Taxation · Supply under GST

Schedule III of CGST: Activities Neither Goods nor Services

Updated 5 October 2026 · Fact-checked

Schedule III of the CGST Act, 2017 lists activities that are neither a supply of goods nor a supply of services, so no GST applies. Examples are employee services to an employer, court services, funeral services, sale of land, sale of completed buildings and actionable claims other than lottery, betting and gambling. Check the activity against the list first.

Understand Schedule III: Neither Goods nor Services

GST is charged on supply of goods or services. Section 7(2)(a) of the CGST Act, 2017, read with Schedule III, says that activities listed in Schedule III are to be treated as neither a supply of goods nor a supply of services. If an activity is in Schedule III, there is no supply, so there is no GST on it and no registration need arises from it. One caveat applies to land and building, explained below.

Think of Schedule III as a filter. Even when money changes hands and the transaction looks commercial, the law removes certain activities from GST. The reasons differ. Some are not business (employee work, duties of constitutional post-holders). Some are sovereign or public in nature (court and tribunal services). Some are social (funeral and burial services). Some are taxed elsewhere or treated as transfers of rights in property (land, completed buildings, actionable claims).

The entries to remember are:

Services by an employee to the employer in the course of or in relation to employment.
Services by any court or Tribunal established under any law.
Functions performed by MPs, MLAs, and members of Panchayats, Municipalities and other local authorities.
Duties performed by any person who holds a post in pursuance of the provisions of the Constitution, in that capacity.
Duties performed by a Chairperson, Member or Director in a body established by the Central Government, a State Government or a local authority, who is not deemed an employee.
Funeral, burial, crematorium or mortuary services, including transport of the deceased.
Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.
Actionable claims, other than lottery, betting and gambling.
Supply of goods from one place in a non-taxable territory to another place in a non-taxable territory, without the goods entering India. This is paragraph 7 of Schedule III, inserted by the Finance Act, 2023 with effect from 1 October 2023. It is a newer entry, so do not miss it when you revise the list.
Paragraph 8 of Schedule III, which covers three import-linked items: (a) supply of warehoused goods to any person before clearance for home consumption, (b) high seas sales, and (c) supply of goods by a consignee to another person, by endorsement of documents of title, after the goods are dispatched from the port of origin outside India but before clearance for home consumption. The words 'before clearance for home consumption' are written into limbs (a) and (c). Limb (b), high seas sales, does not carry those words, but a high seas sale is also a sale made before the goods are cleared.

Two traps need care. First, the employee entry covers only the employee's service to the employer. It does not cover a service the employee provides outside employment, such as professional work for the same employer under a separate contract. Second, the building entry is tied to Schedule II. A building sold before the completion certificate is issued (or before first occupation, whichever is earlier) is a supply of construction service. Only a sale after that point, with the entire consideration received then, stays outside GST. Also remember that renting or leasing land or a building is a supply of service. Only the outright sale of land is in Schedule III.

The ITC caveat: Schedule III activities are not supplies, but Section 17(3) still counts the value of sale of land and sale of building (subject to clause (b) of paragraph 5 of Schedule II) in the value of exempt supply used for reversal of input tax credit. So if a person makes taxable supplies and also sells land or a completed building, ITC on common inputs and input services can be restricted. Other Schedule III activities are left out of that value.

Section 7(2)(b) is a separate provision. It says that activities undertaken by the Central Government, a State Government or a local authority, in which they are engaged as public authorities, are treated as neither a supply of goods nor a supply of services, as specified on the Council's recommendation. It is not part of the Schedule III list.

Key rules to remember

Legal basis: Section 7(2)(a) read with Schedule III: activities in Schedule III = neither supply of goods nor supply of services; If the activity is in Schedule III, no GST arises on it. For land and building, remember the ITC link under Section 17(3).
Employee entry: Employee → employer service, in the course of or in relation to employment = not a supply; This entry covers only the employee's service to the employer under employment. It does not cover services under a separate contract. Gifts by an employer to an employee are not part of Schedule III. They are a Schedule I matter: para 2 of Schedule I covers supplies between related persons (employer and employee are related persons for this purpose), and the ₹50,000 gift exclusion is a proviso to that para 2. Keep it out of your Schedule III analysis. Supplies for consideration are dealt with under the general supply provisions.
Land and building entry: Sale of land = not a supply. Sale of building = not a supply only if entire consideration is received after completion certificate or first occupation, whichever is earlier; Sale before completion is construction service under Schedule II. Lease or rent of land or building is a service. Under Section 17(3), the value of sale of land and sale of building is included in exempt supply value for ITC reversal.
Actionable claims: Actionable claim = not a supply, except lottery, betting and gambling; Lottery, betting and gambling remain supplies and are taxable.
Court and Tribunal: Services by any court or Tribunal established under any law = not a supply; Court fees collected by the court are outside GST. Services supplied to a court, such as a lawyer's services, are separate and may be taxable.
Funeral services: Funeral, burial, crematorium, mortuary services, including transport of the deceased = not a supply; Applies to these services as listed, not to every related purchase.
Non-taxable territory entry: Supply of goods from one place in a non-taxable territory to another place in a non-taxable territory, without the goods entering India = not a supply; This is paragraph 7 of Schedule III, inserted by the Finance Act, 2023 with effect from 1 October 2023. The key condition is that the goods never enter India.
Imports-linked entries (paragraph 8): Para 8 of Schedule III: (a) supply of warehoused goods before clearance for home consumption; (b) high seas sales; (c) supply by a consignee, by endorsement of documents of title, after dispatch from the foreign port but before clearance for home consumption = not a supply; All three sit in paragraph 8. The words 'before clearance for home consumption' are written into limbs (a) and (c). Limb (b), high seas sales, does not carry those words, but a high seas sale is also a sale made before clearance. Read the exact wording of each limb.

