# Non-Supplies Listed in Schedule III [Section 7(2)]

Schedule III is the negative list under GST – activities/transactions which are treated neither as supply of goods nor as supply of services, and therefore are outside the levy of GST.

## Key Entries in Schedule III

### Para 1 – Employee-Employer Services

Services by an employee to the employer in the course of or in relation to employment.
Covered (NOT a supply):
Casual workers (construction/security agency) on daily wages → in course of employment.
Directors receiving salary with TDS deducted → in course of employment.
NOT Covered (IS a supply):
Contract services between parties (principal-to-principal).
Payments for not joining a competing business (forbearance, not employment).
Independent directors receiving sitting fees → NOT in course of employment.

### Para 2 – Court/Tribunal Services

Services by any Court or Tribunal established under any law in force.
"Court" includes District Court, High Court, and Supreme Court.

### Para 3 – Functions of Constitutional/Statutory Persons

(a) Functions of MPs, MLAs, members of Panchayats, Municipalities, local authorities.
(b) Duties of persons holding a constitutional post (President, VP, PM, CJI, Speaker, Chief Election Commissioner, C&AG, Attorney General, etc.).
(c) Duties of a Chairperson/Member/Director in a body established by CG/SG/local authority (not deemed employee before commencement of clause).

### Para 4 – Funeral Services

Services of funeral, burial, crematorium, mortuary – including transportation of the deceased.

### Para 5 – Sale of Land/Building

Sale of land – always outside GST (whether as-is or after development like levelling, drainage, water/electricity lines).
Sale of building – only if entire consideration received AFTER issuance of completion certificate OR after first occupation, whichever is earlier.
⚠ However, services of land development (levelling, drainage works) on their own ARE taxable at applicable rate.

### Para 6 – Actionable Claims

All actionable claims are outside supply EXCEPT specified actionable claims.
Specified actionable claims [Sec 2(102A)] – treated as supply: Betting, Casinos, Gambling, Horse racing, Lottery, Online money gaming.
Online money gaming [Sec 2(102A)]: Players pay/deposit money or money's worth (including VDA) in expectation of winning money/VDA, regardless of skill/chance, and irrespective of legality under any other law.
Online gaming [Sec 2(80A)]: Game offered on internet or electronic network; includes online money gaming.
Other (non-specified) actionable claims – NOT supply: right to recover insurance money, arrears of rent, future rents (if assignable), unsecured loans/debentures, bills of exchange, promissory notes, bank guarantees, FDRs, right to benefit of contract.

### Para 9 – Co-Insurance Apportionment

Apportionment of co-insurance premium by lead insurer to co-insurer for jointly supplied insurance services to insured.
Condition: Lead insurer must pay CGST/SGST/UTGST/IGST on the ENTIRE premium paid by the insured.

### Para 10 – Reinsurance Ceding Commission

Services by insurer to reinsurer where ceding/reinsurance commission is deducted from reinsurance premium.
Condition: Reinsurer must pay GST on the gross reinsurance premium payable (inclusive of the ceding/reinsurance commission).

Worked example

### Example 1

Example (Employment): Mr. X is on the payroll of ABC Ltd, drawing salary with TDS u/s 192. Salary is NOT a supply (Para 1). After resigning, ABC pays him ₹2 lakh on a contract to consult for 6 months → this IS a supply (principal-to-principal).

### Example 2

Example (Independent Director): Ms. Y, an independent director, receives ₹50,000/meeting as sitting fees. This is NOT in course of employment → IS a supply, taxable under RCM.

### Example 3

Example (Land): A landowner levels land, lays internal roads, drainage, electrical lines, then sells plots. The SALE of plots is outside GST (Sch III Para 5). But if he engages a contractor for the development work, the CONTRACTOR's service is taxable at applicable rate.

### Example 4

Example (Sale of Building): Builder sells flat after receiving completion certificate. Entire consideration received post-CC → outside GST. If even ₹1 received before CC → entire transaction is a taxable supply (construction service).

### Example 5

Example (Co-insurance): Lead insurer A receives ₹100 premium from insured. Apportions ₹40 to co-insurer B. If A pays GST on the full ₹100 → the ₹40 apportionment to B is NOT a supply (Para 9).

⚠️ Common exam mistakes

Treating ALL director remuneration as outside GST. Only whole-time/executive directors on payroll (salary) are covered; sitting fees to independent/non-executive directors ARE taxable (under RCM).
Forgetting that sale of building is outside GST only if entire consideration is received AFTER CC or first occupation. Even partial advance before CC makes it a supply.
Treating ALL actionable claims as non-supplies – specified actionable claims (betting, casinos, gambling, horse racing, lottery, online money gaming) ARE supplies.
Forgetting the conditions in Paras 9 and 10 – the non-supply treatment is conditional on the lead insurer/reinsurer paying GST on the gross amount.

Bare-Act text Section 7(2) read with Schedule III · CGST Act, 2017 · click to expand

Section 7(2)(a): Notwithstanding anything contained in sub-section (1), activities or transactions specified in Schedule III shall be treated neither as a supply of goods nor a supply of services.

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Non-Supplies under Schedule III [Section 7(2)]

Worked example

⚠️ Common exam mistakes