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 2]

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 2]

(b) import of services for a consideration whether or not in the course or furtherance of business; and [Refer Note 1(a)]

(c) the activities specified in Schedule I, made or agreed to be made without a consideration, and [Refer Note 1(b)]

(d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. Omitted [Refer Note 1(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 1(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) and (2) 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 1(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.

Note: CBEC notifies 01/07/2017 as the Commencement date for Sections 6 to 9, 11 to 21, 31 to 41, 42 [except proviso to sub-section (9)], 43 [except proviso to sub-section (9)], 44 to 50, 53 to 138, 140 to 145, 147 to 163 and 165 to 174 of the CGST Act 2017, vide Notification 9/2017.

Amendments History:

1. Amendments made vide Section 3 of the CGST (Amendment) Act, 2018 (GOI Notification dated 29/08/2018), w.r.e.f. 01/07/2017, followed with Notification 2/2019 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)’.

2. 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 dated 28/03/2021). Subsequently, CBIC notifies 01/01/2022 as the commencement date vide Notification 39/2021.

Related Notifications:

1. With regard to clause (b) of sub-section (2), CBIC has issued Central Tax Rate Notifications 14/2017  and 16/2018 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

Section 7 of the Central Goods and Services Tax (CGST) Act, 2017 outlines the “Scope of Supply” under the Act, which is an essential element for the levy and collection of tax under the CGST Act:

Section 7(1) of the CGST Act

Subsection (1) defines “supply” as including:

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) 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. The explanation clarifies that the person and its members or constituents are considered separate entities and transactions between them are considered supplies.

b) Import of services for a consideration, regardless of whether it is in the course or furtherance of business.

c) Activities specified in Schedule I, made or agreed to be made without a consideration.

Section 7(1A) of the CGST Act

Subsection (1A) explains that if certain activities or transactions constitute a supply as per subsection (1), they shall be treated as either a supply of goods or supply of services, as referred to in Schedule II.

Section 7(2) of the CGST Act

Subsection (2) states that activities or transactions specified in Schedule III or those undertaken by the Central Government, a State Government or any local authority as public authorities (as notified by the Government based on the recommendations of the Council) are treated neither as a supply of goods nor a supply of services.

Section 7(3) of the CGST Act

Subsection (3) allows the Government, based on the recommendations of the Council, to specify transactions by notification 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.

In summary, Section 7 of the CGST Act, 2017, provides a comprehensive definition of “supply,” which forms the basis for the levy of the CGST. It also clarifies the treatment of certain transactions as either a supply of goods or services and specifies activities that are not considered supplies under the Act.

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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, Finance Act 2023, CGST Amendment Act 2023, 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 the Amendments made by various Notifications issued by CBIC from time to time, with best possible efforts for accuracy. In any case, E&OE. For official/ updated information, please visit CBIC website.

CBIC Updates (GST)

Index of GST Circulars, Notifications, Press Releases, Orders, etc. issued by CBIC from 2017 and onwards along with Section-wise/ Rule-wise Text of GST Acts/ Rules:

CGST: CGST Act/ Definitions, CGST Rules, GST Forms

IGST: IGST Act/ Definitions, IGST Rules

UTGST: UTGST Act/ Definitions, UTGST Rules

GST Circulars (CGST/ IGST/ UTGST): 2023, 2022, 2021, 2020, 2019, 2018, 2017

GST Instructions: 2023, 2022, 2021, 2020, 2019, 2018, 2017

CGST Notifications: 2023, 2022, 2021, 2020, 2019, 2018, 2017

CGST Rate Notifications: 2023, 2022, 2021, 2020, 2019, 2018, 2017

IGST Notifications: 2022, 2021, 2020, 2019, 2018, 2017

IGST Rate Notifications: 2023, 2022, 2021, 2020, 2019, 2018, 2017

UT Tax/ UTGST Notifications: 2022, 2021, 2020, 2019, 2018, 2017

UT Tax/ UTGST Rate Notifications: 2023, 2022, 2021, 2020, 2019, 2018, 2017

Compensation Cess Notifications: 2023, 2022, 2021, 2020, 2019, 2018, 2017

Compensation Cess Rate Notifications: 2023, 2022, 2021, 2020, 2019, 2018, 2017

CBIC Orders (CGST/ IGST/ UTGST): 2023, 2022, 2021, 2020, 2019, 2018, 2017

CBIC Press Releases: 2020, 2019, 2018, 2017

Note: For Official/ updated copy, please visit the CBIC website.