How to solve Schedule III: Neither Goods nor Services questions

Use this method for any question that asks whether a transaction is a supply or attracts GST.

1Read the facts and identify the activity: who supplies what, to whom, and for what consideration.
2Match the activity against the Schedule III entries. Look for keywords: employee, court, tribunal, funeral, land, building, actionable claim, warehouse, high seas, and goods moving between two places outside India without entering India.
3Check the conditions of the entry. For employees, check that the service is under employment. For buildings, check completion certificate or first occupation and when consideration was received.
4Check the exceptions. Lottery, betting and gambling are not covered under actionable claims. Lease or rent of land is not a sale of land.
5If the facts involve a gift by an employer to an employee, treat it as a separate Schedule I question, not a Schedule III one. Para 2 of Schedule I covers supply of goods or services between related persons (employer and employee are related persons for this purpose) made in the course or furtherance of business, even without consideration. The ₹50,000 gift exclusion is a proviso to para 2 of Schedule I, so it belongs to Schedule I and not to Schedule III: gifts by an employer to an employee not exceeding ₹50,000 in value in a financial year are not treated as a supply. If the gifts in the financial year exceed ₹50,000, the whole value, not just the excess, is treated as a supply. Schedule III covers only what its entries say.
6State the conclusion clearly: 'neither a supply of goods nor of services, hence GST not leviable', or 'not covered, hence a supply and taxable subject to other provisions'. If the question involves ITC and the activity is sale of land or building, add the Section 17(3) point.
7If amounts are given, total only the items the question asks for, and state which items you excluded and why. An employee's salary is the employer's payment for employment, not the value of a supply, so do not add it to a value total.

Quickest way: Keyword scan plus exception check

When to use it: Use this for MCQs and for the short written answers in Paper 3 Section B, where you have only a few minutes per question.

Underline the activity word in the question: salary, court fee, burial, plot, flat, lottery, bonded warehouse.
Match it to the Schedule III keyword. If there is no match, treat it as a possible supply.
Test the one exception that matters for that keyword: lottery for actionable claims, completion certificate for building, lease for land, separate contract for employee.
In MCQs, eliminate options that call land sale or employee salary taxable, then check the exception. There is no negative marking, so always answer.
In written answers, use the format: provision (Section 7(2)(a) read with Schedule III) → facts → conclusion. Add the value excluded or included, since step marks follow each stage.

Common mistakes in Schedule III: Neither Goods nor Services

Treating lease or rent of land as covered by Schedule III.
Students remember 'land' and stop reading the entry, which covers only sale of land.
Fix: Remember: sale of land is outside GST, but renting, leasing or licensing land or a building is a supply of service unless separately exempted.
Saying every sale of a building is outside GST.
Students forget that the entry is subject to Schedule II paragraph 5(b).
Fix: Check the completion certificate or first occupation date. A sale before that, or with consideration received partly before it, is a supply of construction service.
Excluding all payments to employees from GST.
Students confuse the employee entry with all employer-employee dealings.
Fix: Schedule III covers only services by the employee to the employer in the course of or in relation to employment. Services under a separate contract need separate analysis. Gifts by an employer are not a Schedule III matter at all; they fall under Schedule I and are analysed separately.
Treating lottery, betting and gambling as outside GST because they are actionable claims.
Students remember 'actionable claims' but not the exclusion.
Fix: Write the entry as 'actionable claims other than lottery, betting and gambling'. These three are supplies.
Assuming services supplied to a court are covered because court services are covered.
The entry is read as 'anything involving a court'.
Fix: The entry covers services by the court or Tribunal, such as court fees. A lawyer's fee for representing a client is the lawyer's own supply and is analysed separately.
Mixing up Schedule III with exemption notifications.
Both result in no tax payable.
Fix: Schedule III means there is no supply at all. An exempt supply is still a supply, and it counts in aggregate turnover and affects ITC reversal. One link to remember: under Section 17(3), the value of exempt supply for ITC reversal includes sale of land and sale of building (subject to clause (b) of paragraph 5 of Schedule II), even though these are Schedule III entries. State the difference in your answer where relevant.

