Section-7 Meaning and Scope of Supply under GST

INTRODUCTION:-

As per Section 7 (1) of CGST Act 2017, “supply” includes–

(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange,
license, rental, lease or disposal made or agreed to be made for a consideration by a
person in the course or furtherance of business;

(b) import of services for a consideration whether or not in the course or furtherance
of business;

(c) the activities specified in Schedule I,(Refer below) made or agreed to be made without a
consideration; and

(d) the activities to be treated as supply of goods or supply of services as referred to in

Schedule II (Refer below).

(2) Notwithstanding anything contained in sub-section (1),–

(a) activities or transactions specified in Schedule III (Refer below); or

(b) such activities or transactions undertaken by the Central Government, a State

Government or any local authority in which they are engaged as public authorities, as may
be notified by the Government on the recommendations of the Council, shall be treated
neither as a supply of goods nor a supply of services.

(3) Subject to the provisions of sub-sections (1) and (2), the Government may, on the
recommendations of the Council, specify, by notification, the transactions that are to be
treated as—

(a) a supply of goods and not as a supply of services; or

(b) a supply of services and not as a supply of goods.

SCHEDULE I Activities To Be Treated As Supply Even If

Made Without Consideration

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1. Permanent transfer or disposal of business assets where input tax credit has been
availed on such assets.

2. Supply of goods or services or both between related persons or between distinct persons
as specified in section 25, when made in the course or furtherance of business:

Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an
employer to an employee shall not be treated as supply of goods or services or both.

3. Supply of goods-

(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of
the principal; or

(b) by an agent to his principal where the agent undertakes to receive such goods on behalf
of the principal.

4. Import of services by a taxable person from a related person or from any of his other
establishments outside India, in the course or furtherance of business.

SCHEDULE II Activities To Be Treated As Supply Of Goods

Or Supply Of Services
1. Transfer

(a) any transfer of the title in goods is a supply of goods;

(b) any transfer of right in goods or of undivided share in goods without the transfer of title
thereof, is a supply of services;

(c) any transfer of title in goods under an agreement which stipulates that property in goods
shall pass at a future date upon payment of full consideration as agreed, is a supply of
goods.

2. Land and Building

(a) any lease, tenancy, easement, license to occupy land is a supply of services;

(b) any lease or letting out of the building including a commercial, industrial or residential
complex for business or commerce, either wholly or partly, is a supply of services.

3. Treatment or process:

Any treatment or process which is applied to another person’s goods is a supply of services.

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4. Transfer of business assets

(a) where goods forming part of the assets of a business are transferred or disposed of by
or under the directions of the person carrying on the business so as no longer to form part
of those assets, whether or not for a consideration, such transfer or disposal is a supply of
goods by the person;

(b) where, by or under the direction of a person carrying on a business, goods held or used
for the purposes of the business are put to any private use or are used, or made available to
any person for use, for any purpose other than a purpose of the business, whether or not
for a consideration, the usage or making available of such goods is a supply of services;

(c) where any person ceases to be a taxable person, then any goods forming part of the
assets of any business carried on by him shall be deemed to be supplied by him in the
course or furtherance of his business immediately before he ceases to be a taxable person,
unless-

(i) the business is transferred as a going concern to another person; or

(ii) the business is carried on by a personal representative who is deemed to be a taxable

person.

5. Supply of services The following shall be treated as supply of services, namely:-

(a) renting of immovable property;

(b) construction of a complex, building, civil structure or a part thereof, including a complex
or building intended for sale to a buyer, wholly or partly, except where the entire
consideration has been received after issuance of completion certificate, where required, by
the competent authority or after its first occupation, whichever is earlier.

Explanation to Schedule I.

For the purposes of this clause- (1) the expression “competent authority” means the Government
or any authority authorized to issue completion certificate under any law for the time being in
force and in case of non-requirement of such certificate from such authority, from any of the
following, namely:-

(i) an architect registered with the Council of Architecture constituted under the Architects Act,
1972; or

(ii) a chartered engineer registered with the Institution of Engineers (India); or

(iii) a licensed surveyor of the respective local body of the city or town or village or development
or planning authority;
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(2) the expression “construction” includes additions, alterations, replacements or remodeling of
any existing civil structure;

(c) temporary transfer or permitting the use or enjoyment of any intellectual property right;
(d) development, design, programming, customization, adaptation, upgradation,
enhancement, implementation of information technology software;

(e) agreeing to the obligation to refrain from an act, or to tolerate an act or a situation, or to
do an act; and

(f) transfer of the right to use any goods for any purpose (whether or not for a specified
period) for cash, deferred payment or other valuable consideration.

6. Composite supply: The following composite supplies shall be treated as a supply of

services, namely:-

(a) works contract as defined in clause (119) of section 2; and

(b) supply, by way of or as part of any service or in any other manner whatsoever, of goods,
being food or any other article for human consumption or any drink (other than alcoholic
liquor for human consumption), where such supply or service is for cash, deferred payment
or other valuable consideration.

7. Supply of Goods:

The following shall be treated as supply of goods, namely:- Supply of goods by any
unincorporated association or body of persons to a member thereof for cash, deferred
payment or other valuable consideration.

SCHEDULE III Activities or Transactions Which Shall Be

Treated neither As a Supply of Goods Nor A Supply Of
Services
1. Services by an employee to the employer in the course of or in relation to his
employment.

2. Services by any court or Tribunal established under any law for the time being in force.

3. (a) the functions performed by the Members of Parliament, Members of State Legislature,
Members of Panchayats, Members of Municipalities and Members of other local authorities;

(b) the duties performed by any person who holds any post in pursuance of the provisions
of the Constitution in that capacity; or

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(c) the duties performed by any person as a Chairperson or a Member or a Director in a
body established by the Central Government or a State Government or local authority and
who is not deemed as an employee before the commencement of this clause.

4. Services of funeral, burial, crematorium or mortuary including transportation of the

deceased.

5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.

6. Actionable claims, other than lottery, betting and gambling.

Explanation.-For the purposes of paragraph 2, the term “court” includes District Court, High
Court.

POINTS IN BRIEF:-

GST is levied on a supply of goods or services.

Supply of anything other than goods or services does not attract GST.
GST should be made for Consideration in the course or furtherance of business.
GST should be made by the taxable person [(Taxable person as per section 2 (107)
means person who is registered or liable to be registered under section 22 (person
liable for registration) and section 24 (Compulsory registration in certain cases)] within
a taxable territory (Taxable Territory as per section 2(109) means territory to which
provisions of this Act apply).

Consideration:

Section 2 (31) of the CGST Act, “Consideration” means in relation to supply of goods
or services or both includes –
(a) any payment made or to be made, whether in money or otherwise in respect of, in
response to or for the inducement of the supply of goods or services or both, whether
by the recipient or by any other person but shall not include any subsidy given by the
Central Government or a State Government.
(b) The monetary value of any act or forbearance in respect of, in response to or for
the inducement of the supply of goods or services or both whether by the recipient or
by any other person but shall not include any subsidy given by the Central
Government or State Government.
Provided that a deposit given in respect of the supply of goods or services or both
shall not be considered as payment made for such supply unless the supplier applies
such deposit as consideration for the said supply.

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