The Goods and Services Tax, GST, has replaced all other types of indirect
taxes applicable on goods and services. Instead of VAT, service tax, etc., a
single GST is charged on the value of goods and services. There are different
GST rates applicable for different types of goods and services. However, in
some instances, no GST is levied. Non-application of GST is called GST
exemption. This exemption is available for specific businesses, goods and
services.
Exempt supply under GST
Exempt supply under GST means supplies which not attract goods and service
tax. In these supply no GST is charged. Input tax credit paid on these
supplies will not be able for utilisation. These are the following three
types of supply which are considered as exempt supply:-
- supplies which are chargeable to nil rate tax.
- supplies which are partially and wholly exempt from the charge of GST by the notifications which amended the section 11 of CGST and section 6 IGST.
- supplies which comes under the sec 2(78) of the Act. which covers the supplies which are not taxable under the Act like alcoholic liquor for human consumption.
GST exemption from registration
- Agriculturists
- Person who fall in the threshold exemption limit of turnover for supply of goods INR 40 lakhs and for supply of services INR 20 lakhs and for specified category INR 20 lakh and INR 10 lakh.
- Person who are making NIL Rated and exempt supply of goods and services such as fresh milk, honey, cheese, agriculture services etc.
- Person making activities which are not covered under the supply of goods and services such as funeral services , petroleum products etc.
- person making supplies those are covered under reverse charge such as tobacco leave, cashew nut(not shelled and peeled ) etc.
Let’s understand the exemptions in each instance –
GST exemption for businesses
Small and medium scale businesses can enjoy GST exemptions if their
aggregate turnover is up to a specified limit. When the GST Act was
launched, this limit was INR 20 lakhs for individuals and businesses and INR
10 lakhs for hilly states and North-eastern States of India. However, in the
32nd GST Council Meeting, which was held in January 2019, the limits have
been changed. These limits are as follows –
- Businesses and individuals who are supplying goods can claim GST exemption if their aggregate turnover is less than INR 40 lakhs in a financial year.
- For hilly and north-eastern States of India, the limit has been revised to INR 20 lakhs.
- For businesses and individuals involved in the supply of services, the limit for claiming GST exemption is INR 20 lakhs
- In case of hilly and north-eastern States, if the aggregate turnover is up to INR 10 lakhs, businesses and individuals supplying services can claim GST exemptions.
Hilly and north-eastern States would include Arunachal Pradesh, Jammu and
Kashmir, Himachal Pradesh, Uttarakhand, Tripura, Nagaland, Sikkim,
Meghalaya, Mizoram, Assam and Manipur.
Aggregate turnover, as per the GST Act, would include the aggregate value of
all types of taxable supplies, inter-state supplies, exempt supplies and the
goods and services which have been exported. The following, would, however,
be deducted from the value of aggregate turnover –
- CGST, SGST or IGST already paid by the investor
- Taxes which are payable on the basis of reverse charge mechanism
- Value of the inward supply of goods and services
- Value of non-taxable goods and services#
GST exemptions for goods
There is a list of goods which do not attract GST as recommended by the GST
Council. The reasons for granting exemption on goods might include any of
the following –
- In the interest of the public
- The exemption is as per the GST Council’s recommendation
- The exemption is granted by the Government through a special order
- The exemption is allowed on specific goods through an official notification
Moreover, there are two types of GST exemptions on goods. These are as
follows –
- Absolute exemption - under this type of exemption, the supply of specific types of goods would be exempted from GST without considering the details of the supplier or receiver and whether the good is supplied within or outside the State.
- Conditional exemption – under this type of exemption, supply of specific types of goods would be GST exempt subject to certain terms and conditions which have been specified under the GST Act or any amendment or notification.
