Supply under GST: formula sheet

Key formulas

Basic test of supply, Section 7(1)(a)

Supply = supply activity (sale, transfer, barter, exchange, licence, rental, lease, disposal) + consideration + in the course or furtherance of business

All three elements are needed under clause (a). Made or agreed to be made is enough.

Supply to members, Section 7(1)(aa)

Person (not an individual) ↔ its members or constituents, for cash, deferred payment or other valuable consideration = supply

The person and its members are deemed two separate persons.

Import of services, Section 7(1)(b)

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

The business test is not needed here. Consideration is still needed.

Schedule I activities, Section 7(1)(c)

Activities in Schedule I, without consideration = supply

These are deemed supplies. Check the specific entry in Schedule I for its conditions.

Classification, Section 7(1A)

Activity that is a supply under Section 7(1) → goods or services as per Schedule II

Schedule II only classifies. It does not create supply.

Exclusions, Section 7(2)

Schedule III activities, and notified activities of Government or local authority as public authorities = neither goods nor services

Section 7(2) applies despite sub-section (1).

General rule of supply

Supply = supply of goods or services or both for consideration, in the course or furtherance of business (section 7(1)(a))

Import of services for consideration is a supply even if not in the course or furtherance of business (section 7(1)(b)).

Schedule I rule

Activity in Schedule I, made or agreed to be made without consideration = supply (section 7(1)(c))

Related-person and distinct-person supplies must be in the course or furtherance of business. Gifts by an employer to an employee not exceeding ₹50,000 in a financial year are not a supply.

Schedule II rule

Supply under section 7(1) → classified as goods or services as per Schedule II (section 7(1A))

It classifies; it does not create a supply. Example: transfer of title in goods = goods; transfer of right to use goods without title = services.

Schedule III rule

Schedule III activity = neither supply of goods nor supply of services (section 7(2)(a))

No GST is levied. Section 7(2)(b) separately covers notified public-authority activities.

Under-construction property

Construction before completion certificate or first occupation = service; entire consideration after it = sale of building, not a supply

Linked to paragraph 5, clause (b) of Schedule II and sale of building in Schedule III. The service is a taxable supply.

Section 17(3) link

Explanation to section 17(3): value of exempt supply excludes Schedule III, except paragraph 5 of Schedule III and prescribed activities under paragraph 8(a)

Sale of land and sale of building (falling in Schedule III) count in the value of exempt supply for ITC apportionment. Construction service under Schedule II, paragraph 5(b), is taxable, not exempt.

Composite supply rule

Tax on composite supply = tax treatment of the principal supply

Section 8(a) CGST Act. The whole bundle takes the rate and nature of the principal supply.

Mixed supply rule

Tax on mixed supply = tax treatment of the supply attracting the highest rate

Section 8(b) CGST Act. Compare the rates of all items in the bundle and apply the highest to the whole.

Test for composite supply

Two or more supplies + naturally bundled in ordinary course + one principal supply

If all three hold, it is composite. Otherwise check for mixed supply.

Test for mixed supply

Two or more supplies + single price + not naturally bundled (not composite)

No principal supply is needed. The highest rate decides.

Application to IGST

Section 20, IGST Act: CGST provisions on composite and mixed supply apply mutatis mutandis to integrated tax

The same classification rule applies to inter-State supplies.

Charging rule, CGST

CGST is levied on intra-State supplies, on the value under section 15, at notified rates ≤ 20%

Paid by the taxable person. Alcohol for human consumption is excluded.

Charging rule, IGST

IGST is levied on inter-State supplies under section 5 of the IGST Act, at notified rates ≤ 40%

Import of goods: IGST is levied with customs duty under the Customs Tariff Act, 1975.

Reverse charge on notified supplies

Section 9(3): notified category of goods or services or both → recipient pays tax

Applies whether or not the supplier is registered. Only notified categories qualify.

Reverse charge on unregistered suppliers

Section 9(4): notified class of registered persons + specified supplies from an unregistered supplier → recipient pays tax

Both the class of recipient and the category of supply must be notified.

E-commerce operator liability

Section 9(5): notified services supplied through an operator → operator pays tax as if it were the supplier

No physical presence: the representative pays. If none, the operator appoints a person in the taxable territory.

Compulsory registration link

Section 24(iii) and (iv): persons liable under reverse charge or under section 9(5) must register

Registration is required even without crossing the normal turnover threshold in section 22.

Fuel exclusion

Petroleum crude, HSD, petrol, natural gas, ATF: tax only from a notified date (section 9(2))

Until notified, these are not taxed under CGST.

