The Central Goods and Services Tax Act, 2017
SCHEDULE I
[See section 7]
Activities to be treated as Supply even if made without consideration
1. Permanent transfer or disposal of business assets where input tax credit has been availed on such assets.
2. Supply of goods or services or both between related personsC1 or between distinct personsC2 as specified in section 25, when made in the course or furtherance of business:
Provided that gifts not exceeding fifty thousand rupees in value in a financial year by an employer to an employee shall not be treated as supply of goods or services or both.
3. SupplyC3 of goods—
(a) by a principal to his agent where the agent undertakes to supply such goods on behalf of the principal; or
(b) by an agent to his principal where the agent undertakes to receive such goods on behalf of the principal.
4. Import of servicesC4 by a 1[person] from a related person or from any of his other establishments outside India, in the course or furtherance of business.
References
Enforcement:
Enforced w.e.f. July 01, 2017 [Notification No. G.S.R. 658(E) dated 28.06.2017].
Amendments:
1. Substituted by Central Goods and Services Tax (Amendment) Act, 2018, w.e.f. 01.02.2019 [vide Notification No. 2/2019–Central Tax dated 29.01.2019], for the words “taxable person”.
Circular:
C1. Director’s Personal Guarantee: The activity of providing personal guarantee by the Director to the banks/ financial institutions for securing credit facilities for their companies is to be treated as a supply of service, even when made without consideration. However, as per RBI, no consideration can be paid to the director by the company. Hence, the open market value of the said transaction/supply may be treated as zero. In such a scenario, no tax is payable on such supply of service by the director to the company. In cases where the director, who had provided the guarantee, is no longer connected with the management but continuance of his guarantee, the taxable value of such supply of service shall be the remuneration/ consideration provided to such a person/ guarantor by the company, directly or indirectly.[Circular No. 204/16/2023-GST dated 27.10.2023]
C2. The inter-state movement of goods like movement of various modes of conveyance, between distinct persons as specified in section 25(4) of the Central Goods and Services Tax Act, 2017, including the ones specified at (i) to (viii) of para 3 of the Circular, may not be treated as supply and consequently IGST will not be payable on such supply. [Circular No. 1/1/2017-IGST dated 07.07.2017]. The circular 1/1/2017-IGST shall mutatis mutandis apply to inter-state movement of such goods, and except in cases where movement of such goods is for further supply of the same goods, such inter-state movement shall be treated ‘neither as a supply of goods or supply of service,’ and consequently no IGST would be applicable on such movements.[Circular No. 21/21/2017-GST dated 22.11.2017]
C3. Scope of Principal-agent relationship in the context of Schedule I of the CGST Act. [Circular No. 57/31/2018-GST dated 04.09.2018]. For del-credere agent (DCA), refer Circular No. 73/47/2018-GST dated 05.11.2018.
C4. In case of import of services by a registered person in India from a related person located outside India, the tax is required to be paid by the registered person in India under reverse charge mechanism. In such cases, the registered person in India is required to issue self-invoice under Section 31(3)(f) of CGST Act and pay tax on reverse charge basis. In cases where the foreign affiliate is providing certain services to the related domestic entity, and where full input tax credit is available to the said related domestic entity, the value of such supply of services declared in the invoice by the said related domestic entity may be deemed as open market value in terms of second proviso to rule 28(1) of CGST Rules. Further, in cases where full input tax credit is available to the recipient, if the invoice is not issued by the related domestic entity with respect to any service provided by the foreign affiliate to it, the value of such services may be deemed to be declared as Nil, and may be deemed as open market value in terms of second proviso to rule 28(1) of CGST Rules.[Circular No.210/4/2024-GST dated 26.06.2024]
C5. In the cases, where no consideration is charged by the person from the related person, or by an overseas affiliate from its Indian party, for extending loan or credit, other than by way of interest or discount, it cannot be said that any supply of service is being provided between the said related persons in the form of processing/ facilitating/ administering the loan, by deeming the same as supply of services as per section 7(1)(c) of the CGST Act, read with S. No. 2 and S. No. 4 of Schedule I of CGST Act. Accordingly, there is no question of levy of GST on the same by resorting to open market value for valuation of the same as per rule 28 of CGST Rules, 2017. However, in cases of loans provided between related parties, wherever any fee in the nature of processing fee/ administrative charges/ service fee/ loan granting charges etc. is charged, over and above the amount charged by way of interest or discount, the same may be considered to be the consideration for the supply of services of processing/ facilitating/ administering of the loan, which will be liable to GST as supply of services by the lender to the related person availing the loan.[Circular No. 218/12/2024-GST dated 26.06.2024]