The taxable event under GST is supply of goods or services or both made for a consideration in the course or furtherance of business. Supply has been defined under section 7 of the CGST Act, 2017. There are three schedules pertaining to section 7. Schedule I specifies the activities to be treated as supply even if made without consideration. Consideration is essential to constitute a supply. However, the activities listed in the schedule I would be treated as supply even if made without consideration. Since such activities are treated as a supply, GST would be leviable on these activities. When certain activity or transaction qualifies to be a supply, schedule II tells us whether such activity or transaction should be treated as a supply of goods or as a supply of services. In the pre-GST era, there were a lot of ambiguity regarding whether a particular transaction should be treated as a supply of goods or should be treated as a supply of services. Schedule II removes such ambiguity to a great extent. GST is leviable on the supply of goods or services or both. However, schedule III specifies certain activities or transactions which shall be treated neither as a supply of goods nor as a supply of services. Accordingly, the activities or transactions listed in schedule III are not treated as supply under the GST law. As such, no GST would be applicable on the activities or transactions listed in schedule III.
Section 7 of the CGST Act, 2017 defines ‘supply’ as below-
‘7. (1) For the purposes of this Act, the expression “supply” includes—
(a) all forms of supply of goods or services or both such as sale, transfer, barter, exchange, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business;
(aa) the activities or transactions, by a person, other than an individual, to its members or constituents or vice versa, for cash, deferred payment or other valuable consideration.
Explanation—For the purposes of this clause, it is hereby clarified that, notwithstanding anything contained in any other law for the time being in force or any judgment, decree or order of any Court, tribunal or authority, the person and its members or constituents shall be deemed to be two separate persons and the supply of activities or transactions inter se shall be deemed to take place from one such person to another;
(b) import of services for a consideration whether or not in the course or furtherance of business; and
(c) the activities specified in Schedule I, made or agreed to be made without a consideration;
(d) ***
(1A) Where certain activities or transactions constitute a supply in accordance with the provisions of sub-section (1), they shall be treated either as supply of goods or supply of services as referred to in Schedule II.
(2) Notwithstanding anything contained in sub-section (1),—
(a) activities or transactions specified in Schedule III; 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), (1A) 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.‘
Following are the schedules as mentioned in Section 7 of the CGST Act, 2017-
Schedule I- It specifies the activities to be treated as supply even if made without consideration.