Activities Treated as Supply Without Consideration (Schedule I GST)
Most of us think GST only applies when there’s money involved—sell something, get paid, tax applies. Simple, right? But GST is not always that straightforward. There are times when you don’t take a single rupee, yet the law says, “Nope, this is still supply.” And once it’s supply, GST wants its cut.
That’s exactly what Schedule I of the CGST Act is about. It quietly lists a handful of situations where GST applies even when there’s no consideration. Businesses often miss these because, let’s be honest, no one naturally thinks of tax when giving away stuff for free or shifting goods around. But the law does.
When you shift between your own branches
This is probably the biggest one. Let’s say you’ve got an office in Delhi and a branch in Bangalore. If you move goods between the two, you might think, “Well, it’s all mine anyway, so why would GST apply?” But GST doesn’t see it that way. The law says both branches are distinct persons, so that stock transfer itself is supply.
I know it feels weird because no customer is involved, no payment is made. But from the government’s angle, if they allowed free stock transfers without GST, businesses could move everything around, sell from another branch, and skip tax.
A real example: a manufacturer in Gujarat sends raw material to its unit in Maharashtra. Even though it’s all within the same company, GST still applies because it’s treated as supply between two persons.
Employer giving more than just salary
Here’s another tricky one. Salary is fine. It’s not supply. But let’s say an employer starts showering employees with perks—like gifting a car, paying for private club memberships, giving expensive electronics during Diwali. That’s where GST comes in.
Picture this: A company gives its senior manager a brand-new car as a “thank you.” Or imagine HR distributing iPads worth ₹60,000 each during festivals. If the value crosses ₹50,000 a year per employee, GST considers it supply.
Now, most companies don’t think about tax when giving gifts to employees. But the law says if it’s beyond the agreed employment contract, it’s supply. So even “free” things aren’t really free when GST gets involved.
Agents moving goods
Agents are another area people forget. If you, as a principal, hand over goods to your agent to sell later, that’s supply—even though technically no money has changed hands yet.
Think of a company that manufactures packaged snacks. It sends 1,000 boxes to a consignment agent. The agent hasn’t sold anything yet, but just that transfer is supply in GST terms.
Same goes if the agent delivers on your behalf. The law doesn’t want businesses using agents as a loophole to delay tax.
Importing services from a related party abroad
This one hits multinationals hard. If your company in India gets “free” consultancy or IT support from its parent company overseas, GST still says it’s supply.
Let’s say your Indian branch gets regular business advice from the US headquarters. No invoices raised, no money paid. But GST says: “Service was imported, related party was involved, so pay tax.”
Why? Because otherwise companies could just shift services across borders for free and avoid tax completely.
Why GST does this
On the surface, it feels unfair—taxing something that’s free. But GST isn’t only about cash. It’s about the flow of value. Whenever value shifts, the tax credit chain has to stay unbroken. If companies were allowed to move stock or services for free, the entire GST system would start leaking.
Schedule I is basically a “plug-the-loopholes” list. It says: even if no money moves, if value shifts, it’s supply.
Where businesses usually mess up
I’ve seen businesses stumble in the same few areas:
- Moving goods from one state branch to another without recording GST.
- Gifting employees expensive perks without realizing GST kicks in.
- Sending stock to agents and forgetting it counts as supply.
- Importing free services from parent companies abroad.
On paper, these don’t look like taxable events. But when an audit happens, they come back to bite.
Why you should care
Missing these rules can hit you two ways: either you lose input tax credit, or you end up paying penalties and interest. It’s not just compliance—it directly affects your bottom line.
Imagine a company that keeps transferring machinery between units without recording it as supply. Later, auditors come knocking, and suddenly there’s a massive tax liability with interest. That’s why understanding Schedule I is not optional—it’s survival.
Final thoughts
Schedule I basically reminds us that GST doesn’t just tax cash—it taxes the movement of value. Whether it’s between branches, between an employer and employee, through an agent, or across borders, GST wants its share.
So next time you’re shifting stock, gifting perks, sending goods to agents, or getting “free” help from your foreign parent company, pause. Ask: “Does this look like supply under GST?” If yes, better record it and stay compliant.
Because the truth is—nothing’s really free once GST is in the picture.
