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Activities or Transaction Excluded from Supply - Section 7 Schedule III - GST Ready Reckoner - GSTExtract Activities or Transaction which shall be treated neither as supply of goods nor as supply of services - Schedule III As per Section 7(1) sub-section 2 , There are exception of supply, Schedule III to the CGST Act, 2017 provides the Activities or transaction which shall be treated as neither supply of goods nor supply of services (in other words, exclude from the supply) 1. Services by an employee to the employer in the course of or in relation to his employment. [ Para 1 ] Meaning of Employer and Employee These term have not been defined in the GST Act in the common parlance, these term may be defined as under: - (1) Employer a person who has engaged or hired the services of another. he is entitled to rights and bound to perform duties. (2) Employee is a person who is hired for a wages, salary, fee, or payment to perform work for an employer. Clarification in respect of levy of GST on Director s remuneration - [ Circular no. 140/2020-GST Dated 10th June 2020 ] Where in the salaries paid to directors are subject to tax deducted at Source under section 192 under Income Tax Act 1961 not a treated a supply , In case where the remuneration is in the nature of professional fee and not a salary the same is liable for tax deduction at source in other section of Income Tax Act 1961, then it is treated as supply under GST and GST payable the recipient of services under RCM . Stipend paid to interns will be employer-employee transactions. Hence, not liable for GST. Salary received as a partner from firm and share of profit received from partnership is not supply and hence out of GST. Clarification in respect of levy of GST Perquisites provided by employer to the employees as per contractual agreement [ Circular No. 172/04/2022-GST Dated 6th July 2022 ] Any perquisites provided by the employer to its employees in terms of contractual agreement entered into between the employer and the employee are in lieu of the services provided by employee to the employer in relation to his employment. It follows therefrom that perquisites provided by the employer to the employee in terms of contractual agreement entered into between the employer and the employee, will not be subjected to GST when the same are provided in terms of the contract between the employer and employee. As per Education Guide issued by CBIC 2012 ( Services Tax Regime ) Only services that are provided by an employee to the employer in the course of employment outside the ambit of services. Services provided on contract basis i.e. principal to principal basis are not services provided in the course of employment. Amount paid by the employer to employee for premature termination of a contract of employment are treatable as amount in relation to services provided by the employee to the employer in the course of employment. Services provided by casual worker to employer who gives wages on daily basis to the worker then these are services provided by the worker in the course of employment. Casual worker is employed by a contractor like a building contractor or a security services agency, who deploys them for execution of a contract of contract or for provision of security services to a client. then services provided by the worker to the contractor are services in the course of employment and hence not taxable. 2. Services by any Court or Tribunal established under any Law for the time being in force. [ Para 2 ] Tribunals are the constitutional bodies and are appointed under article 323A and 323B of the constitution of India. Court as per explanation to schedule III, the term Court includes District Court, High Court, and Supreme Court. The consideration for an activity in the nature of fees or court fees for a court or tribunal is not subject to GST. Service of Court Receiver are activities or transactions, which shall be treated neither as supply of goods or nor supply of services; hence, the fee or charges paid to the court receiver are not liable to GST. ( Bai Mumbai Trust Vs Suchitra , 2019 Bombay HC) Important Clarification The Consumer Dispute Redressal Commissions (National/State/District) may not have been set up directly under Article 323B of the constitution. However they are clothed with the characteristics of a tribunal, it is clarified by the circular that fee paid by litigants in the Consumer Dispute Redressal Commissions are not liable to GST. Any penalty imposed by or amount paid to these Commissions will also not attract GST.[ Circular No. 32/06/2018-GST Dated 12 Feb 2018] 3. (a). The functions performed by the Members of Parliament, Members of State Legislature, Members of Panchayats, Members of Municipalities and Members of other local authorities; or (b). The duties performed by any person who holds any post in pursuance of the provisions of the constitution in that capacity; or (c). The duties performed by any person as a Chairperson or a member or a Director in any Body established by the Central Government or a State Government or Local Authority and who is not deemed as an employee before the commencement of this clause. [ Para 3 ] That duties performed by the Members of parliament, Member of State Legislature, Members of Panchayats, , Members of Municipalities and Members of other local authorities are exempt only if these are duties performed in the capacity of constitution, not in any other capacity. 4. Services of funeral, burial, crematorium, or mortuary including transportation of the deceased. [ Para 4 ] This clause is self-explanatory. 