{"id":16590,"date":"2020-09-19T11:55:07","date_gmt":"2020-09-19T06:25:07","guid":{"rendered":"https:\/\/corpbiz.io\/learning\/?p=16590"},"modified":"2024-12-18T17:53:52","modified_gmt":"2024-12-18T12:23:52","slug":"guide-on-section-7-schedule-1-of-the-cgst-act","status":"publish","type":"post","link":"https:\/\/corpbiz.io\/learning\/guide-on-section-7-schedule-1-of-the-cgst-act\/","title":{"rendered":"Overall Guide on Section 7 Schedule 1 of the CGST Act"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Section 7 Schedule 1 of CGST Act talks about the Activities to be treated as Supply even if made without consideration. The supply made between any related persons for inadequate or no Consideration is covered under <em>Schedule I of the GST Act<\/em>. Such transactions will be treated as \u2018Supply\u2019 only if it happens in furtherance or course of business.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_82_2 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title ez-toc-toggle\" style=\"cursor:pointer\">Page Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 eztoc-toggle-hide-by-default' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/corpbiz.io\/learning\/guide-on-section-7-schedule-1-of-the-cgst-act\/#Activities_Treated_as_Supply_under_Section_7_Schedule_1\" >Activities Treated as Supply under Section 7 Schedule\n1<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/corpbiz.io\/learning\/guide-on-section-7-schedule-1-of-the-cgst-act\/#Permanent_transfer_or_sale_of_business_assets_where_Input_Tax_Credit_has_been_availed_on_such_assets\" >Permanent transfer or sale of\nbusiness assets where Input Tax Credit has been availed on such assets<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/corpbiz.io\/learning\/guide-on-section-7-schedule-1-of-the-cgst-act\/#Supply_of_goods_or_services_between_any_related_or_distinctive_persons\" >Supply of\ngoods or services between any related or distinctive persons<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/corpbiz.io\/learning\/guide-on-section-7-schedule-1-of-the-cgst-act\/#Supply_of_goods\" >Supply of\ngoods<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/corpbiz.io\/learning\/guide-on-section-7-schedule-1-of-the-cgst-act\/#Import_of_services_by_any_taxable_person\" >Import of\nservices by any taxable person<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/corpbiz.io\/learning\/guide-on-section-7-schedule-1-of-the-cgst-act\/#Conclusion\" >Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Activities_Treated_as_Supply_under_Section_7_Schedule_1\"><\/span>Activities Treated as Supply under Section 7 Schedule\n1<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The following are the activities under Section 7 Schedule 1 that are treated as supply even if it is made without any consideration. Those activities are as follows:-<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter\"><img decoding=\"async\" width=\"585\" height=\"346\" src=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/image-75-e1600495867810.png\" alt=\"Supply under Section 7 Schedule 1\" class=\"wp-image-16592\" srcset=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/image-75-e1600495867810.png 585w, https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/image-75-e1600495867810-300x177.png 300w\" sizes=\"(max-width: 585px) 100vw, 585px\" \/><\/figure><\/div>\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Permanent_transfer_or_sale_of_business_assets_where_Input_Tax_Credit_has_been_availed_on_such_assets\"><\/span>Permanent transfer or sale of\nbusiness assets where Input Tax Credit has been availed on such assets<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Permanent transfer or sale of business assets where ITC has been availed on an asset can be treated as supply without consideration. <strong><a href=\"https:\/\/corpbiz.io\/gst-registration\" title=\"GST Registration in India\">GST Registration<\/a><\/strong> is applicable on sale of business assets only; it does not apply on sale of personal property.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">What is Permanent Transfer?<\/h4>\n\n\n\n<p>Permanent transfer means transfer of goods\nwithout any intention of receiving back the goods. <\/p>\n\n\n\n<h4 class=\"wp-block-heading\">What is Input Tax Credit?<\/h4>\n\n\n\n<p>ITC means that at the time of paying taxes on output, any\nperson who has already paid on the input can reduce the tax.