Schedule I, II and III Amendments under CGST Amendment Act, 2018

Sections 30, 31 and 32 of the Central Goods and Services Tax (Amendment) Act, 2018 amended Schedules I, II and III respectively of the Central Goods and Services Tax Act, 2017. These amendments affect the scope and classification of supplies, including imports of services from related persons, the role of Schedule II, merchant trade transactions, warehoused goods and specified high-sea transactions.

Effective date: The relevant amendments made by sections 30, 31 and 32 of the CGST (Amendment) Act, 2018 were brought into force from 1 February 2019. However, the amendment made by section 31 to the heading of Schedule II expressly operates retrospectively from 1 July 2017.

Section 30 - Amendment of Schedule I of the CGST Act

Schedule I is linked to section 7 of the CGST Act and identifies specified activities that are treated as supplies even when they are made without consideration.

Section 30 of the CGST (Amendment) Act, 2018: In Schedule I of the principal Act, in paragraph 4, for the words "taxable person", the word "person" was substituted.

What changed in Schedule I?

Paragraph 4 concerns import of services by a person from a related person or from any of his other establishments outside India, in the course or furtherance of business.

The amendment replaced the narrower expression "taxable person" with "person". The present Schedule I therefore refers to import of services by a person from a related person or another establishment outside India in the course or furtherance of business.

Section 31 - Amendment of Schedule II of the CGST Act

Section 31: In Schedule II of the principal Act, in the heading, after the word "ACTIVITIES", the words "OR TRANSACTIONS" were inserted, and the amendment is deemed to have taken effect from 1 July 2017.

Purpose of Schedule II

Schedule II operates in conjunction with section 7 of the CGST Act and deals with activities or transactions that are to be treated as a supply of goods or as a supply of services where the requirements of supply under the Act are otherwise satisfied.

The 2018 amendment changed the heading so that it refers to "activities or transactions", rather than merely "activities". The amendment was expressly given retrospective operation from the commencement of GST on 1 July 2017.

Section 32 - Amendment of Schedule III of the CGST Act

Schedule III is important because activities or transactions specified in it are treated under section 7 of the CGST Act as neither a supply of goods nor a supply of services.

Section 32 of the CGST (Amendment) Act, 2018 inserted paragraphs 7 and 8 into Schedule III and also inserted Explanation 2 dealing with the meaning of "warehoused goods".

Paragraph 7 - Goods moving entirely outside India

Paragraph 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.

This provision covers what is commonly described as merchant trade or third-country trade, where goods move from one location outside India to another location outside India without entering India.

By placing the transaction in Schedule III, the CGST Act treats the specified transaction as neither a supply of goods nor a supply of services for GST purposes, subject to the statutory conditions.

Paragraph 8 - Warehoused goods and specified high-sea transactions

Paragraph 8 covers two categories of transactions:

Paragraph 8(a): Supply of warehoused goods to any person before clearance for home consumption.

Paragraph 8(b): Supply of goods by the consignee to another person by endorsement of documents of title to the goods after dispatch from the port of origin outside India but before clearance for home consumption.

Paragraph 8(a) therefore addresses supplies of goods while they remain warehoused and before they are cleared for home consumption. Paragraph 8(b) covers the specified transfer of goods after dispatch from a foreign port but before clearance for home consumption in India.

Meaning of "warehoused goods"

Section 32 also renumbered the existing Explanation as Explanation 1 and inserted Explanation 2.

Explanation 2: For paragraph 8, the expression "warehoused goods" has the same meaning as assigned to that expression in the Customs Act, 1962.

Legal effect of inclusion in Schedule III

Section 7 defines the scope of "supply" under the CGST Act. Section 7(2) provides, notwithstanding section 7(1), that activities or transactions specified in Schedule III are to be treated neither as a supply of goods nor as a supply of services.

Accordingly, paragraphs 7 and 8 introduced by the 2018 Amendment Act brought the specified merchant-trade, warehoused-goods and pre-clearance transactions within Schedule III.

Practical point: The precise GST treatment of a transaction depends on its facts, the applicable version of the CGST and IGST legislation, subsequent amendments, relevant notifications and circulars, and the period to which the transaction relates. The statutory text applicable to the relevant tax period should therefore be checked before determining tax liability.

Summary of Sections 30, 31 and 32

Section 30: replaced "taxable person" with "person" in paragraph 4 of Schedule I.

Section 31: inserted "or transactions" in the heading of Schedule II, with retrospective effect from 1 July 2017.

Section 32: inserted paragraphs 7 and 8 in Schedule III covering specified transactions involving goods outside India, warehoused goods and goods transferred before clearance for home consumption. It also inserted Explanation 2 defining "warehoused goods" by reference to the Customs Act, 1962.

Official statutory resources

For the authoritative and updated statutory text, readers may consult the Central Goods and Services Tax (Amendment) Act, 2018 on India Code, the Central Goods and Services Tax Act, 2017 on India Code, and the official CBIC GST portal.