Chapter 3: Key Definitions and Concepts

Meaning of Supply

Under GST, the term “Supply” is the core taxable event. As per Section 7 of the CGST Act, 2017, supply includes all forms of supply of goods or services such as sale, transfer, barter, exchange, license, rental, lease, or disposal, made for a consideration by a person in the course or furtherance of business.

Key Elements of Supply:

There must be a supply of goods or services.

It should be for consideration, except in certain cases under Schedule I (like supply to related persons).

The supply must be in the course or furtherance of business.

The supply should be taxable under GST and not exempt.

Deemed Supplies (Schedule I): Even without consideration, the following are treated as supplies:

Permanent transfer of business assets where input tax credit has been availed.

Supplies between related persons or distinct persons (branches in different States).

Supply of goods by a principal to his agent and vice versa.

Import of services from a related person or establishment outside India.

Meaning of Business

As per Section 2(17) of the CGST Act, “business” includes:

Any trade, commerce, manufacture, profession, or similar activity.

Any activity undertaken continuously or regularly, whether or not for profit.

Supply or acquisition of goods/services in connection with commencement or closure of business.

Provision by a club, association, or society to its members.

Activities of government undertaken as public authorities.

Essence: The definition is inclusive and broad, ensuring that even incidental or one-time commercial activities may fall under the ambit of business.

Taxable Person

As defined under Section 2(107), a taxable person means any individual or entity:

Registered or liable to be registered under GST, and

Engaged in economic activity involving the supply of goods or services.

Who Qualifies as a Taxable Person:

Proprietors, partnerships, companies, HUFs, trusts, etc.

Persons crossing threshold limits (₹40 lakh for goods, ₹20 lakh for services, subject to variations by State).

Persons registered voluntarily.

Persons required to register mandatorily (e.g., inter-State suppliers, e-commerce operators, etc.).

Who Is Not a Taxable Person:

Employees providing services to employer in course of employment.

Non-taxable persons engaged exclusively in exempt or non-GST supplies.

Taxable Supply

As per Section 2(108), a taxable supply means a supply of goods or services or both which is leviable to tax under the GST Act.

Key Points:

It must be a “supply” as defined in Section 7.

It should not be wholly exempt or zero-rated.

Examples: sale of goods, professional services, leasing, commission income, etc.

The Place of Supply determines which State’s GST will apply — CGST + SGST (for intra-State) or IGST (for inter-State). The provisions are contained under Sections 10–14 of the IGST Act, 2017.

(a) For Goods

(b) For Services

Importance: Correct determination of place of supply ensures the right tax (IGST or CGST+SGST) is levied and credit flows properly across States.

The Time of Supply determines when tax becomes payable under GST. It fixes the point of taxation, i.e., the date on which liability to pay GST arises.

(a) Time of Supply – Goods

(Section 12 of CGST Act)

Example: Invoice dated 15th July; goods delivered on 20th July; payment received on 10th July. → Time of supply = 10th July (earliest of the three events).

(b) Time of Supply – Services

(Section 13 of CGST Act)

Significance: Determining the correct time of supply is crucial for:

Timely tax payment,

Interest and penalty avoidance,

Accurate return reporting (GSTR-1 and GSTR-3B).