Supply In GST: Types, Place, Time & Value Rules

The concept of supply in GST is quite important to understand if you want to calculate the net value of production over a certain period. However, in GST, supply is known as the taxable income. 

In most cases, supply is known as the taxable event. There are various types of taxable events like manufacturing, rendering, sale of services, entry into a territory or state have been done away with only just one event that is supply. 

Businesses currently need to identify the accounts for supplies. This will help you to meet the requirement for tax obligations to avoid penalties as well as non-compliance. 

What Is Supply Under GST?

Under the Goods and Services Tax (GST) in India, “supply” is a fundamental concept that determines the taxability of transactions. It is defined under Section 7 of the Central Goods and Services Tax (CGST) Act, 2017.

Supply refers to all forms of exchange and supply of goods or services (or both) made or agreed for a consideration (payment) by a person in the course or furtherance of business.

Source:- https://cbic-gst.gov.in/hindi/pdf/e-version-gst-fliers/eflier-meaning-scopeofsupply14062017.pdf ( Use These Types Of Images for Explaining the application of GST in various sectors) 

Elements Of Supply Under GST  

There are basically six elements of supply under GST that are commonly used today. Now, in this article, you will get the complete insight into it. Some of the key factors that you must know about it are as follows:- 

1. Supply Of Goods Or Services( Both) 

The transaction must involve the supply of goods (tangible items like products), services (intangible activities like consulting), or a combination of both.

Example: Selling a car (goods) or providing repair services (services).

2. For A Consideration 

The supply must be made for a consideration, which can be monetary (cash, bank transfer) or non-monetary (barter, exchange of goods/services). Exception: Certain supplies without consideration, as listed in Schedule I, are deemed taxable (e.g., free supply of goods to related parties).

Example: Selling a laptop for ₹50,000 or exchanging goods for services.

3. In The Course Of Furtherance Of Business 

The supplier must be a taxable person, i.e., a person registered or liable to be registered under GST. A person includes individuals, companies, partnerships, trusts, etc.

Example: A registered business selling goods to a customer.

4. By A Taxable Person 

The supplier must be a taxable person, i.e., a person registered or liable to be registered under GST. A person includes individuals, companies, partnerships, trusts, etc.

Example: A registered business selling goods to a customer.

5. Territorial Nexus 

The supply must take place within the taxable territory of India for GST to apply.

The place of supply rules determine whether the transaction is intra-state (CGST + SGST) or inter-state (IGST). 

Example: Supply of goods from Delhi to Mumbai is an inter-state supply.

6. Not Excluded By Law 

The transaction must not fall under Schedule III (activities not treated as supply) or other exclusions. Examples of exclusions: Services by employees to employers, sale of land, or actionable claims (other than lottery, betting, gambling).

Example: Salary paid to an employee is not a supply.

Importance Of Understanding The Concept Of GST 

There are several important aspects of understanding the concept of GST. Some of the key aspects of it are as follows:-    

1. Determines The Taxability 

The concept of supply is the core trigger for GST liability. Only transactions qualifying as “supply” under Section 7 of the CGST Act, 2017 are taxable. Understanding what constitutes a supply (e.g., sale, barter, or deemed supply) ensures accurate identification of taxable events.

Example: Knowing that gifting business assets to a related party (without consideration) is a taxable supply prevents non-compliance.

2. Ensures Compliance With GST Laws 

Properly classifying transactions as supply (taxable, exempt, or zero-rated) helps businesses comply with GST regulations, avoiding penalties and interest. Misinterpreting supply (e.g., treating a non-taxable transaction as taxable) can lead to incorrect tax payments or audits.

Example: Recognizing that employee services are not a supply (per Schedule III) avoids unnecessary tax reporting.

3. Correct The Tax Rate Application 

The nature of supply (goods, services, composite, or mixed) determines the applicable GST rate and tax treatment. Understanding supply helps businesses apply the correct rate and avoid disputes with tax authorities.

Example: A mixed supply (e.g., a gift hamper) is taxed at the highest rate of its components, which requires a clear understanding.

