Section 2
Section 2 of the CGST Act, 2017 defines important GST terms such as aggregate turnover, composite supply, electronic commerce, exempt supply, and goods, which form the foundation for interpretation and application of GST law.
Section 2 contains the definitions of important terms used throughout the CGST Act. It includes definitions from Section 2(1) to Section 2(121).
Applicability
- Section 2 of the CGST Act came into force from 22-06-2017 vide Notification No. 01/2017-Central Tax dated 19-06-2017.
Important Definitions under Section 2
Some commonly used definitions are:
Section 2(6) – Aggregate Turnover
Meaning
Aggregate Turnover means the total value of all supplies made by a person having the same PAN across India.
It includes:
- Taxable supplies
- Exempt supplies
- Exports of goods or services
- Inter-state supplies
It excludes:
- CGST, SGST, IGST and Compensation Cess
- Inward supplies on which tax is payable under Reverse Charge
Importance
Aggregate Turnover is mainly used for:
- GST Registration applicability
- Composition Scheme eligibility
- Determining applicability of GST provisions
Example
Suppose a business has:
- Taxable Supply: ₹32 Lakhs
- Exempt Supply: ₹5 Lakhs
- Export Sales: ₹8 Lakhs
Then Aggregate Turnover = ₹45 Lakhs
Even though export is zero-rated and exempt supply is non-taxable, both are included for turnover calculation.
Section 2(30) – Composite Supply
Meaning
Composite Supply means supply of:
- Two or more goods/services supplied together,
- Naturally bundled in ordinary course of business,
- One of them being the principal supply.
GST rate applicable will be the rate of the principal supply.
Important Conditions
- Supplies should be naturally bundled.
- One supply should dominate the transaction.
- Other supplies should be ancillary.
Example
A hotel provides:
- Room accommodation
- Complimentary breakfast
Here, accommodation is the principal supply and breakfast is ancillary.
Therefore, the entire transaction is taxed as hotel accommodation service.
Practical Importance
Helps determine:
- Correct GST rate
- Nature of supply
- Tax treatment
Section 2(44) – Electronic Commerce
Meaning
Electronic Commerce means supply of goods or services through:
- Digital platform
- Electronic network
- Internet-based applications
Examples
Supply through:
- E-commerce websites
- Mobile applications
- Online marketplaces
Examples of E-Commerce Operators
- Amazon
- Flipkart
- Swiggy
- Zomato
Practical Importance
Important for:
- TCS provisions under GST
- Registration requirements
- E-commerce compliance
- Liability of operators
Section 2(47) – Exempt Supply
Meaning
Exempt Supply means:
- Supply attracting Nil GST rate,
- Supply wholly exempt under GST notification,
- Non-taxable supply.
Types of Exempt Supply
- Nil Rated Supply
- Wholly Exempt Supply
- Non-Taxable Supply
Examples
- Fresh milk
- Unprocessed agricultural products
- Healthcare services
- Educational services (subject to conditions)
Practical Importance
Exempt supplies:
- Affect Input Tax Credit eligibility
- Included in Aggregate Turnover
- Require reversal of proportionate ITC in some cases
Section 2(52) – Goods
Meaning
Goods means every kind of:
- Movable property
But excludes:
- Money
- Securities
Includes:
- Actionable claims
- Growing crops
- Grass
- Things attached to land agreed to be severed before supply
Examples of Goods
- Mobile phones
- Machinery
- Furniture
- Vehicles
- Computers
Not Considered Goods
- Currency
- Shares and securities
Practical Importance
Section 2 is considered the foundation section of GST law because meanings of words used in other sections are interpreted based on these definitions.
The content provided in this article is intended solely for educational and informational purposes and should not be construed as professional accounting, taxation, legal, or financial advice. Readers are advised to consult a qualified professional before making any financial, tax, legal, or business decisions based on the information contained herein.Disclaimer