Turnover limit (section 10(1))

Aggregate turnover in preceding FY ≤ ₹50,00,000

Government may notify a higher limit, not exceeding ₹1,50,00,000, on the Council's recommendation.

Maximum rate caps (section 10(1))

Manufacturer ≤ 1%; Schedule II para 6(b) suppliers ≤ 2.5%; other suppliers ≤ 0.5% of turnover in State or Union territory

Actual rate is as prescribed. Rate applies to turnover in the State or Union territory.

Section 10(2A) option

Tax ≤ 3% of turnover in State or Union territory

For a person not eligible under sub-sections (1) and (2), for example a service provider. Aggregate turnover in the preceding year must not exceed ₹50 lakh, and the conditions listed in section 10(2A) must be met. They are similar to section 10(2) but not identical.

Services allowance (second proviso to section 10(1))

Services value ≤ higher of 10% of preceding-year turnover in the State or Union territory, or ₹5,00,000

Excludes services under Schedule II para 6(b). Interest or discount on deposits, loans or advances (exempt) is not counted.

Eligibility under section 10(2)

No services (save the allowance); no non-taxable supplies; no inter-State outward supplies; no supply through an e-commerce operator liable to collect TCS under section 52; not a notified manufacturer; not a casual or non-resident taxable person

Same PAN rule: all registered persons with that PAN must opt.

Effects (section 10(3), (4))

Option lapses when turnover exceeds limit; no tax collected; no ITC

Lapse is from the day turnover exceeds the limit.

Forward charge (Section 12(2))

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

Applies to the extent covered by the invoice or payment.

Date of receipt of payment (forward charge)

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

Explanation 2 to Section 12(2).

Excess advance up to ₹1,000

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

Proviso to Section 12(2). It is an option, not compulsory.

Reverse charge (Section 12(3))

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

If none of these can be determined, use the date of entry in the recipient's books.

Vouchers (Section 12(4))

Date of issue of voucher if the supply is identifiable at that point; otherwise date of redemption

Single-purpose style vouchers fall under the first limb.

Residuary rule (Section 12(5))

Periodical return required: date on which return is to be filed. Any other case: date on which tax is paid

Used only when sub-sections (2), (3) and (4) cannot fix the date.

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

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

Applies to delayed payment of consideration.

Forward charge: general rule, Section 13(2)

Time of supply = earliest of (a) invoice date, if issued within the Section 31 period, or payment date, whichever is earlier; (b) service date, if invoice is not issued in time, or payment date, whichever is earlier; (c) date recipient shows receipt in books, if (a) and (b) do not apply

Applies to the extent covered by the invoice or payment.

Date of receipt of payment

Earlier of: date entered in supplier's books, date credited to supplier's bank account

Same meaning in Sections 13 and 14, with a bank-credit proviso in Section 14.

Excess up to ₹1,000

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

Option belongs to the supplier. It applies only to the excess over the tax invoice amount.

Reverse charge, Section 13(3)

Earlier of: (a) recipient's payment date (books entry or bank debit, whichever is earlier); (b) day after 60 days from supplier's invoice date, where the supplier issues the invoice; (c) recipient's invoice date, where the recipient must issue the invoice

If none can be determined, use the date of entry in the recipient's books. For associated enterprises with a supplier outside India, use the earlier of books entry or payment date.

Interest, late fee or penalty, Section 13(6)

Time of supply for that addition = date the supplier receives it

Covers late payment additions to value.

Change in rate: supply before the change, Section 14(a)

(i) invoice and payment both after change: earlier of payment or invoice date; (ii) invoice before change, payment after: invoice date; (iii) payment before change, invoice after: payment date

Rate follows the time of supply so found.

Change in rate: supply after the change, Section 14(b)

(i) payment after change, invoice before: payment date; (ii) invoice and payment both before change: earlier of the two; (iii) invoice after change, payment before: invoice date

Check the rate that applies on the date found.

Bank credit proviso, Section 14

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

Use it when the payment is entered in books near the change date but credited late.

Transaction value

Transaction value = price actually paid or payable for the supply

Applies only if supplier and recipient are not related and price is the sole consideration (Section 15(1)).

Taxable value

Taxable value = Transaction value + Section 15(2) inclusions − eligible Section 15(3) discounts

Amounts already in the price are not added again. Compute GST on this value.

