can boost the scope of your record keeping to meet your goals with ease. 

The concept of “supply” is the cornerstone of the Goods and Services Tax (GST) framework in India, introduced under the GST Act, 2017. Supply determines the taxability of transactions, encompassing the provision of goods, services, or both, whether for consideration or not.   

As per Section 7 of CGST supply includes sale, transfer, barter, exchange, license, rental, lease, or disposal made in the course of business. It also covers activities specified in Schedule I, such as permanent transfer of business assets or transactions between related parties, even without consideration. 

What Is Supply In GST? 

In the Goods and Services Tax (GST) framework in India, introduced under the Central Goods and Services Tax (CGST) Act, 2017, the term “supply” is the foundation for determining tax liability. As defined under Section 7 of CGST Act, supply encompasses all types of supply of goods, services, or both, prepared or agreed to be prepared for a consideration in the course or furtherance of business. Supply in GST forms an essential component in GST calculation. It includes:

• Forms of Supply: Sale, transfer, barter, exchange, license, rental, lease, or disposal of goods or services.
• Deemed Supplies: Certain transactions specified in Schedule I of the CGST Act, such as:
  • Permanent transfer or disposal of business assets. 
  • Transactions between related parties or distinct entities (e.g., branches of the same business), even without consideration.
  • Supply of goods by a principal to an agent or vice versa.
• Non-Taxable Supplies: Supplies that are exempt or outside the GST purview, such as those listed in Schedule III (e.g., services by an employee to an employer).
• Types of Supply:
  • Taxable Supply: Attracts GST (CGST, SGST, or IGST) based on whether it is intra-state or inter-state.
  • Exempt Supply: No GST is levied (e.g., basic food items, certain services).
  • Composite/Mixed Supply: Involves bundled goods/services taxed based on specific rules.

Importance Of Understanding The Concept Of Supply In GST 

Understanding the concept of supply in the Goods and Services Tax (GST) framework in India is crucial for several reasons:  

1. Determines Tax Liability 

The concept of supply, as defined under Section 7 of CGST Act, 2017, establishes whether a transaction is taxable. It includes sales, transfers, barters, or even transactions without consideration (e.g., related-party transfers per Schedule I). Correct identification ensures accurate tax application (CGST, SGST, or IGST).

2. Compliance With GST Laws 

Businesses must classify supplies as taxable, exempt, or non-taxable to comply with GST regulations. Misclassification can lead to penalties, interest, or incorrect tax reporting.

3. Input Tax Credit Eligibility 

Understanding supply helps businesses determine eligibility for ITC. For instance, ITC is available only on taxable supplies usable for business purposes, not exempt or personal supplies.

4. Correct Tax Jurisdiction 

The nature of supply (intra-state or inter-state) dictates the applicable tax type, based on place and time of supply rules, preventing errors in tax remittance.

5. Avoids Litigation 

Clear knowledge of supply reduces disputes with tax authorities over taxability, valuation, or classification of transactions like composite or mixed supplies.

6. Business Efficiency 

Proper understanding streamlines invoicing, accounting, and GST return filing, enhancing operational efficiency and reducing compliance costs.

Characteristics Of Taxable Supply 

There are some core characteristics of Taxable supply in GST. Some of its core characteristics are as follows:- 

1. Supply Of Goods Or Services 

It involves the provision of goods (tangible items), services (intangible activities), or a combination, as defined under Section 7 of CGST Act. This includes sale, transfer, barter, exchange, license, rental, lease, or disposal.

2. Made For Consideration 

A taxable supply typically involves a payment or consideration (monetary or non-monetary) in the course or furtherance of business. However, certain supplies without consideration (e.g., relatable -party transactions or permanent asset transfers per Schedule I) are also taxable.

3. In The Course Of Furtherance Of Business 

The supply must be there in connection with a business activity, such as trade, commerce, or profession, by a taxable person. As this can make things easier for you in the long run. 

4. Not Exempt Or Non Taxable 

It excludes supplies listed in Schedule III (e.g., employee services to employers) or those specifically exempted under GST notifications (e.g., basic food items, healthcare services).

5. Taxable Event 

The supply triggers a tax liability under CGST, SGST, or IGST, depending on whether it is intra-state (within the same state) or inter-state (across states), determined by place of supply rules.

