Supply under GST: formula sheet

Key formulas

General test of supply

Supply = supply of goods or services + consideration + in the course or furtherance of business

All three elements must be present, unless the case falls under import of services or Schedule I.

Import of services

Import of services for consideration = supply, whether or not in the course or furtherance of business

Section 7(1)(b). The business condition is dropped, but consideration is still needed.

Schedule I activities

Schedule I activities = supply even without consideration

Section 7(1)(c). Examples: permanent transfer or disposal of business assets with ITC availed, and (Entry 2) supplies between related persons or between distinct persons as specified in Section 25, made in the course or furtherance of business.

Forms of supply

Sale, transfer, barter, exchange, licence, rental, lease, disposal

Inclusive list. Other forms can also be supply.

Consideration

Consideration = payment in money or otherwise

It may come from the recipient or from any other person. A deposit is consideration only if applied as consideration for the supply; a refundable deposit is not consideration.

Order of analysis

Section 7(2) exclusions (Schedule III and notified government activities = not a supply) → Section 7(1) with Schedule I → Schedule II

Section 7(1) is subject to Section 7(2), so check the exclusions first. Schedule III activities and the government activities notified under Section 7(2)(b) are not supplies even if consideration and business are present. For everything else, apply Section 7(1) and Schedule I. Use Schedule II last, only to classify the supply as goods or services.

Statutory basis

Section 7(1)(c): activities specified in Schedule I, made or agreed to be made without a consideration = supply

This is the clause that lets a no-consideration transaction be a supply. It works only for listed activities.

Business asset transfer

Permanent transfer or disposal of business assets + ITC availed on them = supply

If no ITC was availed on the asset, this entry does not apply. A temporary use is not a permanent transfer.

Related or distinct persons

Supply between related / distinct persons + in course or furtherance of business = supply

Employer-to-employee gifts not exceeding ₹50,000 in a financial year are not supply. Above that, they are tested as a supply.

Principal and agent

Goods from principal to agent (agent to supply on principal's behalf) or from agent to principal (agent to receive on principal's behalf) = supply

The entry covers goods only, and only where the agent undertakes the supply or receipt on the principal's behalf.

Import of services from related person

Import of services by a taxable person from a related person or from his other establishment outside India + in course or furtherance of business = supply

Applies even if no payment is made.

Classification rule (Section 7(1A))

Supply under Section 7(1) → goods or services as per Schedule II

Schedule II classifies only. It does not decide whether a supply exists.

Neither-supply rule (Section 7(2)(a))

Schedule III activity → neither supply of goods nor supply of services

Applies notwithstanding Section 7(1), so consideration does not matter.

Government activities (Section 7(2)(b))

Notified activities of Central/State Government or local authority as public authority → neither goods nor services

Only activities that are notified qualify, and only when done as a public authority.

Power to notify (Section 7(3))

Government may notify a transaction as goods and not services, or services and not goods

Subject to Section 7(1), (1A) and (2). It cannot override Schedule III.

Exempt supply value for credit (Section 17(3))

Value of exempt supply includes sale of land and (subject to Schedule II para 5(b)) sale of building; other Schedule III value is excluded, except the prescribed value of activities under para 8(a) of Schedule III

Also included: supplies on reverse charge where the recipient pays tax and transactions in securities. Land and building sales are counted by this rule even though they are not supplies.

Composite supply rule

Composite supply → taxed as the principal supply (rate and treatment of the principal supply)

Section 8(a). The bundle must have two or more supplies, one of which is the principal supply.

Mixed supply rule

Mixed supply → taxed as the supply attracting the highest rate of tax

Section 8(b). Compare the rates of all items in the bundle and pick the highest.

Tax on mixed supply

Tax = Total value of the bundle × highest rate among its items

The whole single-price value is taxed at that rate, not item by item.

Tax on composite supply

Tax = Total value of the bundle × rate of the principal supply

Ancillary items do not change the rate, even if their own rate is higher or lower.

Forward charge: Section 12(2)

Time of supply = earlier of (invoice date or last date to issue invoice under Section 31) and (date of receipt of payment)

Applies to the supplier of goods. Applied separately to each part of the supply covered by an invoice or payment.

Date of receipt of payment

Earlier of (date entered in supplier's books) and (date credited to supplier's bank account)

This is Explanation 2 to Section 12(2).

Excess advance up to ₹1,000

Excess received up to ₹1,000 over the invoice amount: time of supply = invoice date for that excess, at the supplier's option

Applies only where the excess is received over the amount indicated in the tax invoice, and only up to ₹1,000.

Reverse charge: Section 12(3)

Time of supply = earliest of (date of receipt of goods), (earlier of the payment date in recipient's books and the date debited in his bank account), and (the day immediately following 30 days from the date of the supplier's invoice or similar document)

If none of these can be determined, the time of supply is the date of entry in the recipient's books of account.

Vouchers: Section 12(4)

Date of issue of voucher if the supply is identifiable then; otherwise the date of redemption

Applies to supply of vouchers by a supplier.

Residual: Section 12(5)

Where a periodical return has to be filed: the date the return is to be filed. In any other case: the date the tax is paid

Used only when sub-sections (2), (3) or (4) cannot determine the time.

Interest, late fee, penalty: Section 12(6)

Time of supply of the addition in value = date the supplier receives it

Applies to additions for delayed payment of consideration.