4. Input Tax Credit Eligibility 

ITC can only be claimed on supplies used for business purposes and taxable outputs. Understanding supply ensures businesses claim ITC correctly. Misclassifying a supply (e.g., personal use of goods as business supply) can lead to ITC denial during audits.

Example: ITC on goods used for exempt supplies is not allowed, requiring careful supply classification.

5. Determines The Time & Place Of Supply 

The concept of supply is linked to the time of supply (when GST liability arises) and place of supply (whether CGST/SGST or IGST applies). Accurate understanding ensures timely tax payments and correct jurisdictional reporting.

Example: A supply from Delhi to Karnataka is an inter-state supply (IGST), while within Delhi, it’s intra-state (CGST + SGST).

6. Facilitates Proper Documentation & Invoicing 

GST-compliant invoices must reflect the nature of supply (goods/services, taxable/exempt). Understanding supply ensures accurate invoicing and record-keeping. Errors in invoicing due to misclassification can lead to disputes with customers or tax authorities.

Example: Issuing an invoice for a composite supply requires mentioning the principal supply clearly.

7. Avoids Litigation & Penalties 

Misinterpreting supply (e.g., treating a non-supply as taxable or vice versa) can lead to tax evasion or overpayment, resulting in penalties, interest, or litigation. A clear understanding minimizes errors and ensures smooth audits.

Example:- Failing to account for deemed supplies (like branch transfers) can attract penalties.

Types Of Supply Under GST 

There are several types of supply under GST. You must go through the details to have a correct understanding of it. Some of the core types of GST that you should know from your end are as follows:- 

1. Taxable Supply 

Supplies of goods or services (or both) that are liable to GST at applicable rates (e.g., 5%, 12%, 18%, 28%). Includes most business transactions like sales, rentals, or services.  

Examples:- Selling a smartphone for ₹20,000 (taxable at 18% GST).

2. Non-Taxable Supply 

Supplies that are not subject to GST as they fall outside the scope of GST law. Includes goods/services explicitly excluded, such as alcohol for human consumption, petroleum products, and electricity.  

Examples:- Sale of diesel (not under GST, taxed under state VAT).

3. Exempt Supply 

Supplies that are exempt from GST under Section 11 of the CGST Act or notifications, but are within the GST framework. No GST is charged, and Input Tax Credit (ITC) cannot be claimed on inputs used for such supplies.  

Examples:- Supply of fresh vegetables or healthcare services.

4. Zero-Rated Supply 

Supplies that are taxed at a 0% GST rate, primarily exports or supplies to Special Economic Zones (SEZs). ITC can be claimed on inputs used for zero-rated supplies, making them tax-neutral.  

Example:- Exporting garments to a foreign country.

5. Composite Supply 

A supply comprising two or more goods/services that are naturally bundled and supplied together, where one is the principal supply. Taxed at the rate applicable to the principal supply.

Example:- A mobile phone sold with a charger and earphones (taxed at the rate of the phone, e.g., 18%).

6. Mixed Supply 

A supply of two or more goods/services that are not naturally bundled but supplied together for a single price. Taxed at the highest GST rate applicable to any of the components.  

Example:- A gift hamper with sweets (5%) and electronics (18%) is taxed at 18%.

7. Deemed Supply 

Certain transactions without consideration are treated as taxable supplies under Schedule I.

Includes:

• Permanent transfer/disposal of business assets.
• Supplies between related persons or distinct entities (e.g., inter-state branch transfers).
• Import of services for business without consideration.  

Example:- Transfer of goods from a Delhi branch to a Mumbai branch (taxable as inter-state supply).

8. Continuous Supply 

Supplies of goods or services provided continuously or on a recurrent basis under a contract, with periodic payments. GST liability arises based on the time of supply (e.g., invoice issuance or payment receipt).

Example: Monthly telecom services or rental agreements.

List Of Supplies & Taxability Under GST   

In this article, you will receive the complete idea about the list of supplies and taxability under GST. So, you must go through this table to have a clear understanding and insight to it  to have a clear idea about it.    

Place Of Supply Of GST( Under Section 12& 13 Of IGST Act) 

The Place of Supply for services under the Integrated Goods and Services Tax (IGST) Act, 2017, is a critical concept in determining whether a supply is intra-state (subject to CGST + SGST/UTGST) or inter-state (subject to IGST). 

