Third Schedule (III) to CGST Act 2017: Activities/ Transactions which shall not be treated as Supply of Goods or Services

Provisions under the ‘Third Schedule (III)’ to the CGST Act 2017 regarding “Activities/ Transactions which shall not be treated as Supply of Goods or Services”:

Schedule III to CGST Act 2017: Activities or Transactions which shall be treated neither as a Supply of Goods nor a Supply of Services (See Section 7)

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

(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 specified actionable claims. [Note 4]

7. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India. [Refer Note 1 & 3]

8. (a) Supply of warehoused goods to any person before clearance for home consumption; [Note 1 & 3]

(b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption. [Note 1 & 3]

Explanation 1: For the purposes of paragraph 2, the term “court” includes District Court, High Court and Supreme Court. [Refer Note 2]

Explanation 2: For the purposes of paragraph 8, the expression “warehoused goods” shall have the same meaning as assigned to it in the Customs Act, 1962. [Refer Note 2 & 3]

Amendments History:

1. Paragraphs 7 & 8 inserted vide the CGST (Amendment) Act, 2018 (GOI Notification dated 29/08/2018), followed with Central Tax Notification 2/2019 on commencement date of 01/02/2019. Thus certain supplies in respect of Merchant trading, Sale of goods in customs bonded warehouse and High Seas sales inserted in Schedule.

2. Explanation renumbered as Explanation 1. Further, Explanation 2 inserted vide the CGST (Amendment) Act, 2018 (GOI Notification dated 29/08/2018), followed with Central Tax Notification 2/2019 on commencement date of 01/02/2019.

3. Retrospective amendment for exemption to certain activities and transactions in Schedule III of the CGST Act, vide Section 159 of the Finance Act, 2023, followed with Central Tax Notification 28/2023 on commencement date of 01/10/2023:

(i) Paragraphs 7 and 8 and the Explanation 2 thereof (as inserted vide section 32 of the Finance Act, 2018) shall be deemed to have been inserted therein with retrospective effect from July 1, 2017.

(ii) Accordingly, no refund shall be made of all the tax which has been collected, but which would not have been so collected, had this retrospective amendment or exemption been in force at all material times.

4. Paragraph 6 amended vide the CGST (Amendment) Act, 2023 (Notification dated 18/08/2023), pending notification on commencement date.

Commentary on Schedule III of the CGST Act, 2017

Schedule III of the CGST Act, 2017 lists activities and transactions that are neither considered as a supply of goods nor a supply of services under the GST framework. This means that the transactions listed under this schedule are not subject to GST. Below is a commentary on each clause with relevant examples:

Clause 1 of Schedule III of the CGST Act, 2017

Services by an employee to the employer in the course of or in relation to his employment: Any service provided by an employee to their employer as part of their job responsibilities is not considered a supply of goods or services. For example, a software engineer working on a project for their employer is not subject to GST.

Clause 2 of Schedule III of the CGST Act, 2017

Services by any court or Tribunal established under any law for the time being in force: Judicial services provided by courts and tribunals, including District Court, High Court and Supreme Court are not subject to GST.

Clause 3 of Schedule III of the CGST Act, 2017

Functions and duties performed by certain government officials, such as Members of Parliament, State Legislature, Panchayats, Municipalities and other local authorities, as well as constitutional post holders and certain chairpersons, members or directors of government-established bodies are not considered as supplies under GST.

Clause 4 of Schedule III of the CGST Act, 2017

Services of funeral, burial, crematorium or mortuary, including transportation of the deceased: Services related to the disposal of human remains, such as conducting a funeral, cremation or burial and transporting the deceased are exempt from GST.

Clause 5 of Schedule III of the CGST Act, 2017

Sale of land and subject to clause (b) of paragraph 5 of Schedule II, sale of building: Transactions involving the sale of land and buildings (except under-construction buildings where the buyer receives possession before completion) are not considered supplies under GST.

Clause 6 of Schedule III of the CGST Act, 2017

Actionable claims, other than lottery, betting and gambling: Actionable claims refer to claims that can be legally enforced. These claims excluding lottery, betting and gambling activities are not subject to GST. Examples include insurance claims and debt claims.

Clause 7 of Schedule III of the CGST Act, 2017

Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India: Transactions involving goods moving between two non-taxable territories (outside India) without entering India are not subject to GST.

Clause 8 of Schedule III of the CGST Act, 2017

Supply of warehoused goods to any person before clearance for home consumption and supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption: This provision pertains to transactions involving goods stored in a customs warehouse in India. GST is not applicable to the supply of these goods before they clear customs for domestic consumption. This also applies to the transfer of goods ownership through endorsement of documents of title after dispatch from the port of origin, but before customs clearance.

These provisions aim to exempt specific transactions and activities from GST, ensuring that the tax system remains fair, simple and efficient.

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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 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.