Supply – Definition under Section 7

## Supply – The Taxable Event under GST

### Why 'Supply' is Critical

Under GST, the taxable event is supply — not sale, not manufacture, not provision of service. If a transaction is not a supply, GST cannot be levied at all.

### Inclusive Definition of Supply – Section 7

Supply includes:

#### Limb 1 – Section 7(1)(a): The Three-Ingredient Test

Any transaction of:

All three ingredients (Goods/Services + Consideration + Business) must be present for Limb 1 to apply.

#### Limb 2 – Section 7(1)(b): Import of Services

Import of services for consideration is supply — even if NOT in the course of business. (Only this limb relaxes the business requirement.)

#### Limb 3 – Section 7(1)(c): Schedule I Activities

Certain activities are deemed supply even without consideration (e.g. permanent transfer of business assets where ITC was availed). Discussed separately.

#### Limb 4 – Section 7(1A) read with Schedule II

Where activity qualifies as supply, Schedule II classifies whether it is supply of goods or services.

#### Limb 5 – Section 7(2) read with Schedule III

Specified activities/transactions are neither supply of goods nor of services (negative list — e.g. services by an employee to employer, sale of land, sale of building post-CC).

#### Limb 6 – Section 7(1)(aa): Club to Members

Activity or transaction by a person, other than an individual, to its members or vice versa, for consideration, is supply — even if it lacks the traditional 'two-person' nexus.

### The Flow Chart

```

Is the transaction in Schedule III?

|

Yes — NOT a supply (game over)

No — Continue

|

Does it satisfy Section 7(1)(a):

goods/services + consideration + business?

|

Yes — SUPPLY (classify under Schedule II)

No — Continue

|

Is it import of service for consideration (7(1)(b))?

Or covered in Schedule I (7(1)(c)) — supply w/o consideration?

Or club-member transaction (7(1)(aa))?

|

Yes — SUPPLY

No — NOT a supply

```

### Examples of Each Transaction Type