The main types of supply under GST differ based on tax treatment, how businesses bundle goods or services, and where the supplier and recipient are located. Section 7 of the CGST Act, 2017 defines the scope of supply and covers sales, transfers, leases, rentals, licenses, and other business transactions made for consideration. It also covers certain transactions without consideration under Schedule I.
Once a transaction qualifies as a supply, its classification determines the applicable GST treatment, including the tax rate and input tax credit rules. Supplies can therefore be taxable, exempt, nil-rated, zero-rated, or outside GST, while composite and mixed supplies follow separate classification rules. Businesses also classify supplies as inter-state or intra-state based on the location of the supplier and place of supply.
Key Takeaways
- Section 7 of the CGST Act defines supply and covers specified transactions made for consideration in the course or furtherance of business, along with certain supplies made without consideration.
- A supply may be taxable, exempt, nil-rated, zero-rated, or outside the GST framework.
- From 22 September 2025, the GST Council implemented a simplified rate structure centred on 5% and 18%, with a 40% special rate for specified goods and services.
- Exports and supplies to SEZ units or developers qualify as zero-rated supplies, subject to the applicable conditions and ITC provisions.
- A composite supply follows the GST treatment of its principal supply, whereas a mixed supply generally attracts the highest applicable rate among its individual supplies.
- Businesses making taxable supplies must assess whether they need GST registration based on their turnover, nature of supply, and applicable compulsory registration rules.
What is Supply Under GST?
Supply forms the taxable event under GST, so GST generally applies only when a transaction qualifies as a supply. Section 7 of the CGST Act, 2017 covers several types of transactions, including:
- The sale, transfer, barter, exchange, license, rental, lease, or disposal of goods or services for consideration in the course or furtherance of business.
- The import of services for consideration, whether or not the transaction relates to business.
- Certain activities listed in Schedule I, which the law treats as supplies even without consideration.
- Activities covered by Schedule II, which classifies specified transactions as supplies of goods or services.
Schedule III identifies activities that do not qualify as supplies of goods or services and therefore remain outside the scope of GST.
Types of Supply Under GST
GST classifies supplies according to their tax treatment, how businesses bundle them, where they take place, and who makes or receives them. This includes:
1. Based on Taxability
a. Taxable Supply
A taxable supply attracts GST at the applicable rate. Under the current rate structure, applicable rates include 5%, 18%, and 40%, along with specified rates such as 3% for gold and certain precious metals and 0.25% for rough diamonds. The supplier generally collects GST and may claim eligible input tax credit.
b. Exempt Supply
An exempt supply attracts no GST because the government has exempted it through notification. Businesses generally cannot claim ITC attributable to exempt supplies. Examples include specified healthcare and educational services.
c. Nil-Rated Supply
A nil-rated supply carries a 0% GST rate under the applicable tariff. Although the supplier does not charge GST, the supplier generally cannot claim ITC attributable to such supplies. Examples include specified fresh vegetables and cereals.
d. Zero-Rated Supply
A zero-rated supply carries a 0% effective tax burden while retaining ITC benefits, subject to the applicable conditions. Exports and supplies to SEZ units or developers qualify as zero-rated supplies under Section 16 of the IGST Act.
e. Non-GST Supply
GST does not cover certain goods, including alcoholic liquor for human consumption and specified petroleum products. Other applicable taxes, such as state VAT or excise duty, may apply to these products.
2. Based on Bundling
a. Composite Supply
A composite supply combines two or more goods or services that businesses naturally bundle and supply together, with one constituting the principal supply. Under Section 8(a), the GST treatment of the principal supply applies to the entire bundle. For example, a seller may supply goods together with packing, transportation, and insurance.
b. Mixed Supply
A mixed supply combines two or more independent goods or services for a single price without naturally bundling them. Under Section 8(b), the highest applicable GST rate among the items applies to the entire bundle. For example, a gift hamper containing chocolates and packaged beverages may qualify as a mixed supply.
3. Based on Location
a. Inter-State Supply
An inter-state supply occurs when the supplier’s location and the place of supply fall in different states or Union Territories. IGST generally applies under Section 7 of the IGST Act. The law also treats imports and supplies to or from SEZ units or developers as inter-state supplies.
b. Intra-State Supply
An intra-state supply occurs when the supplier’s location and the place of supply fall within the same state or Union Territory, subject to specific exceptions. CGST and SGST/UTGST generally apply under Section 8 of the IGST Act.
4. Based on Direction and Nature
a. Outward Supply
A registered person makes an outward supply when the person supplies goods or services to another person. Businesses generally report these supplies in GSTR-1.
b. Inward Supply
A registered person receives an inward supply when another person supplies goods or services to the registered person. Eligible inward supplies can support an Input Tax Credit claim.
c. Continous Supply
A continuous supply involves the ongoing or recurring supply of goods or services under a contract with periodic payment or invoicing. Examples include telecom, internet, and certain annual maintenance services.
d. Reverse charge supply
Under reverse charge, the recipient pays GST instead of the supplier for notified supplies covered by Section 9(3) or other applicable provision.
How Supply Type Affects GST Rate and Input Tax Credit?
The type of supply determines the GST treatment, including the applicable tax rate and whether you can claim input tax credit on related purchases. The table below compares the treatment of each type of supply.
| Type of Supply | GST Treatment | Input Tax Credit | Example |
| Taxable supply | Applicable GST rate, such as 5%, 18%, or 40%, depending on the goods or services | Generally available, subject to ITC rules | Mobile phones, taxable restaurant services |
| Zero-rated supply | 0% effective tax burden | Available, subject to conditions | Exports, supplies to SEZ units or developers |
| Exempt supply | No GST because the government exempts the supply | Generally not available on inputs attributable to exempt supplies | Specified healthcare and educational services |
| Nil-rated supply | 0% GST rate under the tariff | Generally not available on inputs attributable to nil-rated supplies | Specified fresh vegetables, salt |
| Non-GST supply | Outside the GST framework | GST ITC does not apply | Alcohol for human consumption, specified petroleum products |
| Composite supply | Rate applicable to the principal supply | Depends on the applicable ITC rules | Goods supplied with packing and transportation |
| Mixed supply | Highest applicable GST rate among the items | Depends on the applicable ITC rules | Gift hamper containing independently taxable items |
Note: The key distinction lies between zero-rated, exempt, and nil-rated supplies. Zero-rated supplies can retain ITC benefits and may qualify for refunds, subject to the applicable conditions.