Here is a list of some of the most common goods which are GST exempt –
| Types of goods | Examples |
|---|---|
| Live animals | Asses, cows, sheep, goat, poultry, etc. |
| Meat | Fresh and frozen meat of sheep, cows, goats, pigs, horses, etc. |
| Fish | Fresh or frozen fish |
| Natural products | Honey, fresh and pasteurized milk, cheese, eggs, etc. |
| Live trees and plants | Bulbs, roots, flowers, foliage, etc. |
| Vegetables | Tomatoes, potatoes, onions, etc. |
| Fruits | Bananas, grapes, apples, etc. |
| Dry fruits | Cashew nuts, walnuts, etc. |
| Tea, coffee and spices | Coffee beans, tea leaves, turmeric, ginger, etc. |
| Grains | Wheat, rice, oats, barley, etc. |
| Products of the milling industry | Flours of different types |
| Seeds | Flower seeds, oil seeds, cereal husks, etc. |
| Sugar | Sugar, jaggery, etc. |
| Water | Mineral water, tender coconut water, etc. |
| Baked goods | Bread, pizza base, puffed rice, etc. |
| Fossil fuels | Electrical energy |
| Drugs and pharmaceuticals | Human blood, contraceptives, etc. |
| Fertilizers | Goods and organic manure |
| Beauty products | Bindi, kajal, kumkum, etc. |
| Waste | Sewage sludge, municipal waste, etc. |
| Ornaments | Plastic and glass bangles bangles, etc. |
| Newsprint | Judicial stamp paper, envelopes, rupee notes, etc. |
| Printed items | Printed books, newspapers, maps, etc. |
| Fabrics | Raw silk, silkworm cocoon, khadi, etc. |
| Hand tools | Spade, hammer, etc. |
| Pottery | Earthen pots, clay lamps, etc. |
GST Exemption on services
Just like specific goods, specific services are also GST exempt. There are
three types of supply of services which would qualify for GST exemption.
These include the following –
- Supplies which have a 0% tax rate
- Supplies which do not attract CGST or IGST due to the provisions stated in a notification which amends either Section 11 of CGST Act or Section 6 of IGST Act
- Supplies which are defined under Section 2(78) of the GST Act which are not taxable.
Since these types of supplies are GST exempt, any Input Tax Credit which is
applicable on these supplies would not be available to utilise or set off
the GST liability.
Moreover, even under supply of services, there can be two types of GST
exemptions which are as follows –
- Absolute exemption wherein the service would be exempted from GST without any conditions
- Conditional exemption or partial exemption wherein exemption is granted based on a condition. This condition states that if the service is supplied intra-State or if the service is supplied by a registered person to an unregistered one, GST would be exempted if the total value of such supplies received by a registered person is not more than INR 5000/day.
Here is a list of some of the services which enjoy GST exemption –
| Types of services | Examples |
|---|---|
| Agricultural services | Cultivation, supplying farm labour, harvesting, warehouse related activities, renting or leading agricultural machinery, services provided by a commission agent or the Agricultural Produce Marketing Committee or Board for buying or selling agriculture produce, etc. |
| Government services | Postal service, transportation of people or goods, services by a foreign diplomat in India, services offered by the Reserve Bank of India, services offered to diplomats, etc. |
| Transportation services | Transportation of goods by road, rail, water, etc., payment of toll, transportation of passengers by air, transportation of goods where the cost of transport is less than INR 1500, etc. |
| Educational services | Transportation of faculty or students, mid-day meal scheme, examination services, services offered by IIMs, etc. |
| Medical services | Services offered by ambulance, charities, veterinary doctors, medical professionals, etc. |
| Organizational services | Services offered by exhibition organisers for international business exhibitions, tour operators for foreign tourists, etc. |
| Other services | Services offered by GSTN to the Central or State Government or Union Territories, admission fee payable to theatres, circuses, sports events, etc. which charge a fee up to INR 250 |
Though GST is applicable for all businesses and on the supply of goods and
services, the above-mentioned exemptions are available. These exemptions
reduce the GST burden and help in the socio-economic development of the
country.
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