It is governed by Section 12 (for domestic supplies where both supplier and recipient are in India) and Section 13 (for cross-border supplies or where one party is outside India). Below is a concise explanation of the Place of Supply of Services under these sections.  

Section 12 Of The IGST Act: Place of Supply of Services (Supplier and Recipient in India)

Section 12 applies when both the supplier and recipient of services are located in India. It specifies the place of supply based on the nature of the service.

General Rule (Section 12(2))

• The place of supply is the location of the recipient if their address is available in the supplier’s records.
• If the recipient’s address is not available, it is the location of the supplier.
• Example: A consultancy firm in Delhi provides services to a company in Mumbai (recipient’s address known). Place of supply = Mumbai (intra-state for Maharashtra, CGST + SGST).

Specific Rules For Certain Services

For specific services, the place of supply deviates from the general rule:

• Services Related to Immovable Property (Section 12(3)):
  • Includes services like architects, surveyors, or hotel accommodation.
  • Place of supply: Location of the immovable property.
  • Example: Interior design for a property in Goa. Place of supply = Goa.
• Restaurant, Catering, Personal Grooming, Fitness, Beauty Treatment, Health Services (Section 12(4)):
  • Place of supply: Location where the services are performed.
  • Example: A restaurant in Chennai provides catering. Place of supply = Chennai.
• Training and Performance Appraisal Services (Section 12(5)):
  • For services provided to a registered person: Place of supply = Location of the recipient.
  • For services provided to an unregistered person: Place of supply = Location where services are performed.
  • Example: Training conducted in Pune for an unregistered individual. Place of supply = Pune.
• Admission to Events (Cultural, Sporting, Educational, etc.) (Section 12(6)):
  • Place of supply: Location where the event is held.
  • Example: Ticket for a concert in Kolkata. Place of supply = Kolkata.
• Organization of Events, Exhibitions, or Conferences (Section 12(7)):
  • For a registered person: Place of supply = Location of the recipient.
  • For an unregistered person: Place of supply = Location where the event is held.
  • Example: A Delhi-based company organizes a trade fair in Hyderabad for an unregistered client. Place of supply = Hyderabad.
• Transportation of Goods (Section 12(8)):
  • Place of supply: Location of the recipient (if registered).
  • For unregistered recipients: Place of supply = Location where goods are handed over for transportation.
  • Example: Goods transported for a registered company in Bengaluru. Place of supply = Bengaluru.
• Passenger Transportation Services (Section 12(9)):
  • Place of supply: Location where the passenger embarks for a continuous journey.
  • Example: A passenger boards a bus in Jaipur for Delhi. Place of supply = Jaipur.
• Services on Board a Conveyance (Section 12(10)):
  • Includes services like in-flight meals or entertainment.
  • Place of supply: Location of the first scheduled point of departure.
  • Example: In-flight meal on a flight from Mumbai to Dubai. Place of supply = Mumbai.
• Banking, Financial, and Intermediary Services (Section 12(12)):
  • Place of supply: Location of the recipient (if available in supplier’s records); otherwise, location of the supplier.
  • Example: A bank in Delhi provides a loan to a customer in Gujarat. Place of supply = Gujarat.
• Telecommunication Services (Section 12(11)):
  • Fixed line, internet, leased circuits: Place of supply = Location where the line/circuit is installed.
  • Post-paid mobile/internet: Place of supply = Billing address of the recipient.
  • Pre-paid mobile/internet (via agent): Place of supply = Location of the selling agent.
  • Pre-paid mobile/internet (direct): Place of supply = Location where payment is received.
  • Example: A prepaid mobile recharge in Kerala. Place of supply = Kerala.

Section 13 Of IGST Act: Place Of Supply Of Services (Cross-Border Supplies)

Section 13 applies when either the supplier or recipient is located outside India (e.g., imports, exports, or international transactions). It determines the place of supply for cross-border services.

1. General Rule (Section 13(2))

• The place of supply is the location of the recipient.

• If the recipient’s location is not available, it is the location of the supplier.

Example: An Indian consultant provides services to a US client (recipient’s address known). Place of supply = USA (export, zero-rated).