<\/p>\n\n\n\n<h4 class=\"wp-block-heading\">Situations qualified as \u201cSupply\u201d<\/h4>\n\n\n\n<p>When there is no permanent transfer of goods, it will\nnot qualify as \u201cSupply\u201d. <\/p>\n\n\n\n<p><strong><em>For Example-<\/em><\/strong> Goods sent for work or for testing or certification will not qualify as supply as there is no permanent transfer. <\/p>\n\n\n\n<h4 class=\"wp-block-heading\">When ITC has\nbeen claimed?<\/h4>\n\n\n\n<p>When ITC has been claimed on any business assets,\nother than sale of those assets, it will qualify as \u201cSupply\u201d<\/p>\n\n\n\n<p>Donation of business assets or discarding in any other manner other than as a sale will qualify as \u2018Supply\u2019, when ITC has been claimed.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Supply_of_goods_or_services_between_any_related_or_distinctive_persons\"><\/span>Supply of\ngoods or services between any related or distinctive persons <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Supply of goods or services between any related or distinctive persons as mentioned in&nbsp;Section 25, when made in the furtherance or course of business are determined as supply without consideration.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Who is a Related Person under\nGST Law?<\/h3>\n\n\n\n<p>Persons shall be considered to be related if they\nfall under any of the categories mentioned below-<\/p>\n\n\n\n<ul>\n<li>The business together control any other business;<\/li>\n\n\n\n<li>Persons under common management;<\/li>\n\n\n\n<li>Officer or director of one business is the officer or director of\n     another business;<\/li>\n\n\n\n<li>Members of the same family;<\/li>\n\n\n\n<li>Businesses are legally recognized as partners;<\/li>\n\n\n\n<li>Any person who holds at least 25% of shares in another company\n     either directly or indirectly;<\/li>\n\n\n\n<li>Any person who controls the other person directly or indirectly;<\/li>\n\n\n\n<li>Any employer and any employee.<\/li>\n<\/ul>\n\n\n\n<p>It also states that gifts not exceeding INR 50,000 in value in a financial year by any employer to any employee will not be treated as supply of goods or services.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">What is the taxability of\nsupply between any related persons?<\/h3>\n\n\n\n<p>Supply made in between related persons with\nconsideration will constitute as \u2018Supply\u2019 like another transaction.<\/p>\n\n\n\n<p>The supply made between any related persons for inadequate or no Consideration is covered under Schedule I of the GST Act. Such transactions will be treated as \u2018Supply\u2019 only if it happens in furtherance or course of business.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Supply_of_goods\"><\/span>Supply of\ngoods<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Any supply between agent and principal will be liable to pay GST. Agent and principal both will be liable to pay GST jointly. The person who is paying GST can later claim ITC. These are the following conditions-<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">By An Agent to the Principal<\/h3>\n\n\n\n<p>Supply of Goods by any agent to\nthe principal where the agent receives the goods on behalf of the principal is\nconsidered as supply without consideration. In this context, any supply between agent and principal will be liable to pay\nGST.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">By a principal to the agent where the agent undertakes the supply of such goods on behalf of the principal<\/h3>\n\n\n\n<p><em><strong>Following are the methods for appropriate valuation-<\/strong><\/em><\/p>\n\n\n\n<ul>\n<li>Open market value is considered as\nthe value of the supply between two unrelated parties. When a supply is made in\nbetween two related parties, there is a high chance that the prices will be\ninfluenced by the relationship.<\/li>\n<\/ul>\n\n\n\n<p><strong><em>For\nexample- <\/em><\/strong>One company sells\ngoods to any related party at INR 1500 and to any unrelated party at INR 2000.\nIn this particular case we can say that the relationship has manipulated the\npricing of the seller. Hence, for the purpose of valuation, INR 2000 will be\nconsidered.<\/p>\n\n\n\n<ul>\n<li>If the open market value can\u2019t be\ndetermined, then the value of goods of similar kind and quality will be\nconsidered.<\/li>\n<\/ul>\n\n\n\n<p><strong><em>For\nexample-<\/em><\/strong> If X Company makes\nentire sales to Y Company, and then the above method of valuation will not be\nconsidered. They can consider Z Company who sells similar goods as X Company at\nINR 1200. Therefore, the valuation for this purpose would be INR 1200.