The Government of India has made changes in the GST provisions by making amendments in the Act itself vide Notification No. 02/2019 – Central Tax dated 29.01.2019 and made 01.02.2019 as the effective date for such changes.

An attempt has been through this article to analyze the changes made by the CGST (Amendment) Act 2018 in the provisions of ‘Scope of Supply’.

The important aspect of any taxation statue is the incidence of taxation i.e the point at which a particular transaction triggers tax. In GST, the incidence of taxation is ‘Supply’. Supply has not been defined under anywhere in the definitions clauses in the Act, rather the act provides an inclusive definition of the term Supply in section 7 of the CGST Act.


As per amended provisions of Section 7(1) of CGST Act 2017, which has been made retrospective from the date of inception i.e 01.07.2017,  “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;

(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; (and)

(d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II.

(Comment: The term ‘Supply’ has been amended to exclude the activities listed in Schedule II from the inclusive definition of ‘Supply’.. Whether a transaction is Supply or not, the underline test is to see that whether such transaction meet the criteria as mentioned in section 7(1). Whereas schedule II lists out certain activities which are either ‘supply of goods’ or ‘supply of services’. Thus this anomaly has now been removed by deleting clause (d) above and inserting a new sub-section (1A) vide CGST (Amendment) Act 2018 made wef 01.07.2017)

A new sub-section (1A) has been added after the sub-section (1) as below:

(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.


Entry No. 4 of Schedule I has been amended in order to delete the word ‘taxable’. It has the effect that import of service by any person, not necessarily by a taxable person, shall constitute ‘supply’ even without consideration.


The word ‘transactions’ has been inserted in the Heading of Schedule II and after the amendment the heading reads as ‘Activities or Transactions to be treated either as Supply of Goods or Supply of Services’. This amendment has been made with retrospective effect from 01.07.2017.


Schedule III lists out certain transactions which are treated neither as ‘supply of goods’ nor ‘supply of services’.

Vide CGST (Amendment) Act 2018, two entries namely Entry No. 07 and Entry No. 08 have been inserted to give effect to the following.

Entry No. 07: Earlier there was no provision to deal with a situation of supply of goods from a place in non-taxable territory to another place in non-taxable territory without such goods entering into India.

Now with the insertion of Entry No. 7, it has now become clear that such supply shall not be a ‘Supply within the meaning of section 7(2)(a)’.

Entry No. 08(a): As per the existing law, any transfer of ‘Warehoused Goods’ while goods remain in the said ‘Customs Bonded Warehouse’ is a taxable event so as to constitute the same as Supply within the meaning of Entry No. 1(a) of Schedule II and thus IGST is leviable on such transfer.

Again, as per Custom Law, when the said buyer removes goods from the ‘Customs Bonded Warehouse’ for home consumption, he is liable to pay Basic Custom Duty and IGST. It resulted in double taxation.

Thus in order to avoid double taxation on such transactions, Entry No. 08 has been inserted vide CGDT (Amendment) Act 2018 to deal with such situations.

Now as per the amended provision, first type of transfer i.e transfer of title of goods without the goods being removed from bonded warehouse for home consumption or otherwise, would not constitute a ‘supply’.

Entry No. 08(b): High Sea Sales’ is a terminology used in common parlance for ‘Sales in the course of import’. It refers to Sales transaction effected after dispatch of goods from port outside India but before reaching such goods to the Custom Frontier in India.

As per Section 7 (2) of the IGST Act, supply of goods imported into the territory of India till they cross customs frontier of India shall be treated as Inter-state Supply.

It has been clarified vide circular no. 33/2017 – Customs dated 01.08.2017 that IGST on High Sea Sales Transactions shall be levied at the time filing Customs Declaration for the first time.

The said circular suffers from a number of lacunae. The circular was issued under the Customs Laws while it seeks to clarify the leviability of IGST on ‘High Sea Sales’ which is not governed by the customs law. Customs law is applicable when actual importation of goods takes place and prior to that.

In order to put to rest the confusions, Entry No. 08(b) has been inserted vide CGST (Amendment) Act so as to deal specifically the High Sea Sales transactions. After the insertion of new entry, it has now become clear that such High Sea Sales transaction shall not constitute ‘Supply’ and hence IGST shall not be leviable on such transactions.

Disclaimer: The contents of this document are solely for informational and knowledge purpose. Neither have I accepted any liability for any loss or damage of any kind arising out of any inaccurate or incomplete information in this document nor for any action taken i

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Qualification: CA in Practice
Location: BHUBANESWAR, Odisha, IN
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