Notwithstanding anything contained in section 7(1) above,—
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activities or transactions specified in Schedule III; or
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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.
Since the above activities shall neither be treated as supply of goods nor as supply of services, it means that such activities are outside the purview of GST and hence not liable to be taxed.
(a) Activities or transactions specified in Schedule III which will be treated neither as a supply of goods nor a supply of services under GST [Section 7(2)(a)]
As per Schedule III, the following activities or transactions which shall be treated neither as a supply of goods nor a supply of services:
| SL. No. |
Activities or transactions to he treated neither as a supply of goods nor a supply of services |
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 Constitution 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.
[Meaning of “Actionable claim": “Actionable claim" means a claim to any debt, other than a debt secured by mortgage of immovable property or by hypothecation or pledge of movable property, or to any beneficial interest in movable property not in the possession, either actual or constructive, of the claimant, which the civil courts recognise as affording grounds for relief, whether such debt or beneficial interest be existent, accruing, conditional or contingent. ] |
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Services that are provided by the employee to the employer in the course of employment are outside the ambit of services only. Services provided outside ambit of employment for a consideration would be a service. For example, if an employee provides his services on contract basis to an associate company of the employer, then this would be treated as provision of service.
Similarly, services provided on contract basis by a person to another person on principal-to-principal basis are not services provided in the course of employment.
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Any amount received by an employee from the employer on premature termination of contract of employment is treatable as amount paid in relation to services provided by the employee to the employer in the course of employment. Hence, amounts so paid would not be chargeable to GST. However any amount paid for not joining a competing business would be liable to be taxed being paid for providing the service of forbearance to act.
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The functions performed by the Members of Parliament or Members of State Legislature, etc. shall not cover such situation where these persons perform functions which are not related to the holding of their office and member. For example, if a Member of Parliament gets consideration for acting in a movie such consideration shall be subject to GST.
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Services of Funeral, burial, crematorium or mortuary including transportation of the deceased by any mode of transportation have been provided as exclusion from the purview of GST under this entry. Since the terms “funeral”, burial or “cremation” have been used, these services will cover all kinds of religions. In some religions, the deceased are put to funeral. In some other religions, the dead bodies are put to burial. Similarly, other modes of cremating the dead bodies will be covered.
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Sale of land or sale of building per se is not subject to tax under GST, but entry 5(b) of Schedule II shall be subject to GST. As per entry 5(b), if any consideration for sale of building, complex, civil structure or a part thereof is received before issuance of completion certificate or first occupation therein, the entire consideration for such sale shall be liable to tax under GST as a supply of services.
(b) Activities/Transactions Notified by the Government on Recommendation of GST Council [Section 7(2)(b)]
Such activities/ 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.
The Central Government has notified the services by way of any activity in relation to a function entrusted to a Panchayat under article 243G of the Constitution for the said purpose. [Notification No. 14/2017 CT (R) dated 28.06.2017] |
