Mukul Kedia


According to Article 366(12A) of Constitution of India, Goods and Service Tax means a tax on supply of goods or services, or both, except taxes on supply of the alcoholic liquor for human consumption. The concept of ‘supply’ is the essence of GST law. 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 Revised Model GST law, entire value of supply will 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.

Supply has been given an inclusive meaning with possible attempt to cover almost every transaction of goods or service. Following things are covered in supply:-

1. All forms of supply of goods and/or services such as sale, transfer, barter, exchange, license, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business. This clause covers transaction for consideration and for business It attempts to cover any possible activity related to goods or service which can be done in business. Valuation related to barter or exchange transactions will be interesting to understand.

2. Importation of services, for a consideration whether or not in the course or furtherance of business. This clause covers import of services for consideration whether for business or personal use. This clause has been amended from earlier GST Law and it has been made more practical. Earlier import of services without consideration were also covered under meaning of supply, but now only import of service from related party for business purpose without consideration has been covered by inclusion in Schedule I.

3. Activities specified in Schedule I are considered supply, even if it is done without consideration. Following things are covered in schedule I:-

  • Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.
  • Supply of goods or services for furtherance of business. This clause is very important as it covers goods or services provided free of cost for furtherance of business.
  • Supply of goods by principal to agent and vice versa where agent undertakes to act on behalf of principal.
  • Import of service from related person for business use.

Schedule II is in the nature of clarification as it lists down various items which shall be considered to supply of goods or supply of service.

Some items are excluded from the meaning of supply which are as under:-

1. Activities specified in Schedule III:-

  • Contract of employment
  • Service by court or tribunal
  • Functions performed by Members of Parliament Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities or any other post in accordance with Constitution
  • Services by foreign diplomatic mission in India
  • Services of funeral, burial, crematorium or mortuary including transportation of deceased

2. Activities performed by Government authorities in which they are engaged as public authorities. Such activities are listed in Schedule IV and they are mainly public services performed by Government.

In addition to above, Government can specify other transactions which shall be excluded from definition of supply on the recommendation of Council.-

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September 2021