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CMA Intermediate · Direct and Indirect Taxation · Concept of Supply including Composite and Mixed Supplies

Which statement about section 7(2)(b) of the CGST Act, 2017 is correct?

Section 7(2)(b) treats government or local authority activities as neither goods nor services only when they are engaged as public authorities and the activities are notified by the Government on the Council's recommendations. Non-notified activities are not automatically excluded.

  1. AAll activities of the Central Government, a State Government or any local authority are outside supply
  2. BActivities undertaken by such governments or local authorities as public authorities are treated as neither goods nor services only if notified by the Government on the Council's recommendationCorrect
  3. CActivities of local authorities are outside supply only if undertaken for a consideration
  4. DSuch activities are treated as a supply of services unless Schedule III applies

Explanation

Section 7(2)(b) covers activities or transactions undertaken by the Central Government, a State Government or a local authority in which they are engaged as public authorities, as may be notified by the Government on the Council's recommendations. Not all their activities qualify; notification is needed. Consideration is not the test, and they are not services by default.

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