Supply under GST: Definition, Scope, Types, Activities, Elements and FAQs

1. What Is Supply under GST?

Supply under GST refers to the transfer of goods or services, whether for consideration or without consideration, during business. It encompasses all supply forms such as sale, transfer, barter, exchange, license, rental, lease, or disposal. Supply plays a crucial role in determining the applicability of GST and the tax liability associated with it. It is a broad concept that covers both tangible goods and intangible services, ensuring that all transactions within the GST framework are properly accounted for and taxed accordingly.

2. Scope of Supplies under GST

The scope of supplies under GST refers to the broad range of goods and services subject to the Goods and Services Tax (GST). It determines what types of supplies are within the purview of GST and should be accounted for in terms of tax liability. The scope of supplies under GST is comprehensive and covers various types of transactions. It includes:

• Goods: The supply of tangible items, such as products, commodities, and materials, is within the scope of GST. This encompasses both new and used goods.
• Services: The provision of services, including professional services, consulting, maintenance, transportation, and other intangible offerings, falls under the scope of GST.
• Sale, Transfer, Barter, Exchange, License, Rental, Lease: Any transaction involving the sale, transfer, barter, exchange, license, rental, or lease of goods or services is within the scope of GST.
• Importation: Importing goods and services into a country is considered a supply and subject to GST.
• Deemed Supply: Certain activities that are not essential supplies but are treated as supplies for GST purposes are known as deemed supplies. These may include self-supplies, transfers of business assets, and disposal of assets.

Businesses must understand the scope of supplies under GST to determine their tax obligations, including registration, charging GST, issuing tax invoices, and filing returns. By properly identifying the supplies that fall within the scope of GST, businesses can ensure compliance with the GST regulations and fulfill their tax responsibilities.

3. Classification of supply and types

Supply classification refers to categorizing different types of supplies based on various criteria under the Goods and Services Tax (GST) framework. Here are the types of supply commonly recognized under GST:

• Taxable Supply: A taxable supply refers to goods or services that are liable to GST. These supplies attract GST at the applicable tax rate, and the supplier must collect and remit the tax to the tax authorities.
• Exempt Supply: An exempt supply refers to the supply of goods or services exempt from GST. These supplies are not subject to GST, and the supplier cannot claim the input tax credit on the inputs or input services used to make such supplies.
• Zero-Rated Supply: Zero-rated supply refers to the supply of goods or services taxable under GST but at a 0% tax rate. GST is applicable, but no tax is charged on these supplies. Suppliers of zero-rated supplies can claim input tax credits on the inputs or input services used for making such supplies.
• Composite Supply: A composite supply involves a combination of two or more goods or services that are naturally bundled together and supplied as a single package. The tax treatment for a composite supply is determined based on the principal supply, which is the predominant element in the bundle.
• Mixed Supply: A mixed supply refers to a supply comprising two or more individual supplies made together but not naturally bundled. Each supply in a mixed supply is distinct and independent, taxed separately based on their tax rates.
• Deemed Supply: Certain specified activities are deemed supplies under GST, even if no actual transaction or consideration is involved. These include transfers between related persons, disposal of business assets, and self-supplies.

Understanding the classification of supply and types is crucial for businesses to determine the tax implications, compliance requirements, and eligibility for input tax credits. It helps correctly apply the appropriate tax rates and fulfill reporting obligations under the GST regime.

4. Activities under Schedule I, II, and III

Activities under Schedule I, II, and III in the Goods and Services Tax (GST) framework determine the treatment of certain transactions and activities for taxation purposes. Here’s an overview of the activities covered under each Schedule:

4.1. Schedule I:

Schedule I includes activities that are treated as supplies even if no consideration is involved. These activities are deemed to be taxable supplies and are subject to GST. Some key activities under Schedule I include:

• Transfer goods or services between related persons, such as a branch and its head office or distinct persons under the same entity.
• Transfer of goods or services between distinct entities, where the entities are registered separately but are under common control.
• Permanent transfer or disposal of business assets when no consideration is involved.
• Supply of goods or services by a taxable person to another taxable or non-taxable person in the course of business when the recipient is located outside the taxable territory.