<\/p>\n\n\n\n<ul>\n<li>If both above mentioned methods does not provide a\nappropriate valuation, then a valuation based on&nbsp;cost&nbsp;that is total\ncost of production or&nbsp;residual method will be considered.<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Import_of_services_by_any_taxable_person\"><\/span>Import of\nservices by any taxable person <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Import of services by any taxable\nperson from any related person or from any of their other business outside\nIndia for business purpose only, shall be treated as supply.<\/p>\n\n\n\n<p>For example, ABC Ltd. is registered in the US by X Ltd. along with Y Ltd. in India. Services imported by Y Ltd from ABC Ltd. without any consideration, then the import will be considered as a supply. GST will be paid by Y Ltd. on <em><a href=\"https:\/\/corpbiz.io\/learning\/analysis-of-reverse-charge-mechanism-under-gst\/\"><strong>Reverse Charge Mechanism<\/strong><\/a><\/em>.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>This blogs deals with transactions between any related persons and other activities that can be treated as \u2018Supply\u2019 under GST even if made without any consideration. GST will be applicable on all these transactions. These are listed in Section 7 Schedule 1 of the <strong>CGST Act, 2017<\/strong><sup><a href=\"https:\/\/www.indiacode.nic.in\/handle\/123456789\/2250?view_type=browse&amp;sam_handle=123456789\/1362\"><strong>[1]<\/strong><\/a><\/sup>. The transactions are mostly between entities that are related or between any agent and a principal. The entities, who pay GST, can later claim it as Input Tax Credit.  <\/p>\n\n\n\n<p>Our&nbsp;<a href=\"https:\/\/corpbiz.io\/\"><strong>CorpBiz<\/strong><\/a>&nbsp;professionals will be at your disposal if you want expert advice on any aspect of GST implications, registration or compliance, and any Government Licensing. We will help you to complete all your compliances concerning all the issues related to GST applicability-based as per your desired activities, ensuring well-timed completion of your work.&nbsp;&nbsp;<\/p>\n\n\n<a href=\"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/09\/Guide-on-Section-7-Schedule-1-of-the-CGST-Act.pdf\" class=\"pdfemb-viewer\" style=\"\" data-width=\"max\" data-height=\"max\"  data-toolbar=\"bottom\" data-toolbar-fixed=\"off\">Guide-on-Section-7-Schedule-1-of-the-CGST-Act<br\/><\/a>\n<p class=\"wp-block-pdfemb-pdf-embedder-viewer\"><\/p>\n\n\n\n<p class=\"text-left\"><b>Read our article<\/b>:<mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/corpbiz.io\/learning\/provisions-for-availing-2-gst-registration-on-one-pan-card\/\">\nKnow the Provisions for availing 2 GST Registration on One PAN Card\n<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Section 7 Schedule 1 of CGST Act talks about the Activities to be treated as Supply even if made without consideration. The supply made between any related persons for inadequate or no Consideration is covered under Schedule I of the GST Act. Such transactions will be treated as \u2018Supply\u2019 only if it happens in furtherance [&hellip;]<\/p>\n","protected":false},"author":18,"featured_media":16598,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[16],"tags":[1014],"acf":{"service_id":"68"},"authorName":"Sakshi Srivastava","authorImageUrl":"https:\/\/corpbiz.io\/learning\/wp-content\/uploads\/2020\/03\/IMG-20180130-WA0007.jpg","authorDescription":"Sakshi has pursued B.B.A.LL.B.(IPR Hons.). She is an avid reader and is keen to gather and share her knowledge on the subjects relating to IPR, Company Law and GST. Priorly she has worked as a legal researcher and vide her articles she aims at improving the core knowledge of the subjects to the masses.","postViews":19552,"readingTime":4,"_links":{"self":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/16590"}],"collection":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/comments?post=16590"}],"version-history":[{"count":20,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/16590\/revisions"}],"predecessor-version":[{"id":67928,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/posts\/16590\/revisions\/67928"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media\/16598"}],"wp:attachment":[{"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/media?parent=16590"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/categories?post=16590"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/corpbiz.io\/learning\/wp-json\/wp\/v2\/tags?post=16590"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}