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CS Professional · Goods and Services Tax (GST) and Corporate Tax Planning · Supply under GST

Under Section 7 of the CGST Act, 2017, which of the following statements about the interaction of sub-sections (1), (2) and (3) is correct?

Schedule III activities are treated as neither supply of goods nor services despite sub-section (1), and the Government's power under sub-section (3) to classify transactions is subject to sub-sections (1), (1A) and (2). It cannot override sub-section (2) and needs the Council's recommendation.

  1. AActivities in Schedule III are treated neither as a supply of goods nor of services notwithstanding sub-section (1), and the Government's power under sub-section (3) is subject to sub-sections (1), (1A) and (2)Correct
  2. BThe Government can under sub-section (3) notify an activity in Schedule III as a supply of services, overriding sub-section (2)
  3. CSub-section (2) applies only if the activity is made without consideration
  4. DSub-section (3) allows the Government to decide, without the Council's recommendation, which transactions are supplies of goods

Explanation

Section 7(2) begins with 'notwithstanding anything contained in sub-section (1)' and treats Schedule III activities as neither goods nor services. Section 7(3) operates subject to sub-sections (1), (1A) and (2), so it cannot override sub-section (2). It also requires the Council's recommendation, which rules out the other options.

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