Indirect Tax Laws and Practice · Supply under GST

Schedule I: Supplies Without Consideration under GST

Updated 11 October 2026 · Fact-checked

Schedule I lists activities that count as supply under GST even when no consideration is paid. They are: permanent transfer of business assets on which ITC was availed, supplies between related or distinct persons in the course of business, principal-agent supplies of goods, and import of services from related persons. Check which entry fits, then check its conditions.

Understand Schedule I: Supplies without Consideration

Normally, a transaction is a supply only if it is made for a consideration in the course or furtherance of business. Section 7(1)(a) says so. Section 7(1)(c) makes an exception: the activities specified in Schedule I are supply even when they are made, or agreed to be made, without consideration.

The reason is simple. Without this rule, a business could move goods or services to a related person free of cost and avoid tax. Schedule I closes those gaps. It is a closed list. If an activity does not fit one of its entries, it is not a supply under this route.

The entries, in plain words, are four:

Permanent transfer or disposal of business assets where input tax credit has been availed on those assets.
Supply between related persons or between distinct persons (for example, different registrations of the same entity), when made in the course or furtherance of business. Gifts from an employer to an employee up to ₹50,000 in a financial year are not treated as supply.
Supply of goods between principal and agent: by the principal to the agent, where the agent undertakes to supply those goods on the principal's behalf, or by the agent to the principal, where the agent undertakes to receive goods on the principal's behalf.
Import of services by a taxable person from a related person, or from any of his other establishments outside India, in the course or furtherance of business.

Note how this connects to the rest of Section 7. Import of services for a consideration is already a supply under Section 7(1)(b). The Schedule I entry catches the same import when it is made without consideration from a related person. Schedule I applies only to what the law lists; exclusions in Schedule III and Section 7(2) are tested separately.

Key rules to remember

Statutory basis: Section 7(1)(c): activities specified in Schedule I, made or agreed to be made without a consideration = supply; This is the clause that lets a no-consideration transaction be a supply. It works only for listed activities.
Business asset transfer: Permanent transfer or disposal of business assets + ITC availed on them = supply; If no ITC was availed on the asset, this entry does not apply. A temporary use is not a permanent transfer.
Related or distinct persons: Supply between related / distinct persons + in course or furtherance of business = supply; Employer-to-employee gifts not exceeding ₹50,000 in a financial year are not supply. Above that, they are tested as a supply.
Principal and agent: Goods from principal to agent (agent to supply on principal's behalf) or from agent to principal (agent to receive on principal's behalf) = supply; The entry covers goods only, and only where the agent undertakes the supply or receipt on the principal's behalf.
Import of services from related person: Import of services by a taxable person from a related person or from his other establishment outside India + in course or furtherance of business = supply; Applies even if no payment is made.

How to solve Schedule I: Supplies without Consideration questions

Use this sequence for any question asking whether a free or no-consideration transaction is a supply.

1Note that there is no consideration. If there is consideration, test it under Section 7(1)(a) or 7(1)(b) first.
2Match the transaction to one of the four Schedule I entries: business asset, related or distinct persons, principal-agent, import from related person.
3Check the entry's conditions: was ITC availed on the asset, is the transaction in the course or furtherance of business, are the parties related or distinct, does the agent act on the principal's behalf.
4Apply the exception: an employer's gifts to an employee up to ₹50,000 in a financial year are not supply. Add all gifts in the year before testing.
5Check whether Schedule III or Section 7(2) excludes the activity.
6State the conclusion clearly: supply or not a supply, with the entry and condition that decided it.

Quickest way: Four-entry check

When to use it: Use for MCQs and short case questions where the transaction is free and you must decide quickly.

Ask: any consideration? If yes, leave Schedule I.
Ask: is it an asset, related party, agent, or import of service?
Hunt for the one condition that breaks it: no ITC on the asset, not in business, gifts within ₹50,000 total for the year, not on behalf of the principal.
If the condition holds, answer supply. If it fails, answer not a supply under Schedule I.