6. Made By A Taxable Person 

The supplier must complete the registration process or liable to get registration under GST, excluding entities dealing only in exempt or non-taxable supplies.

7. Valuation For Tax 

The taxable supply is valuable on the basis of the transaction value or as per GST valuation rules, which determines the tax amount. Application for the proper valuation  of supplied goods will help you to determine the tax. 

Types Of Supply Under GST 

Under the Goods and Services Tax (GST) framework in India, as known as in the Central Goods and Services Tax (CGST) Act, 2017, supply categorization on the basis of their nature, taxability, and other criteria. Below are the key types of supply under GST:

1. Taxable Supply 

• Supplies of goods, services, or both that attract GST (CGST, SGST, or IGST).
• Made for consideration in the course or furtherance of business.
• Includes deemed supplies under Schedule I (e.g., related-party transactions, permanent transfer of business assets).
• Example: Sale of electronics, provision of consultancy services.

2. Exempt Supply 

• Supplies that are not liable to GST, as specified under Section 2(47) of the CGST Act or through exemptions notified by the government.
• Includes supplies listed in Schedule III (e.g., employee services to employer) and notified exemptions (e.g., basic food items, healthcare).
• No Input Tax Credit (ITC) is available for exempt supplies.
• Example: Supply of fresh milk, educational services.

3. Non Taxable Supply 

• Supplies outside the GST purview, not attracting any tax.
• Includes items like alcohol for human consumption, petroleum products (currently outside GST), and supplies in Schedule III.
• Example: Sale of petrol, land transactions.

4. Intrastate Supply 

• Supply of goods or services within the same state or union territory.
• Attracts CGST and SGST.
• Determined by place of supply rules.
• Example: A retailer in Maharashtra selling goods to a customer in Maharashtra.

5. Inter State Supply 

• Supply of goods or services across different states or union territories, or to/from outside India.
• Attracts IGST.
• Example: A supplier in Delhi selling to a buyer in Karnataka.

6. Composite Supply 

• A supply comprising two or more goods/services naturally bundled and supplied together, where one is the principal supply.
• Taxed at the rate applicable to the principal supply.
• Example: A laptop sold with pre-installed software, taxed as a supply of the laptop.

7. Mixed Supply 

• A supply of two or more goods/services for a single price, not naturally bundled, and supplied together.
• Taxed at the highest GST rate applicable to any component.
• Example: A gift hamper with sweets (5% GST) and electronics (18% GST), taxed at 18%.

8. Zero Rated Supply 

• Supplies related to exports or supplies to Special Economic Zones (SEZs).
• No GST is chargeable, but ITC can be claimed or refunded
• Example: Export of garments to a foreign buyer.

9. Deemed Supply 

• Transactions treated as supplies under Schedule I, even without consideration.
• Example: Transfer of machinery between branches of a company in different states.

10. Continuous Supply 

• Supplies provided continuously or on a recurrent basis, with periodic payments.
• Includes services like telecommunications or goods supplied in installments.
• Taxable based on time of supply rules (e.g., invoice issuance or payment receipt).
• Example: Monthly internet subscription services.

Place Of Supply Under GST 

The place of supply in the Goods and Services Tax (GST) framework in India, as defined under the Central Goods and Services Tax (CGST) Act, 2017, and the Integrated Goods and Services Tax (IGST) Act, 2017, determines whether a supply is intra-state (within the same state) or inter-state (across states), thereby deciding the applicable tax—CGST and SGST/UTGST or IGST. It is critical for GST compliance and accurate tax calculation. The rules for determining the place of supply are there in Sections 10 to 13 of the IGST Act, 2017, and vary based on the nature of the supply (goods, services, or both).  

1. Place Of Supply For Goods 

Section 10 of IGST Act:

• General Rule: The place of supply is the location where the goods are delivered or where the movement of goods terminates for delivery to the recipient.
  • Example: If goods are shipped from Mumbai to a buyer in Delhi, the place of supply is Delhi (inter-state, attracts IGST).
• Goods Supplied on Approval or Return Basis: The place of supply is where the goods are finally accepted by the recipient.
• No Movement of Goods: The place of supply is the location of the goods at the time of supply (e.g., sale of pre-installed machinery).
• Goods Installed or Assembled: The place of supply is the location where the goods are installed or assembled.
  • Example: A machine installed in Karnataka for a buyer is taxed in Karnataka.
• Goods Supplied on Board: For supplies on a conveyance (e.g., aircraft, train), the place of supply is where the goods are on board. 
  • Example: Food sold on a flight departing from Chennai has Chennai as the place of supply.

