JQuery Autocomplete PHP source issue

I am trying to use JQuery autocomplete feature using separate php script as source. When I use static table directly in JQuery as source, it works flawlessly:

$(function() {
   $( ".auto" ).autocomplete({
     source: ["Choice1", "Choice2"],
     minLength: 1
   });
});

But when I change the source to the php file (which is located in the same folder), the autocomplete feature doesn't seem to work.

$(function() {
   $( ".auto" ).autocomplete({
     source: 'search.php',
     minLength: 1
   });
});

Here is rest of my code related to autocomplete

Input field:

<tr>
    <div class="ui-widget">
       <td class="tg-031e"><form action="" method="post"><input type="text" class="txtbox auto ui-autocomplete-input" value=""/></form></td>
    </div>
</tr>

Php script:

<?php
    include_once 'php/database_connect.php';
    $searchTerm = $_GET['term'];

    $query = $conn->query("SELECT type FROM material");
    while ($row = $query->fetch_assoc()) {
       $data[] = $row['type'];
    }

    echo json_encode($data);
?>

P.S. Its not up to database connection ($conn), because I use it in other scripts without any problem.