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Article 366(12A) of the Constitutional (101st Amendment) Act, 2016 defines the Goods and Services tax (GST) as “a tax on supply of goods or services or both, except supply of alcoholic liquor for human consumption”. The term ‘supply’ is, however, not defined in the Constitution.

The concept of ‘supply’ is the key stone of the proposed GST architecture. In other words, supply is life blood of GST regime. GST is a multi-stage tax levied on supply of goods and / or services, collected at each stage of the production and distribution, in proportion to the value added by each taxable person in the chain of supply.  In the GST regime, the entire value of supply of goods and / or services is proposed to be taxed in an integrated manner, unlike the existing indirect taxes, which are charged independently either on the manufacture or sale of goods, or on the provisions of services. Section 3 of the Model CGST / SGST Act explains the meaning and scope of term “Supply”.


In general, the definition of supply for GST purposes covers all forms of supply where goods and services are supplied in return for a consideration. Any supply of goods and services without consideration is not a supply unless it is deemed to be a supply. Examples of supply include sale, barter, exchange, license, rental, lease and right to use. Consideration received can be in monetary form or in kind or both.

All Forms Of Supply:

The term “Supply” includes all forms of supply of goods and / or services such as sale, transfer, barter, exchange, license, rental, lease or disposal. The Revised Model GST Law does not define the above terms.

Let us examine what each of the above terms means in legal sense





Sale of Goods Act,1930

A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another. It may be absolute or conditional.


Merriam- Webster

  • to give over the legal possession or ownership of
  • to cause (something) to pass from one to another
  • to cause to go or be taken from one place to another
  • to shift possession of (something) from one person to another


Merriam- Webster

to trade by exchanging one commodity for another


Transfer Of Property Act,1882

When two persons mutually transfer the ownership of one thing for the ownership of another, neither thing or both things being money only, the transaction is called an "exchange".


Merriam- Webster

  • a permission granted by competent authority to engage in a business or occupation or in an activity otherwise unlawful
  • a document, plate, or tag evidencing a license granted
  • a grant by the holder of a copyright or patent to another of any of the rights embodied in the copyright or patent short of an assignment of all rights



the amount paid by a user for the use of property


Merriam- Webster

a contract by which one conveys real estate, equipment, or facilities for a specified term and for a specified rent


Oxford Dictionary

The action or process of getting rid of something:

It may be noted that the term “supply” has been defined in an inclusive manner. The term “includes” is generally used to expand the meaning of the former word.

Thus the term “supply “ may include other transaction of goods and /or services other than the transactions as defined in the above table.

Supply Of Goods And / Or Services:

The supply must be of goods and / or services. The term “goods” and “services” are defined in section 2(49) and section 2(92) of Model CGST / SGST Act respectively.

Section 2(49): “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;

Section 2(92) : “services’’ means anything other than goods;

Explanation 1 - Services include transactions in money but does not include money and securities;

Explanation 2 - Services does not include transaction in money other than an activity 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.

It may be noted that the term ‘service’ has been defined in the wider sense as any transaction which is not goods, shall be services except money and securities.

Section 2(1):  "Actionable Claim" shall have the meaning assigned to it in section 3 of the Transfer of Property Act, 1882;

Section 3 of Transfer of Property Act, 1882 : “actionable claim" means a claim :

  • to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property, or
  • to any beneficial interest in movable property not in the possession, either actual or constructive, of the claimant, which the civil courts recognize as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent.

For Example:

  • Claim to unsecured debt
  • Right to recover insurance money

Examples of Actionable Claim [Taxation of Services - An Education Guide dated 20-06-2012]

2.8.11 Would vouchers that entitle a person to enjoy a service, for example a health club, be an actionable claim?

No. Such a voucher does not create a 'beneficial interest' in a moveable property but only entitles a person to enjoy a particular service for a single or specified number of times.

2.8.12 Would recharge vouchers issued by service companies for enabling clients/consumers to avail services like mobile phone communication, satellite TV broadcasts, DTH broadcasts etc be 'actionable claims?

No. Such recharge vouchers do not create a 'beneficial interest' in a moveable property but only enable a person to enjoy a particular service.

Section 2(90) : Securities shall have meaning assigned to it in sub-section (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956).

Thus, activities that are in the nature of only transfer of title by way of sale, redemption, purchase or acquisition of securities on principal-to principal basis would not be liable to GST since excluded from  the definition of ‘goods’ or ‘services’.