Worked examples

Example 1

Mehta Ltd. has the following in a financial year: (a) an employee renders services to Mehta Ltd. under employment, for which Mehta Ltd. pays salary of ₹6,00,000; (b) sale of a plot of land for ₹50,00,000; (c) sale of a completed office building for ₹2,00,00,000, with the completion certificate issued earlier and the entire consideration received after it; (d) sale of lottery tickets for ₹3,00,000. Identify which of these activities are covered by Schedule III (neither supply of goods nor services) and compute the total value of the land and building sales that are covered.

Show the solution

Item (a): the service is rendered by the employee to Mehta Ltd., in the course of employment. It is not a supply made by Mehta Ltd. Schedule III treats the employee's service to the employer as neither a supply of goods nor of services, so it is covered. The salary of ₹6,00,000 is the employer's payment for employment. It is not the value of any supply, so it has no supply value and is left out of the value total.
Item (b): sale of land is in Schedule III. Not a supply. Value ₹50,00,000.
Item (c): sale of building is covered when the entire consideration is received after the completion certificate or first occupation. Here the certificate was issued earlier and the whole consideration came after it. Not a supply. Value ₹2,00,00,000.
Item (d): a lottery is an actionable claim but is excluded from the Schedule III entry. It is a supply and taxable, so it is not counted.
Total value of land and building sales covered = ₹50,00,000 + ₹2,00,00,000 = ₹2,50,00,000.

Answer: Items (a), (b) and (c) are covered by Schedule III and are neither supply of goods nor services. The employee's service in (a) is covered but has no supply value. The land and building sales in (b) and (c) total ₹2,50,00,000. Item (d), ₹3,00,000, is a supply and is taxable.

Example 2

Priya Builders sells a flat to a buyer. The buyer pays ₹30,00,000 before the completion certificate is issued and ₹50,00,000 after it. A student claims that the sale is outside GST because 'sale of building' is in Schedule III. Examine the claim.

Show the solution

Schedule III covers sale of building only subject to clause (b) of paragraph 5 of Schedule II.
Paragraph 5(b) of Schedule II treats construction of a complex, building or civil structure intended for sale to a buyer, wholly or partly, as a supply of service. The exception applies only where the entire consideration is received after issue of the completion certificate (or after first occupation, whichever is earlier).
Here ₹30,00,000 out of the total of ₹80,00,000 was received before the completion certificate. The condition 'entire consideration after completion' is not met.
So the Schedule III entry does not protect the transaction. It is a supply of construction service and is dealt with under GST.

Answer: The claim is wrong. Because part of the consideration was received before the completion certificate, the transaction is a supply of service under Schedule II and is not covered by Schedule III.

Exam tips

Learn the Schedule III list as keywords: employee, court, funeral, land, building, actionable claim, goods between two non-taxable territories, and the customs-related entries. Revise it the day before the exam.
MCQs often test the exception, not the entry. Prepare the three exceptions: lottery, betting and gambling; rent or lease of land; building sold before completion.
In written answers, write the provision first (Section 7(2)(a) read with Schedule III), then the facts, then the conclusion. This format earns step marks.
When a question gives several items with values, list each item with a one-line reason and then total only what the question asks for.
Be able to state the difference between 'not a supply' (Schedule III) and 'exempt supply'. Also remember the one overlap: under Section 17(3), sale of land and building is counted in exempt supply value for ITC reversal. Examiners use this for short theory questions.

Practice questions from Supply under GST

Schedule III: Neither Goods nor Services in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Schedule III: Neither Goods nor Services: frequently asked questions

Is sale of land taxable under GST?

No. Sale of land is in Schedule III and is neither a supply of goods nor a supply of services. However, renting or leasing land is a supply of service and may attract GST unless it is exempt.

Are services by an employee to an employer taxable?

No. Services by an employee to the employer in the course of or in relation to employment are in Schedule III and are not a supply. Services outside employment, under a separate contract, are analysed separately.

Are court fees subject to GST?

No. Services by any court or Tribunal established under any law are in Schedule III. This covers the court's own services such as fees collected by it. Services provided to a court, for example by a lawyer, are a different matter.

What is the difference between Schedule III and an exemption?

Schedule III activities are not a supply at all. Exempt supplies are supplies on which tax is not payable because of an exemption notification or Section 11. Exempt supplies count in aggregate turnover and affect ITC reversal. Schedule III activities are not supplies and stay out of aggregate turnover, but under Section 17(3) the value of sale of land and sale of building (subject to clause (b) of paragraph 5 of Schedule II) is included in exempt supply value for ITC reversal.