2. Specific Rules for Certain Services

For specific services, the place of supply is determined as follows:

3. Services Related to Immovable Property (Section 13(4)):

• Place of supply: Location of the immovable property.
• Example: Architectural services for a property in Dubai. Place of supply = Dubai.

4. Performance-Based Services (Section 13(3)):

• Includes services requiring physical presence (e.g., beauty treatments, training, cultural events).
• Place of supply: Location where services are performed.
• Example: A yoga training session conducted in Singapore. Place of supply = Singapore.

5. Admission to or Organization of Events (Section 13(5)):

• Place of supply: Location where the event is held.
• Example: Organizing a conference in London. Place of supply = London.

6. Transportation of Goods (Section 13(6)):

• Place of supply: Location of the recipient (if known); otherwise, location where transportation begins.
• Example: Goods transported from India to Germany for a German client. Place of supply = Germany.

7. Passenger Transportation Services (Section 13(7)):

• Place of supply: Location where the passenger embarks for a continuous journey.
• Example: A passenger boards a flight in Delhi for London. Place of supply = Delhi.

8. Services on Board a Conveyance (Section 13(8)(a)):

• Place of supply: Location of the first scheduled point of departure.
• Example: In-flight entertainment on a flight from Dubai to Mumbai. Place of supply = Dubai.

9. Banking, Financial, and Intermediary Services (Section 13(8)(b)):

• Place of supply: Location of the supplier.
• Example: A Singapore bank provides services to an Indian client. Place of supply = Singapore.

Online Information and Database Access or Retrieval (OIDAR) Services (Section 13(12)):

• Place of supply: Location of the recipient.
• Example: A Netflix subscription accessed by an Indian user. Place of supply = India (IGST under reverse charge).

Services Supplied to Government or Individuals (Section 13(9)):

• For services like consultancy supplied to a government, diplomatic mission, or individual (not for business).
• Place of supply: Location where services are performed.
• Example: Training provided to a foreign government in India. Place of supply = India.

Other Services (Section 13(8)(c)):

• For services not covered above (e.g., advertising, legal services).
• Place of supply: Location of the supplier.
• Example: Legal services by an Indian lawyer to a foreign client. Place of supply = India.

Components & Supply Of GST 

GST is a comprehensive, multi-stage, destination-based tax imposed on the supply of goods and services. It replaced multiple indirect taxes and is structured into distinct components based on the nature and location of the supply. The key components of GST are:  

1. Central Goods & Services Tax 

• Levied by the Central Government on intra-state supplies (within the same state or Union Territory).
• Revenue goes to the Central Government.
• Example: For a sale in Karnataka with a 12% GST rate, CGST = 6%.

2. State Goods & Services Tax 

• Levied by the State Government on intra-state supplies.
• Revenue goes to the respective State Government.
• Example: For the same sale in Karnataka, SGST = 6% (total GST = CGST 6% + SGST 6% = 12%).

3. Integrated Goods & Services Tax 

• Levied by the Central Government on inter-state supplies (between different states or imports/exports).
• Revenue is shared between the Central and State Governments based on the destination state.
• Example: For a sale from Gujarat to Maharashtra with a 12% GST rate, IGST = 12%.

4. Union Territory Goods & Services Tax 

• Levied by the Union Territory Government on intra-Union Territory supplies (in place of SGST in Union Territories without legislatures, like Chandigarh).
• Revenue goes to the Union Territory.
• Example: For a sale in Chandigarh, CGST 6% + UTGST 6% = 12% GST.

5. Compensation Cess 

• Levied on specific goods/services (e.g., luxury goods, sin goods like tobacco, aerated drinks) to compensate states for revenue losses during GST implementation.
• Applied over and above CGST/SGST or IGST.
• Example: GST on a luxury car (28%) + Cess (15%) = 43% total tax.

Final Takeaway 

Hence, these are some of the crucial points that you need to consider while making an application for Supply in GST. Some of the crucial facts that you should know in this regard are the application of GST.   

You can share your views and opinions in this regard. This is one of the crucial aspects of  GST that you should be well aware of. Additionally, you cannot choose for your counterpart. Try to develop a better understanding in this regard.