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Schedule III of the CGST Act, deals with those areas which can be neither treated as supply of goods nor treated as supply of services. This schedule deals with those goods/services other than that which has been kept constitutionally out of the ambit of GST being alcoholic liquor of human consumption and the items for which applicability of GST has been deferred (five items of petrol being petroleum crude, High Speed Diesel, Aviation Turbine Fuel, Motor Spirit and Natural Gas).

Let us see the nuances in cases where supply shall be neither supply of goods nor supply of services

  • Services by employee to employer shall be regarded as neither supply of goods nor supply of services. However, service by employer to employee shall be a taxable service, which shall be covered by Schedule I-Entry 2 read with Valuation rules. Hence, providing cafeteria, recreation, sports facilities to employees will attract GST.
  • Services provided by Court or Tribunal is included in Schedule III. However, services provided by arbitral tribunal to a business entity shall be subject to RCM.
  • Functions by MPs,MLAs, in discharging their duties by virtue of Constitutional authority is not a supply of service. Providing of legal services by the same MPs/MLAs shall be a taxable service, to a business entity and will be an exempt service if provided to any other person.
  • Sale of building along with sale of land, if Completion certificate is not received and consideration is received shall be taxed. Sale of Building with entire consideration received after obtaining Completion certificate shall not be regarded as supply. Sale of Land is not a supply. However, developed land may be treated as supply with respect to developmental charges.
  • Goods includes actionable claims except money. Actionable claims apart from Betting, Lottery and Gambling are not to be treated as supplies. Attention is warranted here where lottery is treated as supply of goods, betting and gambling related actionable claim is considered as services through the clarification given by the Department vide F. No. 354/107/2017-TRU dated 04.01.2018.
  • Supply of goods which does not enter India from a non-taxable territory to another non-taxable territory has been regarded as neither supply of goods nor services. So, “entering India” is one of the conditions for taxing a supply from a non-taxable territory.
  • The point of taxation during a high-sea sales transactions is only at time of importation when the documents for customs clearance are filed. After including this entry, supplies before clearance of home consumption shall not fall within the ambit of supply. The controversy pertaining to reversal of Input tax credit has been put to rest, as post-insertion of this entry there won’t be any necessity for reversal.
  • Pseudo-Schedule III items-Inserted by way of Notification/Circular:
    • Services provided by way of any activity in relation to a function entrusted to a Panchayat under article 243G of the Constitution.
    • The inter-State movement of goods like movement of various modes of conveyance, between ‘distinct persons’ including trains, buses, trucks, tankers, trailers, vessels, containers & aircrafts, carrying goods or passengers or both, or for repairs and maintenance, would also not be regarded as supplies except in cases where such movement is for further supply of the same conveyance.
  • Inter-State movement of jigs, tools and spares, and all goods on wheels like cranes, except in cases where movement of such goods is for further supply of the same goods, would not be regarded as supplies.


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July 2024