However, the services of dealers, brokers or agents in relation to such transactions would be liable to GST. The activities which are not in the nature of transfer of title in securities (for example a person agreeing not to exercise his right in a security for a given period of time for a consideration) would not be included in exclusion and would be liable to GST.

Examples of Securities:

Buying or selling of mutual funds or debentures would neither be a goods nor service , the same would be a transaction in securities.

Entry and exit load charged by mutual fund: Entry or exit loads are in the nature of consideration for documentation, covering initial expenses, asset management etc. Hence GST would be leviable on such entry and exit loads.

Investment Advisory Fee: GST would also be leviable on fund management activity undertaken by an asset management company (AMC) for which an AMC charges the mutual fund an 'investment and advisory fee', in accordance with provisions contained in the SEBI regulation.

Examples of ‘Transaction in Money’

  • Making of a draft or pay order by bank: Bank charges a commission for preparation of a bank draft or a pay order it is not a transaction only in money. However, for a draft or a pay order made by bank the service provided would be only to the extent of commission charged for the bank draft or pay order. The money received for the face value of such instrument would not be consideration for a service since to the extent of face value of the instrument it is only a transaction in money.
  • Debt collection services or credit control services would not be considered as transaction in money since provided for a consideration and would be liable to GST.

Made or agreed to be made for a consideration

One of the essential conditions for the supply of goods and/or services to fall within the ambit of GST is that a supply is made for a consideration.  For GST purposes, consideration does not refer only to money.  It covers anything which might be possibly done, given or made in exchange for something else.

For instance, it might be something exchanged in a barter arrangement, such as in a part exchange, or where a service is performed in return for another service. A consideration may be monetary, non-monetary or a combination of both but it must be capable of being expressed in monetary terms. 

Section 2(28): "consideration" in relation to the supply of goods or services includes:

(a) any payment made or to be made, whether in money or otherwise, in respect of, in response to, or for the inducement of, the supply of goods or services, 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) the monetary value of any act or forbearance, whether or not voluntary, in respect of, in response to, or for the inducement of, the supply of goods or services, whether by the recipient or by any other person but shall not include any subsidy given by the Central Government or a State Government:


  • Penalty charges on early termination of the contract could be treated as “monetary value of any act” and therefore, could be considered as consideration.
  • Advances forfeited for cancellation of an agreement to provide service could be treated as “monetary value of any act” and therefore, could be considered as consideration.

PROVIDED that a deposit, whether refundable or not, given in respect of the supply of goods or services shall not be considered as payment made for the supply unless the supplier applies the deposit as consideration for the supply;

Example: Donations to a charitable organization are not consideration unless charity is obligated to provide something in return e.g. display or advertise the name of the donor in a specified manner or such that it gives a desired advantage to the donor.

Examples of Non-monetary Consideration [para 2.2.4 of ‘Taxation of Services - An Education Guide’ dated 20-06-2016]

Non-monetary consideration essentially means compensation in kind such as the following:

i. Supply of goods and services in return for provision of service
ii. Refraining or forbearing to do an act in return for provision of service
iii. Tolerating an act or a situation in return for provision of a service
iv. Doing or agreeing to do an act in return for provision of service



And in Return...

A agrees to dry clean B’s Clothes

B agrees to click A’s photograph

A agrees not to open dry clean shop in B’s neighborhood

B agrees not to open photography shop in A’s neighborhood

A agrees to design B’s house

B agrees not to object to construction of A’s house in his neighbourhood

A agrees to construct 3 flats for B on land owned by B

B agrees to provide one flat to A without any monetary consideration

Then for the services provided by A to B, the acts of B specified in 2nd column are non monetary consideration provided by B to A. Conversely, for services provided by B to A, similar reasoning will be adopted.

By A Person

The supply of goods and / or services has to be made by a person. The term ‘person’ has been defined u/s 2(73) of revised Model GST Act  and includes an individual, Hindu undivided family, company, firm, LLP, AOP, BOI, local authority, government, trust, society etc.

Supply made In the course or furtherance of business

A transaction made in the course or furtherance of business, alone will be treated as a supply under GST. The term “in the course or furtherance of” has not been defined under the Model GST Law.

The term “in the course” means in the process or progress of. The term “furtherance” as understood in common parlance means the advancement of a scheme or interest, promotion, furthering, advancement, forwarding, improvement, development, betterment, stimulation.