General rule for goods (forward charge)

Time of supply = earlier of (date of invoice or last date to issue invoice) and (date of receipt of payment)

Section 12(2). Supply is treated as made only to the extent covered by the invoice or the payment (Explanation 1).

Date of receipt of payment

Earlier of (date entered in books of account) and (date credited to bank account)

Explanation 2 to section 12(2). Section 14 has its own proviso on bank credit near a rate change.

Goods sent on approval

Invoice due on the earlier of: date supply takes place, or 6 months from removal

This is the invoicing rule. It is not in the section 12 text supplied here, but it sets the 'last date' that section 12(2)(a) refers to.

Excess payment up to ₹1,000

Excess received up to ₹1,000 over the invoice amount: time of supply for that excess = invoice date for it, at the supplier's option

Proviso to section 12(2). Applies only to the excess, and only if the supplier chooses.

Vouchers

Date of issue if supply is identifiable then; otherwise date of redemption

Section 12(4).

Reverse charge on goods

Earliest of: date of receipt of goods; payment date (books entry or bank debit, whichever is earlier); day after 30 days from supplier's invoice date

Section 12(3). If none can be determined, use the date of entry in the recipient's books.

Supplied before rate change

Invoice and payment both after change: earlier of payment or invoice date. Invoice before, payment after: invoice date. Payment before, invoice after: payment date.

Section 14(a)(i), (ii) and (iii).

Supplied after rate change

Invoice before, payment after: payment date. Both before: earlier of payment or invoice date. Payment before, invoice after: invoice date.

Section 14(b)(i), (ii) and (iii).

Bank credit proviso for rate change

Date of receipt of payment = date of credit in bank, if that credit is after 4 working days from the date of the rate change

Proviso to section 14. Otherwise the Explanation applies: books entry or bank credit, whichever is earlier.

Interest, late fee, penalty

Time of supply for the addition in value = date the supplier receives it

Section 12(6).

Fallback

Periodical return filer: due date of return. Any other case: date of tax payment

Section 12(5), where the time of supply cannot be determined under sub-sections (2), (3) or (4).

Quick revision

• Supply includes sale, transfer, barter, exchange, licence, rental, lease or disposal for a consideration in the course or furtherance of business.
• Import of services for a consideration is a supply whether or not in the course or furtherance of business.
• Schedule I activities are supplies even without consideration.
• Under Section 7(1)(aa), a person other than an individual and its members are treated as two separate persons.
• Schedule II decides whether an activity is a supply of goods or of services.
• Schedule III activities are neither goods nor services.
• A composite supply is taxed as its principal supply.
• A mixed supply is taxed as the supply attracting the highest rate of tax.
• Time of supply of goods under Section 12(2) is the earlier of the invoice date (or last date for invoice) and the date of payment received.
• Payment date is the earlier of entry in books and credit to the bank account.
• Under reverse charge, time of supply is the earliest of receipt of goods, payment date, or the day after thirty days from the supplier's invoice.
• Voucher: date of issue if the supply is identifiable then, otherwise date of redemption.

Common mistakes

• Saying that no consideration means no supply. Fix: When consideration is absent, always check Schedule I. Permanent transfer or disposal of business assets on which ITC was availed, supplies between related persons or distinct persons as specified in Section 25 in the course or furtherance of business, and similar items can still be supply.
• Treating the list of forms of supply as closed. Fix: Remember it is inclusive. If an activity is a supply of goods or services for consideration in business, it qualifies even if it is not named.
• Treating every free transaction as supply. Fix: Match the transaction to a listed entry. If none fits, it is not a supply under Schedule I.
• Treating a transfer of a business asset as supply even when no ITC was availed. Fix: Always look for whether credit was availed on that asset. No ITC availed means this entry does not apply.
• Treating Schedule II as the list of what is taxable. Fix: Remember Schedule II only labels a supply as goods or services after Section 7(1) is satisfied.
• Saying a Schedule III item is exempt supply. Fix: Schedule III is neither goods nor services, so it is not a supply. Exempt supply is a supply. The credit effect differs: Section 17(3) counts only sale of land and building (and the prescribed value for para 8(a)) in the value of exempt supply for apportionment, and other Schedule III value is left out.
• Taxing each item in the bundle at its own rate. Fix: Once you classify the supply as composite or mixed, apply a single rate to the entire value.
• Using the highest rate for a composite supply. Fix: For composite supply use the principal supply's rate, even if an ancillary item has a higher rate.
• Using the actual late invoice date instead of the last date to issue the invoice. Fix: Always ask when the invoice should have been issued under Section 31. Use that due date if the actual invoice was late.
• Taking the bank credit date as the date of payment even when the books entry is earlier. Fix: Take the earlier of the books entry date and the bank credit date, as Explanation 2 requires.

Exam tips

• In case scenarios, underline every payment, gift and inter-party transfer. Each one needs the three-question filter.
• For MCQs, watch for the phrases without consideration and whether or not in the course of business. They usually point to Schedule I or import of services.
• In descriptive answers, structure your reply as: rule, application, conclusion. A clear conclusion earns marks.
• Do not quote a section or schedule item number unless you are sure. Describe the rule in words instead.
• Link the answer to the next step if asked: after deciding supply, say whether goods or services under Schedule II.
• MCQs often hinge on one condition: ITC availed, within ₹50,000, in the course of business. Find it first.
• Add all gifts to an employee for the financial year before comparing with ₹50,000.
• Write the entry name and the condition in your answer. Examiners give marks for naming the reason.