Forms and Types of Supply under GST

GST is fundamentally a tax on the supply of goods or services or both. Whether a transaction is taxable depends first on whether it falls within the scope of "supply" under Section 7 of the Central Goods and Services Tax Act, 2017, and then on classification, place of supply, exemption, rate, valuation and other applicable provisions.

Constitutional Basis of GST on Supply

Article 366(12A) of the Constitution defines "goods and services tax" as a tax on the supply of goods, services or both, except taxes on the supply of alcoholic liquor for human consumption.

Meaning of Goods under the CGST Act

Section 2(52) of the CGST Act defines "goods" broadly as every kind of movable property other than money and securities, while including actionable claims, growing crops, grass and things attached to or forming part of land that are agreed to be severed before supply or under a contract of supply.

Money and Transactions in Money

Section 2(75) defines "money" to include Indian legal tender, foreign currency and specified negotiable or payment instruments when used as consideration to settle an obligation. Money itself is excluded from the definition of goods.

Securities under GST

Securities are excluded from the definitions of both goods and services under the CGST Act. Therefore, the purchase or sale of securities itself is not treated as a taxable supply under GST.

However, the statutory definition of "services" expressly includes facilitating or arranging transactions in securities. Accordingly, brokerage, facilitation or similar separately charged services can be taxable even though the underlying security itself is outside GST.

Services under the CGST Act

Section 2(102) defines "services" broadly as anything other than goods, money and securities. It also covers activities relating to the use or conversion of money where a separate consideration is charged, and includes facilitating or arranging transactions in securities.

Scope of Supply under Section 7

Section 7 is the starting point for determining whether an activity is a supply. Broadly, the provision covers forms of supply such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for consideration by a person in the course or furtherance of business, along with other supplies specifically brought within the statutory scope.

Schedule I also identifies specified activities that may be treated as supply even when made without consideration. Schedule II assists in determining whether specified transactions are treated as supply of goods or supply of services, while Schedule III identifies activities that are outside both categories of supply.

Schedule III: Activities Neither Supply of Goods nor Supply of Services

The following categories are covered by Schedule III of the CGST Act, subject to the precise statutory language and amendments in force:

1. Employee services: Services by an employee to the employer in the course of or in relation to employment.
2. Courts and Tribunals: Services by a court or Tribunal established under law. The statutory explanation includes District Courts, High Courts and the Supreme Court within "court" for this purpose.
3. Specified constitutional and public functions: Functions performed by Members of Parliament, State Legislatures, Panchayats, Municipalities and other local authorities; constitutional duties performed by holders of constitutional posts; and specified duties of chairpersons, members or directors of certain government-established bodies where they are not deemed employees.
4. Funeral and related services: Funeral, burial, crematorium or mortuary services, including transportation of the deceased.
5. Land and completed buildings: Sale of land and, subject to the relevant Schedule II provision, sale of building.
6. Actionable claims: Actionable claims other than specified actionable claims.
7. Merchant trade outside India: Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without the goods entering India.
8. Specified high-sea/warehoused transactions: Supply of warehoused goods before clearance for home consumption and specified supplies by endorsement of documents of title after dispatch from a foreign port but before clearance for home consumption.

Specified Actionable Claims: Current Position

With effect from 1 October 2023, Schedule III was amended so that the exclusion applies to actionable claims other than specified actionable claims. Section 2(102A) defines specified actionable claims to cover actionable claims involved in or by way of:

• betting;
• casinos;
• gambling;
• horse racing;
• lottery; and
• online money gaming.

Government-Notified Activities under Section 7(2)(b)

Section 7(2)(b) enables the Government, on the recommendations of the GST Council, to notify activities or transactions undertaken by the Central Government, a State Government or a local authority in which they are engaged as public authorities, so that such activities are treated neither as a supply of goods nor a supply of services.

CBIC has clarified that the special treatment for grant of alcoholic liquor licences is confined to that specified situation and does not create a general exemption or precedent for other licences or privileges granted for a fee.

Exempt Supply and Schedule III Are Different

An exempt supply is a supply on which GST is not payable because of an exemption or Nil rate. A Schedule III activity is different: it is treated as neither a supply of goods nor a supply of services. The legal classification should therefore be identified before applying exemption or rate provisions.

GST Rate Structure as on 1 September 2026

The broad GST rate structure was substantially rationalised following the 56th GST Council decisions. From 22 September 2025, most goods and services moved into a simplified structure centred on 5% and 18%, with exemptions/Nil treatment where specifically provided and a 40% special rate for specified luxury or sin goods. From 1 February 2026, pan masala and most tobacco/nicotine products were placed at 40%, while bidi was brought under 18%, along with the notified valuation changes.

The applicable rate for a particular supply must always be checked against its current HSN/SAC classification and the notification in force on the date of supply. Special rates and valuation provisions may apply to particular categories.

Official GST Law and Notification Links

Author: Vaishak O