Chapter 3

Section 7. Scope of supply
(1) “Supply” includes:
(a) All forms of providing goods or services for consideration in the course of business (sale, transfer, barter, lease, license, etc.).
(aa) Transactions between a person (other than individual) and its members or constituents for consideration, treated as between separate persons.
(b) Import of services for consideration.
(c) Activities in Schedule I made without consideration.
(1A) Such activities are classified as supply of goods or supply of services per Schedule II.

(2) Activities in Schedule III, or those by government/public authorities as notified, are not treated as supply.

(3) The Government, on Council recommendations, may notify transactions to be treated as supply of goods or services specifically.

Enforced w.e.f. 1st July 2017.

Section 8. Tax liability on composite and mixed supplies
(a) A composite supply (multiple supplies with a principal supply) is taxed as the principal supply.
(b) A mixed supply (multiple supplies) is taxed at the rate of the supply attracting the highest tax.

Enforced w.e.f. 1st July 2017.

Section 9. Levy and collection
(1) Central GST is levied on all intra-State supplies, excluding alcoholic liquor for human consumption, based on value under Section 15, at rates notified (max 20%), payable by the taxable person.
(2) Central tax on petroleum products and aviation fuel is levied from notified dates.
(3) Government may notify supplies for reverse charge, where recipient pays tax.
(4) Certain classes of registered persons may pay tax on reverse charge for supplies received from unregistered suppliers.
(5) For intra-State services supplied through e-commerce operators, the operator pays the tax; if absent in the territory, a local representative is liable.

Enforced w.e.f. 1st July 2017.

Section 10. Composition levy
(1) Registered persons with aggregate turnover ≤ ₹50 lakh in preceding year may opt for composition scheme, paying tax at prescribed rates (max:

• 1% for manufacturers
• 5% for suppliers of specified services
• 5% for others), subject to conditions.
  Government may raise turnover limit (max ₹1.5 crore).
  Small supplies of services (≤10% of turnover or ₹5 lakh) are allowed.

(2) Eligibility:
(a) Not supplying services (except allowed small percentage).
(b) Not supplying exempt goods/services.
(c) No inter-State outward supplies.
(d) Not supplying through e-commerce operator required to collect tax.
(e) Not a notified manufacturer/service provider.
(f) Not a casual/non-resident taxable person.

(2A) Persons not eligible under (1)–(2) may opt for tax ≤3% of turnover if they meet the same conditions.

(3) Option lapses if turnover exceeds prescribed limit.
(4) Person under composition cannot collect GST or claim input credit.
(5) Wrongful use of composition scheme may attract penalty under Sections 73/74.

Explanation: Certain exempt supplies (like interest on loans) are excluded from turnover calculation.

Enforced w.e.f. 22nd June 2017.

Section 11. Power to grant exemption
(1) Government may exempt goods/services fully or partially by notification, in public interest.
(2) Special order may exempt goods/services under exceptional circumstances.
(3) Government may issue explanations to clarify scope within 1 year, effective from the original notification/order.

Explanation: Absolute exemption prevents collecting tax beyond the effective rate.

Enforced w.e.f. 1st July 2017.