2. Place Of Supply For Services 

Section 12 of IGST Act (Services where the location of supplier and recipient is in India):

• General Rule: The place of supply is the location of the recipient, if registered or known. If not, it is the location of the supplier.
  • Example: A consultancy service provided by a Mumbai firm to a registered business in Gujarat has Gujarat as the place of supply (IGST applies).
• Specific Services:
  • Immovable Property-Related Services (e.g., architects, real estate): The place of supply is the location of the immovable property.
    • Example: Valuation service for a property in Pune has Pune as the place of supply.
  • Event-Based Services (e.g., concerts, exhibitions): The place of supply is where the event is held.
    • Example: A conference in Delhi has Delhi as the place of supply.
  • Transportation of Goods: The place of supply is the location of the recipient (if registered) or where goods are handed over for transport.
  • Restaurant/Catering Services: The place of supply is where the services takes place.
    • Example: A catering service in Hyderabad has Hyderabad as the place of supply.
  • Telecommunication Services: The place of supply is where the telecom equipment is installed or where the billing address is located.
  • Banking/Financial Services: The place of supply is the location of the recipient or the supplier’s location if the recipient’s address is unavailable.

Section 13 of IGST Act (Services where the supplier or recipient is outside India):

• General Rule: The place of supply is the location of the recipient. If not available, it is the supplier’s location.
• Specific Cases:
  • Services Related to Immovable Property: The place of supply is the property’s location.
  • Performance-Based Services (e.g., training, repairs): The place of supply is where the service is performed.

3. Special Cases 

• Composite/Mixed Supplies: The place of supply is determined based on the principal supply (for composite) or the supply attracting the highest tax rate (for mixed).
• Online Services (OIDAR): For Online Information and Database Access or Retrieval services, the place of supply is the location of the recipient (often deemed to be in India for non-taxable recipients).
• Imports/Exports: For imported goods, the place of supply is the location of the importer. For exports, it is outside India (zero-rated).

Time Of Supply      

The time of supply under the Goods and Services Tax (GST) framework in India, as defined under the Central Goods and Services Tax (CGST) Act, 2017, determines when the tax liability arises for a supply of goods or services. It establishes the fact at which GST becomes payable and is crucial for compliance, invoicing, and Input Tax Credit (ITC) eligibility. The rules for determining the time of supply are outlined in Sections 12 (for goods) and 13 (for services) of the CGST Act, 2017. Below is a detailed explanation:  

1. Time Of Supply For Goods 

The time of supply for goods is the earliest of the following:

• Date of Issue of Invoice: When the supplier issues an invoice for the goods.
• Payment  date is Received: When the supplier receives payment (in part or full) for the supply.
• Date of Removal of Goods: For supplies involving movement, the date when goods are removed for delivery to the recipient. If no movement is involved, it is the date the goods are made available to the recipient.
• Exceptions:
  • If the invoice is issued within the prescribed time (as per Section 31), the time of supply is the invoice date or payment date, whichever is earlier.
  • If the invoice is not there for issuance within the prescribed time, the time of supply is the date of removal or when goods are made available.

Example:

• Goods are removed on 10th September 2025, invoice issued on 12th September 2025, and payment received on 15th September 2025.
• Time of supply: 10th September 2025 (date of removal, as it is the earliest).

2. Time Of Supply For Services 

The time of supply for services is the earliest of the following:

• Date of Issue of Invoice: When the invoice is issued within a particular period (30 days from the provision of service, or 45 days for banking/insurance services).
• Date Payment is Received: When the supplier receives payment (in part or full).
• Recipient’s Books of Accounts: If none of the above apply, the time of supply is when the recipient records the supply in their books.

Example:

• A consultancy service is provided on 5th September 2025, invoice issued on 10th September 2025, and payment received on 20th September 2025.
• Time of supply: 10th September 2025 (invoice date, as it is within the prescribed period).

3. Continuous Supplies Of Goods/Services  

For supplies provided continuously or on a recurrent basis (e.g., telecom services, construction contracts):

• Goods: Time of supply is the earlier of the invoice date, payment date, or when goods are available, as per the contract terms.
• Services: Time of supply is the earlier of:
  • Date of issue of invoice or payment, if issued within a specific period. 
  • Due date of payment as per the contract, if ascertainable.
  • Date of completion of each milestone or event triggering payment.

