Inward and Outward Supply in GST: Meaning, Example, Differences

Understanding the meaning of inward and outward supply is important for the correct filing of GST returns. It is necessary for a business owner to correctly identify supplies so that they can report them correctly in GSTR-1, GSTR-3B, and GSTR-9. This article will help readers understand these GST terminologies, how to report them, and their impact on GST returns.

What is Inward Supply in GST? 

As per section 2(67) of the CGST Act, inward supply is the receipt of goods or services (or both) by purchase, acquisition, or any other means, with or without consideration.

Example: 

-Raw material purchase 

-Availing of consultancy services 

-Goods or services importation 

-Credit purchases 

Note: The inward supplies qualify for claiming Input Tax Credit (ITC), except as restricted by Section 17(5).

How to File Inward Supply in GST?

Inward supplies are not directly reported by the recipient but are reported through supplier uploads, and then they appear in the Invoice Management System (IMS). The process of inward supplies begins when a supplier uploads their invoices in GSTR-1, which then auto-populates into the recipient's GSTR-2A and GSTR-2B.

• GSTR-1 (Supplier Filing): The supplier uploads invoices in their GSTR-1.
• GSTR-2A is a dynamic statement that is updated whenever the supplier files or amends invoices.
• GSTR-2B is a static monthly statement generated on a fixed date (generally the 14th of the following month). It is used for claiming Input Tax Credit (ITC).
• In GSTR-3B, inward supply entries are not required to be reported line-wise, but the total eligible ITC from inward supplies should be reflected under Table 4 - eligible ITC.
• In GSTR-9 (Annual Return), Taxpayers should disclose consolidated details of inward supplies and ITC availed during the year in the annual return (Form GSTR-9). This acts as a reconciliation statement between monthly/quarterly filings and annual disclosures.

Note: Taxpayers should reconcile the purchase registers with GSTR-2B before claiming ITC in GSTR-3B to ensure compliance and avoid mismatches.

Example of the flow:

1. Supplier uploads the invoice in GSTR-1
2. It appears in the recipient's GSTR-2A (dynamic) and IMS
3. Recipient verifies, reconciles with their purchase register(PR) and takes actions
4. It flows in their GSTR-2B
5. The recipient reports the total eligible ITC in GSTR-3B

This flow ensures a seamless credit mechanism and prevents fraudulent ITC claims, a key purpose of the IMS under GST.

HSN-Wise Summary of Inward Supplies in GSTR-9

Note: 

1. The above details are to be  reported in table 18 of GSTR-9
2. For accuracy, verify these details with your purchase register and GSTR-2B.

What is Outward Supply in GST? 

As per Section 2(83) of the CGST Act, "Outward supply" in relation to a taxable person, means a supply of goods or services or both by sale, transfer, barter, exchange, license, rental, lease or disposal, or any other mode, made or agreed to be made in the course or furtherance of business.

So, outward supply:

• Is made by a taxable person,
• Includes various modes like sale, barter, lease, license, etc.,
• Must be in the course or furtherance of business,
• Covers both goods and services.

This definition forms the basis for determining liability to pay GST, as outward supplies are typically taxable unless specifically exempted.

 Examples of Outward Supply:

• Sale of electronic items by a registered dealer to customers
• Leasing of machinery to another business
• Providing consulting services to clients
• Barter of office equipment for furniture
• Advance received for a future supply of goods or services

How to Report Outward Supply in GST?

Reporting of Outward Supplies under GSTR-1 – Table-wise Breakdown

Reporting of Outward Supplies under GSTR-3B and GSTR-9 – Table-wise Breakdown

HSN-Wise Summary of Outward Supplies in GSTR-9

In GSTR-9, Table 17 needs a summary of outward supplies, which includes: 

Note: For ensuring consistency, it is always advisable to cross-check with your sales register or ERP system.

Key Differences Between Inward and Outward Supply 

Impact of Inward and Outward Supply on GST Filing 

Proper classification of supplies impacts

• Calculation of tax liability 
• Eligibility for ITC 
• Accuracy of annual returns (GSTR-9) 
• Compliance under GST audit 

In order to file the return in the right manner, it is imperative to understand the difference  between inward and outward supplies under GST. Proper classification in GSTR-1, GSTR-3B, and GSTR-9 ensures correct tax liability, correct ITC claim, and compliance with GST rules. It is also required to regularly reconcile and match the transactions as per the GST portal against the books to ensure no mistakes are there.