Comprehending the concept of Supply

For the purpose of GST, Supply covers all forms of supply of goods and services such as sale, transfer, barter, exchange, license, rental, lease for a consideration in the course or furtherance of business.

Essential ingredients for a supply to be taxable are:-
  • It is done in the course or furtherance of business
  • It is for consideration
However there are exceptions in the law.

Importation of service for consideration is taxable supply irrespective of whether import is in the course or furtherance of business.

Schedule I of the law enumerates certain supplies to be deemed as taxable supplies though made without consideration.

S No. Particulars Example
1 Permanent transfer or disposal of business assets where input tax credit has been availed Trader running a grocery shop sells his old calculator to his employee without receiving any amount. Supply of old calculator would be taxable supply provided he had taken input tax credit earlier.
2 Supply of goods or services to related person made in the course of business. It may be noted that gifts provided by an employer to employer not exceeding Rs 50,000/- in value in a financial year would not be taxable supply. Partnership firm comprising two partners Mr Amit and MrBachan was carrying on grocery shop. The firm supplied 20 kgs of rice to MrBachan without receiving any amount. This supply will be taxable.
3 Supply of goods or services to distinct persons A company having factory in Haridwar stock transfers the manufactured goods to its warehouse located in Kolkatta. This will be taxable supply as Haridwar and Kolkata are distinct persons.
4 Supply of goods by principal to his agent and vice versa
5 Importation of services by a taxable person from a related person or from any other establishment outside India, in the course or furtherance of business

Schedule II provides guidance for finding out whether a transaction is supply of good or service. Some of the instances are as follows:

Supply of Service:-
  • Renting of immovable property such as land and building
  • Works contract service relating to immovable property
  • Supply of food or non-alcoholic drinks in restaurant is service
  • Transfer of right to use any goods liking renting out air coolers during summer months for consideration
  • Temporary transfer or permitting the use of intellectual property right would be service
  • Partnership firm running retail shop selling electronic durables provided television to the residence of one of the partners for few days for stop-gap use as the television owned by the partner was sent out for repair. This would be supply of service
Supply of Goods:-
  • Transfer of the title in goods would be supply of goods
  • Supply of goods by residence welfare association not registered under any law to its members after purchasing in bulk would be supply of goods
Composite Supply refers to naturally bundled supply of two or more goods or services or any combination and supplied in conjunction usually as normal business practice where one of which is considered as principal supply.
Eg., 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 principal supply.
Provision of water bottle in luxury bus for long distance journey is an example of natural bundling with transportation service being the principal supply.

Mixed Supply refers to two or more supply of goods or service or combination thereof for a single price and such supply is not a Composite Supply.
The differentiating aspect between Composite Supply and Mixed Supply is whether the bundling is naturally done in the ordinary course of business.

Eg., A Supply of package containing Sweets and Aerated drink for a single price would be mixed supply.
Mixed Supply is taxed at the highest rate applicable for the goods comprised in the bundle.
Time of Supply of goods or services is the earlier of
  • the date of invoice or the last date under GST law on which he is required to issue invoice in the case of goods and date of provision of service if the invoice is not issued within the period prescribed under GST law
  • date on which payment is entered in the books or credited to the supplier’s bank account.
A supplier of goods has to issue invoice within the time period given below:-
  • Supply involves movement of goods- Time of removal of goods.
  • Sale on approval basis- 6 months from date of removal or approval whichever is earlier
  • Other cases-When goods are made available to the recipient

In the case of services, if the above the two norms are not met, then the date of receipt of services as per the books of the accounts of the recipient.

A supplier of service has to issue invoice before supply or within 30 days of supply of service.

The Due date for issue of the invoice in case of continuous supply of goods involving successive statement of accounts or successive payment is governed by separate rules.

Where the supplier collects late fee or penalty for delayed payment by the recipient, time of receipt shall be considered as the time of supply for such receipt of late fee or penalty.
Inter-State supply is one where the Location of Supplier and Place of Supply are in different states. Supply to Special Economic Zone or from a unit in Special Economic Zone or to a touristwill always be inter-state supply regardless of the location and place of supply.

Tourist here denotes a person who is not normally resident in India and who enters India for a stay for not more than six months for legitimate non-immigrant purposes.

GST law provides detailed rules for determining the location of the supplier as well for the place of supply.

  • Inter-state supply attracts IGST
  • Intra- state supply is taxable under CGST & SGST
Location of Supplier Place of Supply Goods/Services Nature of Supply Remarks
Himachal Pradesh Himachal Pradesh Goods Intra State- (CGST & SGST)
Himachal Pradesh Chandigarh Goods Inter State (IGST)
Himachal Pradesh Delhi Goods Inter State (IGST)
Chandigarh Chandigarh Services Inter State (IGST) Chandigarh is Union Territory (UT) without Legislature
Chandigarh Himachal Pradesh Services Inter State (IGST)
Puducherry Puducherry Goods Intra State- (CGST & SGST) Pondicherry is UT with legislature
Puducherry Andhra Pradesh Goods Inter State (IGST)

Download GST Guide For Businesses
Download GST Rates For Goods
Download GST Rates For Services
Download GST Rates For Services Under Reverse Charge


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