4.2. Schedule II:

Schedule II provides specific guidelines for determining whether certain transactions should be treated as a supply of goods or a supply of services. It helps in identifying the nature of the transaction for tax purposes. Some activities covered under Schedule II include:

• Transfer of title in goods: Any transfer of ownership of goods, whether by sale, transfer, barter, exchange, license, rental, lease, or disposal, is treated as a supply of goods.
• Transfer of right to use goods: If the right to use goods is transferred without transferring the ownership, it is treated as a supply of services.
• Works contracts: Contracts involving the supply of goods and services for construction, renovation, alteration, or repair of immovable property are treated as composite supplies.
• Restaurant services: Services provided by restaurants, cafes, eateries, or any other establishment serving food or beverages are treated as supplies of services.

4.3. Schedule III:

Schedule III lists activities that are neither considered as a supply of goods nor services. These activities are outside the scope of GST and are not subject to tax. Some activities covered under Schedule III include:

• Sale of land and buildings (except under construction properties), as it is considered a transaction in immovable property.
• Sale of actionable claims, such as lottery tickets, securities, and commodities futures.
• Services provided by an employee to an employer during employment.

Understanding the activities listed under Schedule I, II, and III helps determine the tax treatment and applicability of GST to various transactions and activities. It ensures compliance with GST regulations and enables businesses to assess their tax liabilities correctly.

5. Taxable Supply under GST

Taxable supply under GST refers to the provision of goods or services subject to the Goods and Services Tax (GST). It includes any supply made in the course or furtherance of business or any economic activity, whether for consideration or not.

To be considered a taxable supply under GST, certain conditions must be met:

• Business Activity: The supply must be made in the course or furtherance of a business or economic activity. It should be done regularly or continuously.
• Consideration: There should be a consideration involved in the supply, which can be in the form of money, goods, services, or anything else of value.
• Scope of GST: The supply must fall within the ambit of GST, as specified by the GST laws and regulations. Certain supplies may be exempt or outside the scope of GST.
• Registration: The supplier must be registered under GST if their aggregate turnover exceeds the threshold limit specified by the authorities. Registered suppliers are required to charge GST on taxable supplies and comply with GST regulations.

Taxable supplies attract GST, and the supplier can collect and remit the applicable GST to the tax authorities. The rate of GST depends on the nature of the goods or services supplied, as determined by the GST rates prescribed by the government.

It is important for businesses to correctly identify and classify their supplies as taxable or non-taxable under GST to ensure compliance with the GST laws and fulfill their tax obligations. This includes maintaining proper records, issuing tax invoices, and filing GST returns per the prescribed timelines.

6. Elements of Supply

The supply elements refer to the essential components that constitute a transaction or activity to be considered as a supply under the Goods and Services Tax (GST) framework. These elements are crucial in determining whether GST is applicable and how it should be levied. Here are the key elements of supply:

1. Goods or Services: Supply can involve either the transfer of goods or the provision of services. Goods refer to movable property, while services encompass intangible activities performed for consideration.
2. Consideration: Supply typically involves a consideration, which can be in the form of money, goods, services, or any other valuable consideration. Consideration is the price or value agreed upon by the parties involved.
3. Business or Furtherance of Business: The supply must be made in the course of a business or connection with the furtherance of a business. It includes activities carried out by individuals, entities, or anyone engaged in trade, commerce, profession, vocation, or any other similar undertaking.
4. Inclusive and Deemed Supplies: Certain activities are deemed to be supplies even if no immediate consideration is involved. Examples include transfers between related parties, supplies of goods or services by a taxable person to a related person for non-business purposes, and specified transactions mentioned in the GST law.

These elements collectively help determine the applicability of GST, the tax rate applicable, and other compliance requirements. Businesses need to identify and understand these elements to ensure proper adherence to GST regulations and reporting of supplies in their tax filings.

FAQS for Supply under GST