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CA Final · Indirect Tax Laws · Supply under GST

A State Government department, acting as a public authority, carries out an activity that is not listed in Schedule III. Section 7(2)(b) of the CGST Act, 2017 is being examined to decide whether the activity is outside the scope of supply. Which statement is correct?

The activity is outside supply only if it is done as a public authority and has been notified by the Government on the Council's recommendations. Section 7(2)(b) requires this notification, so being a government body alone does not exclude an activity.

  1. AAny activity of a State Government is automatically neither a supply of goods nor a supply of services
  2. BThe activity is excluded only if it is an activity undertaken as a public authority that the Government has notified on the Council's recommendationsCorrect
  3. CThe activity is excluded if the department earns no profit
  4. DActivities of a State Government are always supplies of services

Explanation

Section 7(2)(b) excludes only those activities undertaken by the Central or a State Government or a local authority as public authorities that are notified by the Government on the Council's recommendations. Without notification, the exclusion does not apply merely because the government performs the activity. The first option ignores the notification requirement.

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