5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II , sale of building. [ Para 5 ] Sale of land is neither supply of goods nor a supply of services as per para 5 of schedule III of CGST Act. sale of building where the entire consideration has been received after completion certificate is issued or after its first occupation, whichever is earlier- not treated as supply under GST. sale of building where the entire/ part thereof consideration has been received before completion certificate is issued or after its first occupation, whichever is earlier- treated as supply under GST. Sale of developed plots , its contented that it sold land, hence not a supply in terms of entry no. 5 of schedule III. Exception rental, leasing licensing of land building - treated as supply under GST. Important clarification Whether sale of land after levelling, laying down of drainage lines etc., is taxable under GST . [ Circular No. 177/09/2022-TRU Dated 03rd August, 2022 ] 14.3 Land may be sold either as it is or after some development such as levelling, laying down of drainage lines, water lines, electricity lines, etc. It is clarified that sale of such developed land is also sale of land and is covered by Sr. No. 5 of Schedule III of the Central Goods and Services Tax Act, 2017 and accordingly does not attract GST. 14.4 However, it may be noted that any service provided for development of land, like levelling, laying of drainage lines (as may be received by developers) shall attract GST at applicable rate for such services. Issue related to taxability of tenancy rights under GST [ Circular No. 44/18/2018-CGST Dated 2nd May, 2018 4. The transfer of tenancy rights cannot be treated as sale of land or building declared as neither a supply of goods nor of services in para 5 of Schedule III to CGST Act, 2017 . Case Law IN RE: M/S. KEDARAM TRADE CENTRE ( 2023 (4) TMI 300 - AUTHORITY FOR ADVANCE RULING, GUJARAT ) Held that The lease of plot for 90 years by the applicant is not sale of land but is a lease and therefore, does not fall within the ambit of clause 5 of Schedule III of CGST Act, 2017. Hence, it is concluded that this activity i.e. lease of commercial units on payment of one time lease premium and annual premium is a supply falling within the ambit of section 7(1) of CGST Act, 2017 would be leviable to tax at the rate of 18% (i.e. 9% CGST and 9% SGST) in terms of notification No. 11/2017-CT(Rate) dated 28.6.2017. 6. Actionable claims, other than lottery, betting, and gambling other than specified actionable claim. [ Para 6 ] As per Sec 2(1) of CGST Act Actionable Claim shall have the same meaning as assigned to it in section 3 of the Transfer of Property Act, 1882 (4 of 1882). As per Sec. 2(52) of CGST Act , actionable claim includes the definition of goods, then actionable claim are to be considered as goods a s per Education Guide - 2012 7. Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India. [ Para 7 ] Import of Goods have been defined u/s 2(10) of IGST Act 2017 as bringing goods to India from a place outside India. Goods imported into India are subject to IGST and IGST levied on the value of goods determined of said goods as per sec. 12 of Customs Act 1962. [ proviso to sec. 5(1) of IGST Act 2017 ] Where the goods, after moving from non-taxable territory, have moved to other non-taxable territory without entering into India, it shall not be deemed as supply of goods under GST Act. 8. (a) Supply of Warehoused goods to any person before clearance for home consumption; ( Circular No. 46/2017-Customs 24 Nov 2017 ) [ Para 8 ] In accordance with provisions of sectioon3 of customs Tariff Act, 1975, the goods are subjected to custom duty after filling entry at the custom stations. Explantion 2 to Schedule III defines warehoused goods as per meaning as assigned to in the customs Act, 1962. Circular No. 46/2017-Customs D ated 24 November 2017 has clarified applicability of IGST on warehoused goods transferred/sold while being deposited in a warehoused. Circular No. 03/01/2018-IGST Dated 25 May 2018 had further explained the applicability of IGST on goods supplied while being deposited in customs bonds warehouse. Transfer/sale of goods deposited in a customs bonded warehouse is common trade practices whereby the importer file an into-bond bill of entry and store the goods in customs bonded warehouse and thereafter, supplies such goods to another person who files ex-bond bill of entry for clearing the said goods from customs bonded warehouse for home consumption. It has also been clarified by the circular that the supply of goods before their clearance from warehouse would not be subject to the levy of IGST and same would be levied and collect only when warehouse goods are cleared for home consumption from the customs bonded warehouse. (b) Supply of goods by the consignee to any other person, by endorsement of documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption. ( I.e. High Seas Sales) Some Important Clarification 1) Issue :- Whether the activity of holding shares by a holding company of the subsidiary company will be treated as a supply of service or not and whether the same will attract GST or not. [ Circular No. 196/08/2023-GST dated 17th July, 2023 ] Clarification Definition of Goods or Services under CGST exclude the securities Securities does not considered as a goods or service under the definition of Goods (clause 52 ) or Services (Clause 102) of Section 2 of CGST, Act 2017 Further, securities include shares as per definition of securities under clause (h) of section 2 of Securities Contracts (Regulation) Act, 1956 . Analysis :- This implies that the securities held by the holding company in the subsidiary company are neither goods nor services. Further, purchase or sale of shares or securities, in itself is neither a supply of goods nor a supply of services. For a transaction/activity to be treated as supply of services, there must be a supply as defined under section 7 of CGST Act . It cannot be said that a service is being provided by the holding company to the subsidiary company, solely on the basis that there is a SAC entry 997171 in the scheme of classification of services mentioning; the services provided by holding companies, i.e. holding securities of (or other equity interests in) companies and enterprises for the purpose of owning a controlling interest. , unless there is a supply of services by the holding company to the subsidiary company in accordance with section 7 of CGST Act. Conclusion :- The activity of holding of shares of subsidiary company by the holding company per se cannot be treated as a supply of services by a holding company to the said subsidiary company and cannot be taxed under GST.
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