Introduction
The Goods and Services Tax (GST) Act is an indirect tax law in India. It came into effect on 1st July 2017 and replaced multiple state and central taxes like VAT, service tax, and excise duty. GST aims to simplify the tax system by combining various taxes into one, creating a single unified market. It applies to the supply of goods and services across India and is designed to ensure transparency, efficiency, and ease of doing business.
The Goods and Services Tax (GST) Act defines the term “supply” to identify what transactions attract tax. Supply under GST Act is a key concept. Tax is only levied when there is a supply of goods or services or both.
What is Considered as a Supply?
Section 7(1) of the GST Act explains what counts as a supply. It includes all types of transfers of goods or services such as sale, transfer, barter, exchange, license, lease, or rental. These must be done for a consideration and in the course of business.
A special clause, adds that if a person other than an individual provides services or activities to its members or constituents (or vice versa) for payment, it is also treated as a supply. The law treats the person and its members as separate entities, even if other laws or court rulings say otherwise.
The law also includes import of services for a consideration as a supply, whether or not it’s for business purposes. Additionally, certain activities listed in Schedule I are considered supply even if no consideration is involved.
How Is Supply Classified
Under Section 7(1A), any transaction that qualifies as a supply must be classified as either supply of goods or supply of services, as per Schedule II. This helps determine the applicable GST rates and rules.
What Are Exceptions to Supply
Not all activities are treated as supply. Section 7(2) makes important exclusions:
- Specific public authority activities done by Central or State Governments or local bodies, as notified by the government
These are not treated as supply of goods or services, and hence are not taxed under GST.
Government’s Power to Classify Supply
Section 7(3) allows the government to issue notifications, based on GST Council recommendations, to declare certain transactions as either:
- Only supply of goods, or
- Only supply of services
This helps resolve confusion in complex or mixed transactions.
Conclusion
Understanding what qualifies as “supply” under the GST Act is essential for businesses and professionals. The definition is broad and inclusive but also provides clarity through exclusions and government powers. This ensures fair taxation and smooth compliance across various sectors.
