Types of Supply 

 

(i). Taxable supply :

Taxable supply refers to a supply of goods and/or services which is chargeable to tax under the GST Act. Supplies which are exempt or subject to NIL rate of tax will not be treated as taxable supplies. However, exempt supplies shall be included for the purpose of computing the aggregate turnover to determine the threshold / composition limits.

(ii). Exempt supply

Exempt supply means supply of any goods and/or services which are not taxable under the GST Act and includes such supply of goods/or services which are specified in the Schedule to the Act or which may be exempt from payment of tax under Sec. 10 of the Model GST Law.Under Section 10 of the Model GST Law, a supply may be exempt generally either absolutely or subject to such conditions as may be specified in a notification issued by the appropriate government. Further, where an exemption in respect of any goods and/or services from the whole of the tax leviable thereon has been granted absolutely, the taxable person providing such goods and/or services shall not be eligible pay tax on such goods and/or services.

(iii). Zero-rated supply
Zero rated supply is a supply of any goods and/or services on which no tax is payable but credit of the input tax related to that supply is admissible. Exports shall be treated as zero-rated supply. Zero rated supplies will be treated as taxable supply.

(iv). Composite / Mixed supply

Section 2(27) of the Model GST Law defines composite supply to mean a supply consisting of two or more goods, two or more services or a combination of goods and services provided in the course or furtherance of business, whether or not the same can be segregated. Many transactions that fall within the scope of GST may consist of more than one element. These elements may be a mix of goods, or services, or both. Sometimes these elements, if supplied separately, may have different GST liabilities depending upon the rates, applicability of time of supply and place of supply provisions. To avoid disputes about whether the supplier is making a single supply with one liability, or multiple supplies with different liabilities, it has to be determined whether the supply is one of goods, or of services, or it is a supply constituted of both goods and services (composite supplies).

To determine whether a particular supply consists of various elements to be treated as a single supply or as multiple supplies, one has to first identify the essential features of the transaction which involves, ascertaining what the recipient has received. If a component of the supply is to be treated separately from the overall supply of which it is a part, it should be distinct and independent and should amount to more than merely a component of the overall supply. For instance, when a car is given for servicing, as a part of the service, engine oil may be replaced. The supply of the oil cannot be considered as distinct or independent in the context of the overall service required by the recipient. It is also necessary to ascertain whether each supply shall be properly regarded as a principle supply or some of them are merely ancillary to principle supply.

The Model GST Law contains specific provisions [sub-Section (3) Section 3] empowering the Central or a State government to specify, by notification, on the recommendations of the GST Council, whether a transaction involving composite supply will be treated as a supply of goods and not a supply of service or a supply of service and not a supply of goods.

(v). Continuous supply of goods/services

Continuous supply of goods means a supply of goods which is provided or agreed to be provided, continuously or on recurrent basis, under a contract, for which the supplier invoices the recipient on a regular or periodic basis. Continuous supply of services means a supply of service notified by the Central or a State government, provided or agreed to be provided, continuously or on recurrent basis under a contract, for a period of exceeding three months, with periodic payment obligations.

Identifying a supply as a continuous supply of goods/services is required in view of the time of supply of provisions. Section 12 of the Model GST Law provides that in the case of continuous supply of goods, involving successive statement of accounts or successive payments, the time of supply shall be the date of expiry of the period to which such successive statements of accounts or successive payments relate. Where there are no successive statements of accounts, the date of issue of invoice or the date of receipt of payment, whichever is earlier, shall be the time of supply.

Section 13 of Model GST Law provides that in case of continuous supply of services, the time of supply to be (a) where the due date of payment is ascertainable from the contract, the date on which the payment is liable to be made by the recipient of service, whether or not any invoice has been issued or any payment has been received by the supplier of service;(b) where the due date of payment is not ascertainable from the contract, each such time when the supplier of service receives the payment, or issues an invoice, whichever is earlier;(c) where the payment is linked to the completion of an event, the time of completion of that event.

(vi). Inward/Outward supply

An inward supply [Section 2(61)] refers to receipt of goods and/or services whether by purchase, acquisition or any other means by a person registered under the Act. Section 26 of the Model GST Law mandates every registered taxable person other than an input service distributor, a person paying tax under composite scheme or a tax deductor at source to file details of inward supplies as a part of monthly / quarterly return.

An outward supply [Section 2(73)] refers to supply of goods and/or services, whether by sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made by such person in the course or furtherance of business except in case of such supplies where the tax is payable on reverse charge basis. Section 25  of the Model GST Law mandates every registered taxable person other than an input service distributor, person paying tax under composite scheme or a tax deductor at source to file details of outward supplies as a part of monthly / quarterly return.

 

(vii). Inter/Intra State supply

The location of the supplier and the place of supply determines whether a supply is treated as an Intra State supply or an Inter State supply. Determination of the nature of supply is essential to ascertain which type of GST is payable (i.e. CGST/SGST or IGST). Inter State supply of goods means (subject to Section 5 of the draft IGST Act), supply of goods where the location of the supplier and place of supply are in different States. Inter State supply of service means (subject to Section 6 of the draft IGST Act), supply of services where the location of the supplier and place of supply are in different States.

Intra State supply of goods means (subject to Section 5 of the draft IGST Act), supply of goods where the location of the supplier and place of supply are in the same State. Intra State supply of service means (subject to Section 6 of the draft IGST Act), where the location of supplier and the place of supply are in the same State.

 

(viii). Deemed supply

Schedule I of the Model GST Law lists specific transactions made without consideration as deemed supply for GST purposes. They include (i) permanent transfer / disposal of business assets (ii) temporary application of business assets to a private or non-business use (iii) services put to a private or non-business use (iv) assets retained after deregistration and (v) supply of goods / or services by a taxable person to another taxable or non-taxable person in the course or furtherance of business.