Section 7 of CGST Act 2017: Scope of Supply

Provisions under Section 7 of the Central Goods and Services Tax (CGST) Act, 2017 relating to “Scope of Supply”:

Section 7 of CGST Act 2017: Scope of Supply (CHAPTER III LEVY AND COLLECTION OF TAX)

(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, license, 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. [Refer Note 3]

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; [Refer Note 3]

(b) import of services for a consideration whether or not in the course or furtherance of business; and [Refer Note 2(a)]

(c) the activities specified in Schedule I, made or agreed to be made without a consideration, and [Refer Note 2(b)]

(d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. Omitted [Refer Note 2(c)]

(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. [Refer Note 2(d)]

(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- [Refer Note 2(e)]

(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.

Amendments History:

1. CBEC notifies 01/07/2017 as the Commencement date for Section 7 of the CGST Act 2017, vide Central Tax Notification 9/2017 dt. 28/06/2017.

2. Amendments made vide Section 3 of the CGST (Amendment) Act, 2018 (GOI Notification dt. 29/08/2018), w.r.e.f. 01/07/2017, followed with Central Tax Notification 2/2019 dt. 29/01/2019 on commencement date of 01/02/2019:

a) in clause (b) of Sub-section (1), the word ‘and‘ inserted after the text ‘or furtherance of business’;

b) in clause (c) of Sub-section (1), the word ‘and‘ omitted after the text ‘a consideration’;

c) clause (d) of Sub-section (1) omitted;

d) Sub-section (1A) inserted; and

e) in Sub-section (3), the text ‘sub-sections (1) and (2)‘ substituted with the text ‘sub-sections (1), (1A) and (2)‘.

3. Clause (aa) and Explanation inserted in sub section (1), w.r.e.f. 01/07/2017, vide Section 108 of the Finance Act 2021: GOI Notification dt. 28/03/2021. Subsequently, CBIC notifies 01/01/2022 as the commencement date vide Central Tax Notification 39/2021.

4. With regard to clause (b) of sub-section (2), CBIC has issued Notification 14/2017 Central Tax Rate dt. 28/06/2017 and Notification 16/2018 Central Tax Rate dt. 26/07/2018 for notified activities or transactions which shall not be treated as a supply of goods/ services under CGST Act.

Commentary on Section 7 of the CGST Act:

This Section deals with the scope of supply under the Goods and Services Tax (GST) regime in India. This section determines what activities or transactions constitute a “supply” and thus are subject to GST.

i) Section 7(1)(a) covers the most common forms of supply such as sale, transfer, barter, exchange, license, rental, lease, or disposal of goods or services, provided they are made for a consideration and in the course or furtherance of business.

ii) Section 7(1)(b) refers to the import of services for a consideration, irrespective of whether it is in the course or furtherance of business.

iii) Section 7(1)(c) includes activities specified in Schedule I of the CGST Act, which are made or agreed to be made without a consideration. Examples include the supply of goods or services between related persons or distinct persons when made in the course or furtherance of business.

iv) Section 7(1)(d) pertains to activities specified in Schedule II, which determine whether a transaction is to be treated as a supply of goods or services.

v) Section 7(2) states that activities or transactions specified in Schedule III, or certain activities/transactions by the Central Government, State Government, or local authorities as public authorities, shall be treated neither as a supply of goods nor a supply of services.

vi) Section 7(3) empowers the government to specify, by notification and based on the recommendations of the GST Council, the transactions to be treated as either a supply of goods or a supply of services.

Section 7 of the CGST Act, 2017 outlines the scope of supply for the GST regime in India. It covers various forms of transactions and activities and specifies when they are to be considered as a supply of goods, a supply of services, or neither.

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Note: The CGST Act 2017 has been notified vide GOI Notification dt. 12/04/2017, which has subsequently been amended through CGST (Extension to J&K) Act 2017, Finance Act 2018, CGST Amendment Act 2018, Finance Act 2019, Finance Act 2020, Taxation and Other Laws (Relaxation of Certain Provisions) Ordinance 2020, Finance Act 2021, Finance Act 2022 including various Notifications issued by the Govt./ CBIC from time to time, relating to the commencement dates of various Sections/ Provisions in the respective CGST/ Amendment Acts, wherever required. Information on this page is a Section-wise compilation of Amendments made by all such Notifications, with best possible efforts for accuracy. In any case, E&OE. For official/ updated information, please visit CBIC website.