Know everything about supply under GST in India: FAQs

What is a supply under GST?

Any event that has the following characteristics is considered to be a supply. 

• Involves goods and services
• Made in exchange or cash or reward
• Made in the course of business or in the interest of growing a business
• Made by a taxable person
• Taxable
• Made within a taxable territory

What are the different types of supplies under GST?

A supply of goods and services can be either taxable or non-taxable. 

Taxable supplies Taxable supplies involve goods and services for which tax is applicable under the GST law. A registered dealer can recover the tax paid on purchases. Taxable supplies are categorised into regular taxable supplies, nil-rated supplies, and zero-rated supplies. 

• Regular taxable supplies: Supplies of goods or services that attract 5%, 12%, 18%, or 28% GST are considered to be regular taxable supplies. 

• Nil-rated supplies: Supplies of goods or services that attract 0% GST by default are considered nil-rated supplies. You cannot claim input tax credit for nil-rated supplies. 

• Zero-rated supplies: Supplies of goods or services sent as exports, deemed exports or to a SEZ that attract zero GST are considered zero-rated supplies.

Nontaxable Supplies Non-taxable supplies include exempt supplies and non-GST supplies.

• Exempt supplies: Supplies of exempted goods and services do not attract GST under any circumstances. For this reason, ITC cannot be claimed for such supplies.

• Non-GST supplies: Supply of items which do not fall under GST law.

What are the different components of supply under GST?

There are three components that help calculate tax for a particular transaction. 

• Time of supply: This is the time at which the supply was made. This helps the suppliers determine the due date for the payment of taxes. 

• Place of supply: This is the place where the transaction or transfer of ownership happens for a supply of goods. For a supply of services, it is the location of the recipient. 

• Value of supply: This is the value of goods or services collected by the supplier for every transaction. It determines the amount of tax applicable for the supply.

What is a bundled supply and what are its types?

A bundled supply is a combination of goods and services. A bundled supply can be categorized as either a composite supply or a mixed supply.

• Composite supply: A combination of goods and services which are naturally bundled and cannot be sold individually. For instance, when booking hotel accommodations the rooms to stay in come with cleaning services, hot water and towels. These are not sold by the hotel separately.

• Mixed supply: A combination of goods and services which are offered as a bundle but can be sold individually as well, such as a gift basket of handpicked sweets. Here the sweets can be bought individually, but are chosen to be sold together.

How are composite supplies different from mixed supplies?

The following are ways by which composite supplies and mixed supplies can be differentiated:

• For a composite supply, one item or service is the main supply and the others are add-ons. For example, when booking hotel accommodations, the hotel room is the primary supply whereas the cleaning services, hot water and towels are supplementary. For a mixed supply, no main item or service can be distinguished in such a    way. For instance, think of a gift basket of handpicked sweets. Sweets of the same type  can be sold individually or along with other sweets. 

• In order for a supply to qualify as a composite supply, none of the items can be sold individually. For a mixed supply, the buyer chooses to purchase the items together, but they can be purchased separately as well.

When should a supply not be taxed?

For the following cases, the supply must not be taxed:

• When goods are supplied from one non-taxable territory to another without entering India.

• When warehoused goods are supplied to a buyer before they pass clearance for home consumption.

• When goods with regard to high sea sales are supplied.