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Article Dated 03rd January, 2024

Non-Supplies under GST

Section 7(2)(a) provides that activities or transactions specified in Schedule III shall be treated neither as a supply of goods nor a supply of services. Schedule III specifies transactions/activities that are excluded from being considered as supplies under the GST regime. Essentially, it serves as a "Negative list" for taxation in GST.

It`s essential to note that, besides the activities specified in Schedule III, some activities have been notified by the Government through various notifications, which are also treated as non-supplies. Additionally, certain circulars have been issued to clarify that specific transactions should be considered as non-supplies.

Our discussion under this heading will encompass:

  • Non-supplies listed in Schedule III: Activities explicitly mentioned in Schedule III.

  • Non-supplies notified via notification: Activities specified as non-supplies through official notifications.

  • Non-supplies clarified by way of a circular: Transactions clarified as non-supplies through official circulars.

A. Schedule III: Activities or transactions which shall be 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.

Services rendered by a casual worker, who receives daily wages, to their employer are considered services provided in the course of employment. This includes scenarios where casual workers are engaged by construction contractors or security services agencies.

Services provided on a contract basis, where two parties engage on a principal-to-principal basis, do not fall under the category of services provided in the course of employment. In such cases, the relationship is contractual, not employment-based.

Any payment made by an employer to an employee to refrain from joining a competing business is considered compensation for the service of forbearance (refraining from acting). This payment does not qualify as services provided in the course of employment.

2. Services by any court or Tribunal established under any law for the time being in force.

The term "Court" includes District Court, High Court and Supreme Court.

Circular No. 32/06/2018 GST dated 12.02.2018

Fees charged by Consumer Disputes Redressal Commissions, which are quasi-judicial bodies handling consumer complaints, are not subject to Goods and Services Tax (GST). This includes the fees paid by individuals filing complaints and any penalties paid in cash. The exemption is because these commissions, while not classified as tribunals under Article 323B of the Constitution, share characteristics with tribunals. In simple terms, the fees and penalties related to consumer dispute resolution are not liable for GST.

3. The services performed by Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities, and other local authorities, as well as duties carried out by individuals holding constitutional posts like the President of India, Vice President of India, Prime Minister of India, Chief Justice of India, Speaker of the Lok Sabha, Chief Election Commissioner, Comptroller and Auditor General (C & AG), Chairman of Union Public Service Commission, and Attorney General of India, in their official capacities, are covered under this negative list and neither treated as Goods nor services under Goods and Services Tax (GST). Additionally, the duties performed by individuals serving as Chairpersons, Members, or Directors in bodies established by the Central Government, State Government, or Local authority, who are not considered employees before the specified commencement, also fall under this exemption.

4. Services of funeral, burial, crematorium or mortuary including transportation of the deceased.

5. The sale of land and, subject to specific conditions outlined in paragraph 5(b) of Schedule II, the sale of a building are considered part of the negative list under Goods and Services Tax (GST). If the entire consideration for the sale of a building is received after the issuance of the completion certificate or after its first occupation, whichever occurs earlier, it falls within the negative list under GST.

The sale of land, whether in its original state or after development activities such as levelling, laying down of drainage lines, water lines, electricity lines, etc., is considered a sale of land and is covered under Goods and Services Tax (GST). Therefore, the sale of developed land itself does not attract GST.

It`s important to distinguish this from services related to the development of land, such as levelling or laying of drainage lines, which, if provided by a service provider to a developer, would attract GST at the applicable rate for such services.

6. Actionable claims, with the exception of lottery, betting, and gambling, are explicitly excluded from the definition of supply under the Goods and Services Tax (GST) in Schedule III. Even though actionable claims are generally considered goods under section 2(52), this particular provision clarifies that only lottery, betting, and gambling fall under the definition of supply.

Therefore, all other types of actionable claims, such as the right to recover insurance money, claims for arrears of rent, rights to future rents (if assignable), unsecured loans, unsecured debentures, bills of exchange, promissory notes, bank guarantees, Fixed Deposit Receipts, and rights to the benefit of a contract, are not treated as supply under GST.