Inclusions under Section 15(2)

(a) other-law taxes, duties, cesses, fees, charges if charged separately; (b) supplier's liability paid by recipient; (c) incidental expenses such as commission and packing, and things done at or before delivery; (d) interest, late fee, penalty for delayed payment; (e) subsidies linked to price

In (a), taxes under CGST, SGST, UTGST and the Compensation Act are excluded from this clause. In (e), Central and State Government subsidies are excluded.

Discount before or at supply

Excluded from value if duly recorded in the invoice

Section 15(3)(a).

Discount after supply

Excluded if (i) established by agreement at or before supply and linked to specific invoices, and (ii) recipient has reversed the ITC attributable to it, on the basis of the supplier's document

Section 15(3)(b). Both conditions must be met.

Related persons

Officers or directors of one another's businesses; legally recognised partners; employer and employee; person holding 25% or more of voting stock or shares of both; one controls the other; both controlled by a third person; together control a third person; members of the same family; sole agent, distributor or concessionaire

The Explanation to Section 15. 'Person' includes legal persons.

Quick revision

• Supply includes sale, transfer, barter, exchange, licence, rental, lease or disposal for consideration in the course or furtherance of business.
• Import of services for consideration is a supply even if it is not in the course or furtherance of business.
• Schedule I activities are supplies even without consideration.
• Schedule III activities and notified government activities are neither supply of goods nor supply of services.
• Section 7(1A) says activities that are supplies are treated as goods or services as per Schedule II.
• Section 9 levies CGST on intra-State supplies, at rates not exceeding 20%, on the value determined under Section 15.
• Reverse charge under Section 9(3) and 9(4) makes the recipient liable, as if the recipient were the supplier.
• Time of supply of goods is the earlier of the invoice date (or last date to issue it) and the date of payment.
• Under reverse charge for goods, time of supply is the earliest of receipt, payment, or the day after 30 days from the supplier's invoice.
• Value is the transaction value when the parties are not related and price is the sole consideration.
• Discount is excluded only if the conditions in Section 15(3) are met; for post-supply discount the input tax credit must be reversed.
• Related persons include those holding 25% or more of voting stock in both, and sole agents or distributors.

Common mistakes

• Treating supply as meaning sale only Fix: Remember that supply includes transfer, barter, exchange, licence, rental, lease and disposal. Name the right activity in your answer.
• Saying consideration must always be money Fix: Barter and exchange have consideration in kind. Clause (aa) also refers to deferred payment or other valuable consideration.
• Treating every transaction without consideration as a supply. Fix: Match the facts to a specific Schedule I entry. If none fits, the transaction is not a supply.
• Applying Schedule I to a free supply between related persons that is not business-related. Fix: Quote the condition in your answer and check it against the facts before concluding.
• Applying the average or weighted rate to a bundle. Fix: Section 8 gives only two outcomes: the principal supply's rate or the highest rate. No averaging.
• Treating any bundle as composite just because items are sold together. Fix: Test whether the items go together in the ordinary course of business. A gift hamper of unrelated items is mixed.
• Treating all supplies from unregistered persons as reverse charge. Fix: Reverse charge under section 9(4) applies only to a notified class of registered recipients and specified supplies. Check the notification before concluding.
• Saying reverse charge applies automatically to any recipient. Fix: Section 9(3) and 9(4) operate only on notified categories. Always say 'if notified'.
• Testing the limit against current-year turnover for eligibility. Fix: Eligibility uses the preceding financial year. Lapse under section 10(3) uses turnover during the current year.
• Saying a composition person can never supply any services. Fix: Section 10(2)(a) says 'save as provided in sub-section (1)'. Services up to the higher of 10% of turnover or ₹5 lakh are allowed, other than Schedule II para 6(b) services.

Exam tips

• Begin every answer by quoting the limb of Section 7(1) that applies. Examiners reward a clear provision, analysis, conclusion format.
• In case studies, underline words such as consideration, business, member, import and without consideration. Each one points to a different limb.
• Always close with the Section 7(2) check. A one-line statement that no Schedule III entry applies earns marks.
• When the question lists activities, state for each one whether it is a supply and under which clause. Do not bundle them.
• Learn the Schedule I, II and III entries from the Act itself, since questions often hinge on a specific entry.
• Quote the sub-section with the Schedule: Schedule I with section 7(1)(c), Schedule II with 7(1A), Schedule III with 7(2)(a).
• In case-based questions, write the exact condition from the entry, such as 'in the course or furtherance of business' or 'before the completion certificate'.
• Always give a clear classification: supply of goods, supply of services, or neither. A hedged answer loses marks.