There is no exhaustive definition or test for determining whether an activity is in the course or furtherance of business. Internationally, the business test has emerged through judicial decisions. Generally, whether an activity carried by a taxable person constitutes a business or not is determined by considering the whole of the activities carried on by him. If these activities are predominately concerned with the making of taxable supplies to customers for a consideration, it has to be held that the taxable person is in the business of making taxable supplies, and the taxable supplies which he makes are supplies made in the course of carrying on that business, especially if the supplies are of a kind which are made commercially by those who seek to profit from them.

However, there is no presumption that activities carried on by a taxable person cannot be business if the profit motive is absent. GST is not a tax on profit or income but on taxable supplies by taxable persons.


Supply includes importation of service, for a consideration whether or not in the course or furtherance of business.

Suppose Head Office (HO) of company is in Singapore and this company has a branch office (BO) in India. Now, HO provides some technical services to its BO in India  then in that case it will be considered as ‘import of service’ in India provided place of supply of services is in India.

Further, it may be noted that importation of services is included within the meaning of ‘supply’ under CGST / SGST Acts. However, it would be liable to IGST since it would be an inter-state supply. In fact, section 2(30) of IGST Act has adopted the meaning of ‘supply’ from CGST Act.

It may be noted that Importation of services for personal use still continues to be considered as a supply thus if a person takes a career counseling from a foreign university for his daughter and pays the consideration for the same in foreign currency to such university, it will amount to importation of service and will be within the ambit of supply and GST will be charged on the same.

Importation of service without consideration will not tantamount to supply. Thus if A’s brother who is in United States and is an architect , has send the designs for  A’s house out of love and affection and where there is absolutely no consideration involved, monetary or non monetary, then such transaction will not be within the ambit of supply.


As per section 3(1)(c ), Supply includes a supply specified in Schedule I, made or agreed to be made without a consideration. It implies that Transactions as mentioned in Schedule I will be deemed as supply even if they are without consideration.

Permanent transfer/disposal of business assets where input tax credit has been availed on such assets


  • A company donating its old laptops in charity to an NGO on which input tax credit was availed earlier. Such permanent transfer of business assets would constitute supply to attract GST.
  • Goods sent for job work or goods sent for testing would not qualify as ‘supply’ under this clause since there is no permanence in transfer.

Supply of goods or services between related persons, or between distinct persons as specified in section 10 [taxable person], when made in the course or furtherance of business


  • Inter Unit stock transfers from one State to another State.
  • Transfer of goods from the unit in one state to its R&D centre in another state.
  • Employees of Holding company sent on deputation to the associate companies.

Supply of goods by a Principal to his Agent or vice a versa


  • Principal supplying goods to the agent for onwards sale in various parts of the country
  • Agent procuring input for supplying to the factory of the Principal


The tax liability on a composite or a mixed supply shall be determined in the following manner —

Composite Supply : A composite supply comprising two or more supplies, one of which is a principal supply, shall be treated as a supply of such principal supply.

The term word composite supply has been defined in section 2(27)as under:

 “composite supply” means

  • a supply made by a taxable person to a recipient
  • comprising two or more supplies of goods or services, 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;

Illustration : 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 the principal supply.

Mixed Supply : A mixed supply comprising two or more supplies shall be treated as supply of

that particular supply which attracts the highest rate of tax.

The term ‘mixed supply’ has been defined in section 2(66)as under:

 “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;

Illustration: A supply of a package consisting of canned foods, sweets, chocolates, cakes, dry fruits, aerated drink and fruit juices when supplied for a single 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.

Additionally Supply also consists of following schedules

  • Schedule II- List of transactions to be classified as supply of goods or supply of service.
  • Schedule III- list of activities or transactions which shall be treated neither as a supply of     goods nor a supply of services
  • Schedule IV- Activities or transactions undertaken by the central government, a state government or any local authority which shall be treated neither as a supply of goods nor a supply of services


Thus Supply is a very comprehensively defined under Revised GST Law. However the practical implications of the same is very farfetched and it is imperative for the professionals and industry to grasp the new concepts so as undertake tax efficient structuring of business transactions.

The writer has authored a book on 'An Insight into Goods & Service Tax' and is also a member of IDT Committee of PHD Chamber of Commerce.


Published by

CA Chitresh Gupta
Category GST   Report

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