Scope of Supply Under Section 7: Definition, Inclusions & Exemptions: Section 7 of the Act defines “supply” broadly to include various transactions such as sale, transfer, barter, exchange, lease, rental, and disposal when done for consideration in the course of business. It also covers transactions between clubs/associations and their members, import of services for consideration, and specific activities listed in Schedule I, even without consideration.
Additionally, Schedule II helps classify whether a supply is of goods or services. However, certain activities listed in Schedule III, and government functions (if notified), are not considered supply. The government also has the power to specify whether certain transactions should be treated exclusively as goods or services through notifications.
Amended and updated notes on section 7 of CGST Act, 2017. Detail discussion on provisions and rules related to scope of supply.
Chapter III (Sections 7–11) of the Central Goods and Services Tax Act, 2017 deals with the provisions related to levy and collection of tax. Section 7 of CGST 2017 provides for scope of supply.
Recently, we have discussed in detail section 6 (Authorisation of officers of State tax or Union territory tax as proper officer in certain circumstances) of CGST Act 2017. Today, we learn the provisions of section 7 of Central GST Act 2017.
Section 7 of the Central Goods and Services Tax Act, 2017 has been notified by the Ministry of Finance vide Notification No. 9/2017-Central Tax, G.S.R. 658(E), dated 28.06.2017. This notification was come into force from 1st July, 2017 i.e. the commencement date of section 7 is 1-7-2017.
| Name of Act | The Central Goods and Services Tax Act 2017 |
|---|---|
| Enacted by | Parliament of India |
| Administered by | Central Board of Indirect Taxes & Customs |
| Governing body | GST Council |
| Number of Chapters | 21 |
| Number of Sections | 174 |
| You are reading: | |
| Chapter No. | III |
| Chapter Name | Levy and Collection of Tax |
| Section No. | 7 |
| Section Name | Scope of supply |
| Updated 2025 Edition | GST Law Book PDF |
Section 7 of Central GST – Scope of supply1
Section 7(1) of CGST Act
Section 7(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;
2[(aa) the activities or transactions, by a person, other than an individual, to its members or constituents or viceversa, 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; and
(c) the activities specified in Schedule I, made or agreed to be made without a consideration;
(d) [Omitted by CGST (Amendment) Act, 2018] the activities to be treated as supply of goods or supply of services as referred to in Schedule II.
Section 7(1A) of CGST Act
Section 7(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.
Section 7(2) of CGST Act
Section 7(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.
Section 7(3) of CGST Act
Section 7(3): Subject to the provisions of 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.
Notes on Section 7 of GST Act
| Provision | Explanation | Example |
|---|---|---|
| Section 7(1): Definition of Supply | Supply includes all forms of transactions involving goods or services for a consideration in the course of business. | Sale of laptops by a dealer, renting a property for commercial use. |
| Section 7(1)(aa): Supply between Clubs & Members | Transactions between a club or association and its members are considered as supply. The entity and its members are treated as separate persons. | Membership fees paid to a sports club for facilities. |
| Section 7(1)(b): Import of Services | Import of services for consideration is treated as supply, even if not for business purposes. | Hiring a foreign consultant for personal investment advice. |
| Section 7(1)(c): Supply without Consideration (Schedule I) | Certain transactions specified in Schedule I are treated as supply even without consideration. | Transfer of goods between branches in different states. |
| Section 7(1A): Classification as Goods or Services | If an activity is considered a supply under Section 7(1), it must be classified as either a supply of goods or services as per Schedule II. | Renting of immovable property is considered a supply of services. |
| Section 7(2): Transactions NOT Considered as Supply | Some activities are not treated as supply, including: (a) Activities in Schedule III, (b) Government activities in public interest (if notified). | Salary paid to an employee (Schedule III), Government issuing a passport. |
| Section 7(3): Government’s Power to Specify Supply Type | The Government can notify whether a transaction is treated as goods or services. | Government may declare software licenses as services rather than goods. |
FAQs on Scope of Supply (Section 7)
What is the meaning of “supply” under the Act?
“Supply” includes all forms of transactions such as sale, transfer, barter, exchange, license, rental, lease, or disposal made for a consideration in the course or furtherance of business.
Are transactions between members and a club or association considered as “supply”?
Yes. As per Section 7(1)(aa), transactions between a club or association and its members are considered as a supply, even if they were previously treated as mutual activities. The law deems the entity and its members as separate persons.
Is import of services considered a supply?
Yes, as per Section 7(1)(b), the import of services for a consideration is considered a supply, whether or not it is in the course or furtherance of business.
Are there any supplies that do not require consideration?
Yes. As per Section 7(1)(c), certain activities specified in Schedule I are considered as supply even if no consideration is involved.
Are there any activities that are not considered a supply?
Yes. As per Section 7(2), the following are not treated as supply:
- Activities or transactions specified in Schedule III (e.g., services by an employee to an employer in the course of employment).
- Activities undertaken by the Central Government, State Government, or a local authority in their capacity as public authorities (if notified by the Government).
What is the significance of Schedule II in determining supply?
Schedule II clarifies whether a transaction should be treated as a supply of goods or a supply of services when it qualifies as a supply under Section 7(1).
Can the Government classify certain transactions as only supply of goods or services?
Yes. As per Section 7(3), the Government can issue notifications specifying whether certain transactions should be treated as:
(a) Supply of goods and not services, or
(b) Supply of services and not goods.
- Section 7 of CGST Act 2017 shall come into force on 01.07.2017 vide Notification No. 9/2017-Central Tax, G.S.R. 658(E), dated 28.06.2017. ↩︎
- Section 7(1)(aa) with explanation has been newly inserted and shall be deemed to have been inserted w.e.f. 1-July-2017 vide the Finance Act 2021 read with Notification No. 39/2021-Central Tax, S.O. 5328(E), dated 21.12.2021. ↩︎