Common mistakes in Schedule I: Supplies without Consideration

Treating every free transaction as supply.
Students remember the headline 'supply without consideration' and forget the list is closed.
Fix: Match the transaction to a listed entry. If none fits, it is not a supply under Schedule I.
Treating a transfer of a business asset as supply even when no ITC was availed.
The ITC condition is easy to skip when reading a long fact pattern.
Fix: Always look for whether credit was availed on that asset. No ITC availed means this entry does not apply.
Testing each gift to an employee separately against ₹50,000.
Students read 'gift' as a single item.
Fix: The limit is for gifts in a financial year by the employer to the employee. Add all gifts to that employee for the year, then compare.
Ignoring the 'course or furtherance of business' condition for related-person supplies.
The word 'related' draws all attention.
Fix: Check that the supply is made in the course or furtherance of business. A purely personal transfer between relatives is not covered by this entry.
Applying the agent entry to services or to agents who act in their own name.
Students generalise 'principal-agent' to all transfers.
Fix: The entry covers goods, and the agent must undertake to supply or receive them on the principal's behalf.
Forgetting that import of services from a related person is covered even without payment.
Import is linked to consideration in Section 7(1)(b).
Fix: Remember that Schedule I adds the related-person import without consideration, in the course or furtherance of business.

Worked examples

Example 1

Kaveri Textiles Pvt. Ltd. gave one of its employees, Mr. Suresh, a gift voucher of ₹30,000 in October and a gold coin worth ₹35,000 in March of the same financial year. No payment was received from him. Is this a supply under Schedule I?

Show the solution

There is no consideration, so test Schedule I.
The transaction is between an employer and an employee, who are related persons, and the gifts are made in the course of business.
The Schedule I exception: gifts from an employer to an employee not exceeding ₹50,000 in a financial year are not supply.
Add the gifts for the financial year: ₹30,000 + ₹35,000 = ₹65,000.
₹65,000 exceeds ₹50,000, so the exception does not apply and the gifts are tested as a supply under Schedule I.

Answer: The gifts total ₹65,000, which is more than ₹50,000 in the financial year. They are treated as supply under Schedule I even though no consideration is received.

Example 2

Himalaya Engineering Ltd. permanently gives away to a charity a machine used in its business. It had availed ITC on the machine when it was bought. Separately, it gives away an old office table on which it had never availed ITC. Which transfers are supplies under Schedule I?

Show the solution

Both are free, so Schedule I is relevant.
The entry on permanent transfer or disposal of business assets applies only where ITC has been availed on the asset.
For the machine, ITC was availed and the transfer is permanent, so it is a supply.
For the office table, no ITC was availed, so this entry does not apply and the transfer is not a supply under Schedule I.
No other Schedule I entry fits either transaction: the charity is not a related person and not an agent.

Answer: The transfer of the machine is a supply under Schedule I. The transfer of the office table is not a supply under Schedule I.

Exam tips

MCQs often hinge on one condition: ITC availed, within ₹50,000, in the course of business. Find it first.
Add all gifts to an employee for the financial year before comparing with ₹50,000.
Write the entry name and the condition in your answer. Examiners give marks for naming the reason.
Link Schedule I with Section 7(1)(b) and Schedule III in case questions. A single case may test all three.
In written answers, state the conclusion in one sentence, then give the reasoning.

Practice questions from Supply under GST

Schedule I: Supplies without Consideration in other exams

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

Schedule I: Supplies without Consideration: frequently asked questions

Is a gift to an employee always a supply under Schedule I?

No. Gifts by an employer to an employee are not treated as supply if they do not exceed ₹50,000 in a financial year. Above that, the gifts are tested as a supply.

Does Schedule I apply when I transfer an asset on which I never took ITC?

The business-asset entry does not apply, because it needs ITC to have been availed on the asset. Check the other entries and any other rule before concluding.

What is the link between Schedule I and Section 7(1)(c)?

Section 7(1)(c) says the activities specified in Schedule I, made or agreed to be made without a consideration, are supply. Schedule I supplies the list; the section gives it effect.

Are services between a principal and an agent covered by Schedule I?

The principal-agent entry in Schedule I covers supply of goods. It applies where the agent undertakes to supply or receive the goods on the principal's behalf.