In India’s GST system, everything begins with one big idea — supply.
If there’s a supply, there’s tax. If not, there’s no GST.
But not every supply involves payment. Some transactions are taxable even when no money changes hands. This is what makes the GST concept of supply both simple and tricky at the same time.
In this post, we’ll look at the types of supply under GST, understand what’s covered under supply with consideration and without consideration, and see a few easy examples to make it clear.
What Does “Supply” Mean?
Under GST, “supply” includes all forms of supply of goods or services such as sale, transfer, barter, exchange, license, rental, lease, or disposal — made or agreed to be made for a consideration in the course or furtherance of business.
That means, if something of value moves from one person to another as part of a business deal, GST comes into play.
However, even certain activities done without payment are treated as supply under Schedule I of the CGST Act.
So, broadly speaking, GST recognizes two types of supply:
- Supply made with consideration
- Supply made without consideration (deemed supply)
Let’s look at both one by one.
Supply with Consideration
This is the most straightforward form of supply — you sell or provide something, and in return, you get paid. It’s what most of us normally think of when we say “business.”
Key Features
- There is something of value exchanged (money, goods, or services).
- The activity is done in the course or furtherance of business.
- Both parties are independent persons (not related or same registration).
💬 Example 1: Sale of Goods
A trader sells 100 pens for ₹2,000 to a stationery shop.
👉 It’s a supply of goods with consideration, so GST applies on ₹2,000.
💬 Example 2: Sale of Services
A marketing agency designs a company’s logo for ₹10,000.
👉 It’s a supply of services for consideration, and GST applies on the service fee.
💬 Example 3: Barter or Exchange
Consideration doesn’t always mean cash — even goods or services exchanged can count.
👉 Example:
A tailor stitches clothes for a carpenter, and the carpenter repairs the tailor’s shop furniture in return. Both have supplied services of equal value — so both must pay GST on their respective supplies.
💬 Example 4: Composite Supply
Sometimes, two or more items are supplied together as part of a single natural package.
👉 Example:
A hotel provides a stay with complimentary breakfast. The entire transaction is treated as one composite supply, where the main supply (hotel service) decides the tax rate.
💬 Example 5: Mixed Supply
When goods or services that are not naturally bundled are sold together for a single price, it’s called a mixed supply.
👉 Example:
A Diwali gift hamper with chocolates, perfume, and juice sold together for ₹1,000.
It’s a mixed supply, and the highest GST rate among the items applies to the whole pack.
In all the above cases, there’s a clear exchange — something given and something received. That’s what makes them supplies with consideration under GST.
Supply without Consideration (Deemed Supply)
Now comes the interesting part — supplies made without payment that are still taxable under GST. Even though no money is received, the law treats them as supply because they involve business assets or transactions that have taxable value.
These are listed under Schedule I of the CGST Act.
(a) Permanent Transfer or Disposal of Business Assets
If a business permanently gives away or disposes of goods on which it had claimed input tax credit (ITC), it’s considered supply — even if no money is received.
💬 Example:
A company distributes old laptops to employees as gifts. Since ITC was claimed when buying the laptops, giving them away is a deemed supply, and GST must be paid on their value.
(b) Supply between Related or Distinct Persons
In GST, branches in different states are treated as distinct persons — even if they belong to the same company. Transfers between them count as supply, even when there’s no invoice or payment.
💬 Example:
A manufacturer in Gujarat sends goods to its registered branch in Maharashtra. Even though it’s an internal movement, it’s a supply without consideration because both are separate registrations.
However, if the transfer is within the same state and same GST registration, it’s not considered supply.
(c) Transactions between Principal and Agent
Whenever goods are moved between a principal and his agent for sale or further supply, it’s treated as supply even without payment.
💬 Example:
A company sends goods worth ₹5 lakh to its sales agent to sell them on its behalf. The moment goods move to the agent, it’s treated as supply, even if payment will happen later.
Similarly, if the agent sells goods in his own name and keeps the proceeds, that too is treated as supply.
(d) Import of Services from Related Persons or Own Establishments Abroad
If a company in India receives services from its foreign branch or head office, it’s a supply even when no payment is made.
💬 Example:
An Indian subsidiary gets management advice or software support from its parent company in the U.S. without paying for it. Still taxable — it’s a deemed supply of service under GST.
Summary of Supply with vs. without Consideration
| Basis | Supply with Consideration | Supply without Consideration |
| Payment | Money, goods, or services received | No payment received |
| Example 1 | Sale of a laptop for ₹50,000 | Company gifting laptop (ITC claimed) |
| Example 2 | Rent of office space for ₹30,000 | Free transfer of goods to another state branch |
| Example 3 | Service provided for a fee | Goods sent from principal to agent |
| Taxability | Always taxable if business-related | Taxable only if listed in Schedule I |
What Is Not a Supply (Even Without Consideration)
It’s equally important to know what doesn’t count as supply under GST. Some activities are kept outside the GST scope entirely — listed under Schedule III.
Here are a few key examples (relevant to this topic):
- Services by an employee to employer (salary, bonus).
- Gifts from employer to employee up to ₹50,000 per year are exempt.
- Personal transactions (like selling your old car or donating clothes) are not considered supply because they’re not part of business.
These exclusions prevent GST from applying to personal or employment-based activities.
Real-Life Scenarios (Simple Illustrations)
Let’s understand a few practical examples that often create confusion in GST:
Example 1: Gifts to Employees
A company gifts a gold watch worth ₹60,000 to an employee during the festival season.
👉 Up to ₹50,000 is exempt, but GST applies on the balance ₹10,000 since it’s a deemed supply without consideration.
Example 2: Head Office Sending Goods to Branch
A company’s head office in Delhi sends display products to its Chennai branch.
👉 Even without payment, it’s a supply without consideration under Schedule I because they’re distinct entities in GST.
Example 3: Principal–Agent Relationship
A manufacturer sends goods to its sales agent in another city.
👉 Even though ownership hasn’t transferred and no money was paid, GST applies as a deemed supply.
Example 4: Free Sample Distribution
A cosmetic brand distributes free sample boxes of its new product to retailers for promotion.
👉 If the company had claimed ITC on those items, giving them away is a deemed supply and taxable under GST.
Example 5: Services from Foreign Office
An Indian software company receives technical guidance from its overseas head office without any payment.
👉 It’s an import of services without consideration, hence taxable as a deemed supply.
Why GST Includes Supply Without Consideration
You might wonder — why should GST apply when no money changes hands?
The logic is simple: If businesses could move goods or services internally or to related parties for free, they could easily avoid paying GST on real consumption.
So, the law includes these special cases to maintain fairness and transparency in the tax system.
Final Thoughts
The concept of types of supply under GST makes sure that every business activity — whether paid or unpaid — is treated consistently for taxation purposes.
In summary:
- Most supplies happen with consideration — sale, barter, rent, or exchange.
- Some happen without consideration, but are still taxable — transfers between branches, agents, or free distribution of business assets where ITC was claimed.
- Personal gifts, salaries, and private dealings remain outside GST.
Understanding the difference helps businesses avoid mistakes, stay compliant, and plan transactions smartly.
In simple terms:
“If your business gives, transfers, or moves something of value — whether money comes in or not — check if it falls under “supply” in GST.”