7. The supply of goods from a location in a Non-taxable territory to another location in a Non-taxable territory, without the goods entering into India, is considered a transaction that falls outside the scope of the Goods and Services Tax (GST).

For instance, if Shivam purchases goods from the UK and directly sells them to Alex in Australia without the goods physically entering India, it does not attract GST as per the provisions of the law. This scenario is often referred to as an "Export of goods to a third country" or a "high seas sale," where the movement of goods occurs outside the jurisdiction of India, and GST is not applicable to such transactions.

8. The supply of warehoused goods to any person before clearance for home consumption is not considered a supply of goods or services under the Goods and Services Tax (GST) regulations.

For instance, when Rajesh imported goods into India but kept them in a warehouse without clearing them for home consumption, and later sold these goods to Harish while they were still in the warehouse, this transaction between Rajesh and Harish is exempt from GST.

Similarly, the supply of goods by the consignee to another person after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption is also not treated as a supply of goods or services under GST.

For example, when Pranav imported goods from Japan and sold them to Yash in India while the goods were still at the port, this transaction between Pranav and Yash is not subject to GST.


The government has the authority to notify specific activities or transactions undertaken by the Central Government, a State Government, or any Local authority as non-supplies, meaning they will not be treated as the supply of goods or services. Two such activities or transactions have been notified:

Activity in relation to Panchayat/Municipality functions: Services related to any activity in connection with a function entrusted to a Panchayat under Article 243G of the Constitution or a Municipality under Article 243W of the Constitution are considered neither a supply of goods nor a supply of services.

Grant of alcoholic liquor license: Services related to the grant of alcoholic liquor licenses by State Governments are treated neither as a supply of goods nor as a supply of services. This dispensation is specific to liquor licenses and doesn`t set a precedent for other licenses or privileges granted for a fee, where GST is applicable.

It`s important to note that services provided by the government to business entities, including the grant of privileges, licenses, mining rights, and natural resources like spectrum, against payment of consideration in the form of fees or royalties, are taxable under GST. In such cases, businesses are required to pay tax on these services under Reverse charge.


The Central Board of Indirect Taxes and Customs (CBIC) has provided clarification on certain activities that are considered non-supplies. These clarifications are as follows:

(i) Inter-State Movement of Various Modes of Conveyance: [Circular No. 1/1/2017 IGST dated 07.07.2017]

Inter-State movement of various modes of conveyance, such as trains, buses, trucks, tankers, trailers, vessels, containers, and aircraft, carrying goods or passengers or both, or for repairs and maintenance (except in cases where such movement is for further supply of the same conveyance), is treated as `neither a supply of goods nor a supply of service.` Consequently, no Integrated Goods and Services Tax (IGST) is applicable on such movements. However, applicable Central Goods and Services Tax (CGST)/State Goods and Services Tax (SGST)/IGST, as the case may be, shall be leviable on repairs and maintenance done for such conveyance.

(ii) Inter-State Movement of Rigs, Tools, Spares, and Goods on Wheels (like cranes):[ Circular No. 1/1/2017 IGST dated 07.07.2017 & Circular No. 21/21/2017-GST dated 22.11.2017]

The circular mentioned above also applies to the inter-State movement of rigs, tools, spares, and all goods on wheels (like cranes), except in cases where the movement of such goods is for further supply of the same goods. Such inter-State movement is treated as `neither a supply of goods nor a supply of service,` and consequently, no IGST is applicable on such movements. It is reiterated that applicable CGST/SGST/IGST is leviable on repairs and maintenance done for such goods.

CA Pranay Jain is a young and aspiring Chartered accountant. He qualified Chartered Accountancy Course in 2021 and has a well-established practice in various fields of taxation and auditing, with his core area of practice being in the field of litigation i.e., handling assessment and appeal-related matters and representing assesses before various tax departments.

He is also socially active on LinkedIn at

CA Pranay Jain
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