Example:

• A monthly internet service is provided in September 2025, invoice issued on 30th September 2025, payment due on 5th October 2025.
• Time of supply: 30th September 2025 (invoice date).

4. Special Cases 

Reverse Charge Mechanism (RCM) (Section 12(3) for goods, Section 13(3) for services):

• Time of supply is the earliest of:
  • Date of receipt of goods/services.
  • Payment date by the recipient.
  • Date of invoice + 30 days (for goods) or 60 days (for services).
• Example: For a service under RCM received on 1st September 2025, payment made on 5th September 2025, and invoice received on 3rd September 2025, the time of supply is 1st September 2025 (date of receipt).

Goods Sent on Approval/Return Basis:

• Time of supply is the earlier of:
  • Date of acceptance by the recipient.
  • Six months from the date of removal of goods.
• Example: Goods sent on approval on 1st August 2025, accepted on 15th August 2025. Time of supply: 15th August 2025.

Vouchers (Supply of Goods/Services):

• If the supply is identifiable at the time of voucher issuance, the time of supply is the date of issue of the voucher.
• If not identifiable, it is the date of redemption of the voucher.
• Example: A gift voucher for a specific product issued on 10th September 2025 has a time of supply of 10th September 2025.

Advance Payments:

• For advances received, the time of supply is the date of receipt of the advance, and GST is payable on the advance amount.
• Example: An advance of ₹10,000 received on 5th September 2025 for a service to be provided later. Time of supply: 5th September 2025 for the advance amount.

5. Importance Of Time Of Supply 

• Tax Liability: Determines when GST must be paid and reported in GST returns (e.g., GSTR-1, GSTR-3B).
• ITC Eligibility: The recipient can claim ITC based on the time of supply, subject to invoice and payment conditions.
• Compliance: Ensures accurate determination of the tax period for filing returns and remitting taxes.
• Rate Changes: If GST rates change, the time of supply decides which rate applies.

FAQ(Frequently Asked Questions) 

1. What is known as a “supply” under GST?

Answer: It includes specific transactions listed in Schedule I, like related-party transactions or permanent transfer of business assets, even without consideration. Supplies can be taxable, exempt, or non-taxable, depending on their nature.

2. What is the difference between taxable and exempt supply?

Answer: A taxable supply attracts GST (CGST, SGST, or IGST) and is possible in the course of business for consideration, such as selling electronics. An exempt supply is not liable to GST, either due to government notifications or inclusion in Schedule III (e.g., healthcare services, employee services to employers). Input Tax Credit (ITC) is available for taxable supplies but not for exempt supplies.

3. How is the place of supply determined in GST?

Answer: The place of supply determines whether a supply is intra-state (CGST + SGST) or inter-state (IGST). For goods, it is typically where the goods are deliverable (Section 10, IGST Act). For services, it is generally the recipient’s location, or where the service performance takes place for specific cases like immovable property or events (Section 12, IGST Act). Detailed rules are provided in the IGST Act, 2017.

4. What is the time of supply, and why is it important?

Answer: The time of supply (Sections 12 and 13, CGST Act) is the earliest of the invoice date, payment date, or date of goods removal/service provision. It determines when GST liability arises, when taxes you need to pay, and when ITC can be claimed. It ensures accurate tax reporting and compliance, especially during rate changes or advance payments.

5. What are composite and mixed supplies under GST?

Answer: A composite supply is a naturally bundle supply with a principal item, taxed at the rate of the principal supply (e.g., a laptop with pre-installed software). A mixed supply involves two or more goods/services supplied together for a single price, not naturally bundled, taxed at the highest applicable rate (e.g., a gift hamper with sweets and electronics). Proper classification affects tax calculation.

Final Takeaway 

Hence, these are some of the crucial facts that you must be well aware of while meeting your goals with ease. You can share your views and opinions in our comment box to meet your requirements with complete ease. 

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ICA Edu Skills Team

Working with businesses in diverse industries. I'm passionate about helping others understand and manage their finances effectively. This blog is where I share practical tips, insightful guides, and the latest updates on accounting, taxation, GST, TallyPrime, and advanced Excel. Feel free to ask questions, leave comments.

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