Following Activities or transactions shall not treated as supply under GST regime

The law lists down matters which shall not be considered as ‘supply’ for GST by way of Schedule III. Since these are transactions that are not regarded as ‘supply’ under the GST Laws, there is no requirement to report the inward / outward supply of such activities in the returns.

  1. Services by an employee to the employer in the course of or in relation to his employment.

The entry includes only services and not goods. Further, the entry only covers those services provided by an employee to the employer and not vice versa. Therefore, services such as serving of beverages in the office may possibly be regarded as a supply of service under Entry 2 of Schedule I . As per the definition given in section 15 employee AND the employer BOTH are related person.

Any amount received by employee from the employer for not joining or not staring similar work is liable for GST ( Non compete Fees)

Services provided in course of employment: Amount received by  employee from employer on premature termination of contract of employment is not a supply as it is in course of employment.

If Employee provided other service to Holding or subsidiary company or other related party then it is called Supply.

Leased car provided by employer disclosed in Form 12BA as perquisite – the reporting of perquisites admits a personal element involved in the enjoyment of the company car and the supply that is excluded in Schedule III is the service ‘by’ employee ‘to’ employer. But the present case is of supply of leased car ‘by’ employer ‘to’ employee which is not covered by Schedule III. By this admission in Form 12BA, GST becomes applicable but the valuation will not be as adopted in Rule 3 of Income-tax Rules but by GST Valuation Rules.

  1. Services by any court or Tribunal established under any law for the time being in force.
  2. (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;

     (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 a 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.

  1. Services of funeral, burial, crematorium or mortuary including transportation of the deceased.
  2. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building.

It is intriguing as to why two activities being (i) sale of land and (ii) sale of building, have been clubbed into a single entry. However, one may expand the entry to read the two activities as distinct activities, so as to treat a sale of land without the sale of building, also to be outside the purview of GST. Clause b of para 5 of schedule II overrides the entry 5 to schedule III. It is for this reason that development contracts in the real estate sector have been a subject matter of tax in terms of entry 5(b) of the second schedule. , Any part of the consideration if received, prior to obtaining completion certificate or first occupation in a building would stand to be taxed while all transactions entered into thereafter, would be construed as a sale of immovable property

  1. Actionable claims, other than lottery, betting and gambling.

Actionable claims are neither a supply of goods nor a supply of services. However, The definition of the word ‘goods’ includes the words ‘actionable claims’ viz. lottery, betting and gambling,.While lottery is subject to tax as goods, betting and gambling have been subjected to tax as services under the heading 9996.

Betting, Gambling or Horse Racing – Actionable claim in the form of chance to win in betting, gambling or horse racing in a race club shall be 100% of the face value of the bet or the amount paid to totalisator. It is interesting here to refer to schedule III which states that actionable claim other than lottery, betting and gambling would qualify as an activity or transaction which shall be treated neither as supply of goods nor supply of services. The terms ‘goods’ under section 2(52) includes actionable claims. Services under section 2(102) is defined to exclude goods. Accordingly, the actionable claim in the form of chance to win betting, gambling and horse racing @ 28% (refer entry No. 229 to schedule IV of Notification No. 1/2017 (Rate) GST with reference to the above definitions will be goods and not services. Business under section 2(17) is defined to include the services provided by a race club by way of a totalisator or a licence to book maker in such club.

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Yogesh Parmar have vast knowledge in the field of Goods and Services Tax (GST). He is regularly conducting seminars on GST at various location for business personal to provide the knowledge about impact of GST on their business and how compliance should be made. He is founder of "" through which he is sharing his knowledge and latest amendments, circulars, notifications etc related to all type of taxes. He is also associated with some software development companies and providing advisory service and help to understand technical aspect of GST. He is also serving as functional manager as well as tester to those company which is developing software for GST.


  1. fantastic submit, very informative. I wonder why the other specialists of this sector do not realize this.
    You should continue your writing. I am sure, you have a great readers’
    base already!



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