Scope of supply
Section 7, CGST Act
Straight from CBIC
Official source, not a summary of a summary
Full text included
Read the exact words of the law yourself
Amendment history
See what changed, and when
Free, always
No login, no paywall, no book to buy
In one line
Section 7 defines the SCOPE OF SUPPLY – the taxable event. ‘Supply’ includes sale, transfer, barter, exchange, licence, rental, lease and disposal made for consideration in the course of business, plus imports of services and the Schedule I deemed supplies (even without consideration). Schedule III lists activities treated as neither goods nor services.
What this means in practice
The parts that actually decide cases — the things a practitioner checks first.
Schedule I supplies are taxable WITHOUT consideration: permanent transfer of business assets where credit was taken, supplies between distinct or related persons in the course of business (with the employer-employee gift exception up to Rs 50,000 a year), principal-agent supplies, and import of services from a related person.
Schedule III is the outside-GST list: employee services to the employer, court and tribunal services, MP/MLA functions, funeral services, sale of land, sale of a completed building, actionable claims other than specified ones, and – inserted from 01-02-2019 – high seas sales and supplies from a bonded warehouse before clearance.
7(1A) and Schedule II now only CLASSIFY a supply as goods or services; they no longer decide whether something is a supply. That change is retrospective to 01-07-2017.
Secondment of employees is the recurring fight: Schedule III protects a genuine employment relationship, but Northern Operating Systems (SC, 19-05-2022) taxed the arrangement on its documents. Read the agreement before answering.
Questions people actually ask
Real questions we get on this provision, answered straight.
Is a stock transfer to our own branch in another State a supply?+
Yes. Separate registrations are distinct persons under section 25(4), and Schedule I makes a supply between distinct persons in the course of business taxable even without consideration. Value it under Rule 28 – where the receiving branch gets full credit, the invoice value is accepted.
We sold land with a building under construction. Is that outside GST?+
Sale of land is outside GST under Schedule III, and so is a building sold entirely after the completion certificate. But consideration received before completion for an under-construction unit is a taxable supply of construction service – the split depends on the date of the completion certificate or first occupation.
How this provision is built
The skeleton, clause by clause — useful when a notice cites a specific sub-clause.
The exact words of the law
2,145 characters, uneditedReproduced from the CBIC text. We explain it above — but you should always be able to read it yourself.
Read the full provision+
(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, licence, rental, lease or disposal made or agreed to be made for a consideration by a person in the course or furtherance of business; 1 [(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. 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;]
(b) import of services for a consideration whether or not in the course or furtherance of business; 2 [and]
(c) the activities specified in Schedule I , made or agreed to be made without a consideration; 3 [****]
(d) 4 [****]. 5 [(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 .]
(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 6 [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 –
(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.
High Court cases on this section
Judgments in our index that cite this provision. Being listed does not make a case good law — it may have been appealed or distinguished since. Read it before relying on it.
Neeyamo Enterprise Solutions Private Limited v. The Commercial Tax Officer, Madurai
Read the judgment PDF →
AEROCOM CUSHIONS PVT. LTD., NAGPUR v. ASSISTANT COMMISSIONER (ANTI-EVASION), CGST AND CX, NAGPUR-1, COMMISSIONERATE, NAGPUR AND AN
Read the judgment PDF →
MANISH KUMAR v. DIRECTOR GENERAL OF GST INTELLIGENCE
Read the judgment PDF →
SPK AND CO v. THE STATE TAX OFFICER
Read the judgment PDF →
M/s.leela Enterprises v. Assistant Commissioner (ST)
Read the judgment PDF →
M/s.Vasudeva Reddy v. Assistant Commissioner (ST)
Read the judgment PDF →
M/s.Gee Kay Steel Corporation, v. The Assistant Commissioner (ST),
Read the judgment PDF →
M/s. Sita Devi Vundavalli v. Assistant Commissioner (ST)
Read the judgment PDF →
69 more on record. Search all GST case law →
What changed, and when
The amendment trail, newest first — because the version that applies to your case depends on the period.
2017-07-01 · Inserted
39/2021-C.T
Inserted w.e.f. 01st July, 2017 by s. 108 of The Finance Act, 2021 (No. 13 of 2021) – Brought into force on 01st January, 2022 vide Notification No. 39/2021-C.T …
2017-07-01 · Inserted
Inserted w.e.f 01st July, 2017 by s. 3 of The Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018) – Brought into force on 01st February, 2019.
2017-07-01 · Omitted
Omitted – " and" w.e.f 01st July, 2017 by s. 3 of The Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018) – Brought into force on 01st Februar …
2017-07-01 · Omitted
Omitted " (d) the activities to be treated as supply of goods or supply of services as referred to in Schedule II. " w.e.f. 01st July, 2017 by s. 3 of The Centr …
2017-07-01 · Inserted
Inserted w.e.f. 01st July, 2017 by s. 3 of The Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018) – Brought into force on 01st February, 2019 …
2017-07-01 · Substituted
Substituted for – "sub-sections (1) and (2)" w.e.f. 01st July, 2017 by s.3 of The Central Goods and Services Tax (Amendment) Act, 2018 (No. 31 of 2018) – Brough …
Where this comes from
Text reproduced from the Central Board of Indirect Taxes and Customs, as available on 2026-09-05. The explanation and practice notes above are GSTZone’s own, written for this hub. If you spot anything out of date, tell us and we’ll fix it — this hub is checked daily against CBIC.
Reading is free. Getting it wrong isn’t.
Does this apply to your case, or not?
Reading the section is one thing. Knowing whether it bites on your facts, and what it costs if it does, is another. Send us the situation – we will tell you straight, and only take it on if we can genuinely help.
6+ years · 2,500+ GST registrations filed · Bhopal, serving all of India