What is the definition of “supply” under GST?

Under India’s Goods and Services Tax (GST) regime, the term “supply” is fundamental to the tax structure because GST is levied on the supply of goods and services. The definition of supply is broad and includes all forms of supply of goods and services, whether for a consideration or not.

Section 7 of the CGST Act, 2017 defines “supply” in detail:

Section 7(1) of the CGST Act, 2017 defines the term “supply” as:

• “All forms of supply of goods or services or both, made or agreed to be made for a consideration by a person in the course or furtherance of business.”

This is the basic and general definition of supply, which is elaborated by additional provisions.

Key Types of Supply Under GST:

1. Taxable Supply:
   • Supply of goods or services that are subject to tax under GST.
2. Exempt Supply:
   • Supply of goods or services which are exempt from GST, either fully or partially (e.g., healthcare, educational services).
3. Non-Taxable Supply:
   • Goods or services that do not attract GST at all, e.g., alcohol for human consumption.
4. Import of Goods/Services:
   • Importing goods and services is considered a supply under GST, and it is subject to GST.

Provisions Related to “Supply” under GST

1. Section 7(1) – Scope of Supply:
   • This section defines “supply” broadly and includes any form of supply made for a consideration in the course of business.
2. Section 7(2) – Inclusive List of Supplies:
   • The provision expands on the term “supply” and includes:
     • Sale of goods
     • Transfer of goods
     • Barter, exchange, or lease of goods
     • License to use goods or services
     • Import and export of goods or services
     • Supply of goods and services between related parties or as a gift, unless specifically exempted.
3. Section 7(3) – Composite and Mixed Supply:
   • Defines composite and mixed supplies, where multiple goods or services are supplied together:
     • Composite Supply: A supply made up of multiple goods or services that are naturally bundled together.
     • Mixed Supply: A supply made up of different goods or services, not bundled together naturally, but sold for a single price.
4. Section 7(4) – Negative List of Supplies:
   • Specifies supplies that are not included under GST, such as alcohol for human consumption, and goods or services related to a few personal or non-business activities.

Acts in the Indian Constitution Relevant to Supply

1. Constitution (One Hundred and First Amendment) Act, 2016:
   • This amendment enabled the introduction of the Goods and Services Tax in India and laid the groundwork for its framework, including the taxation on the supply of goods and services.
2. Article 246A:
   • Grants the power to both the Union and State governments to levy taxes on the supply of goods and services.
3. Article 265:
   • No tax shall be levied except by the authority of law. This is the foundational article for any tax legislation, including GST, and ensures that taxes can only be levied in accordance with the law, i.e., the GST Act.
4. Article 269A:
   • Defines the authority to levy and collect taxes on the supply of goods and services between States, giving the Union Government the power to collect and distribute taxes to the States.

Landmark Cases and Judgments on “Supply” under GST

Several key rulings have helped clarify the definition of “supply” and its scope under GST:

1. State of Gujarat v. M/s. Essar Steel India Ltd. (2019):

• The Supreme Court examined whether “conversion of iron ore into iron ore pellets” was a taxable supply under GST. The court ruled that this conversion process was a “supply” since it involved a transformation of the goods. This judgment clarified the broad definition of supply to include manufacturing or processing activities, even if there is no transfer of ownership.

2. M/s. Continental Foundation Jt. Venture v. Union of India (2015):

• The Supreme Court held that in case of construction contracts, the transfer of goods and services involved in such contracts could qualify as a “supply,” making them subject to GST. This ruling clarified that services provided under construction contracts, even if not directly for sale, still constitute “supply.”

3. AAR Ruling on Composite Supply (2021):

• The Authority for Advance Rulings (AAR) examined whether the supply of a hotel accommodation service with meals should be classified as a composite supply or a mixed supply. It ruled that it was a composite supply as the primary purpose was to provide accommodation, and the meals were incidental.

4. M/s. Sree Balaji Enterprises v. GST Council (2021):

• This case involved the question of whether the supply of food and beverages in canteens was subject to GST. The ruling clarified that supply of food, even when made in a canteen setting, falls within the scope of taxable supply under GST.

5. New Delhi Television Ltd. (NDTV) v. Union of India (2020):

• NDTV challenged the GST on advertising services, arguing that the services provided in the course of media operations should not be taxed under GST as they constitute a “broadcasting” activity. The case clarified that advertising, despite being ancillary, is a part of the media supply and hence taxable under GST.

Key Takeaways:

1. Supply under GST is the core concept for the levy of tax and includes a wide range of activities such as sale, barter, exchange, transfer, and import/export of goods and services, and can be done for consideration or without consideration (e.g., gifts).
2. Provisions under GST (such as Section 7) define and elaborate on the concept of supply in a manner that includes both tangible and intangible goods/services.
3. Landmark Cases have refined the definition, indicating that supply can also cover processes like manufacturing, services provided within the scope of business activities, and even mixed or composite supplies.

The definition of supply is key to understanding the application of GST, as it determines the scope of taxation, exemptions, and the eligibility for input tax credit.