GST Exempted Goods
Understanding the taxability also involves knowing whether the item is exempt or not under GST. Due to the scope of taxable supplies being widened under GST, exemptions under GST have clearly been defined. Not just knowing the exemption list, but also understanding the implication of an item being exempt is important as certain conditions are attached to it like reversing the ITC.
Also, what can be nil-rated today may become charged a higher tax rate in the future. Hence, clearly demarking the various terms such as Nil Rated, Exempt, Zero-rated and Non-GST supplies under GST is important. Read through and get the complete list of all the GST exemptions notified on Goods at a click of a button!.
Also, click here to view the complete list of exempted services under GST.
What is Exempt Supply
Exempt supplies comprise the following three types of supplies:
- Supplies taxable at a ‘NIL’ rate of tax* (0% tax);
- Supplies that are wholly or partially exempted from CGST or IGST, by way of a notification amending Section 11 of CGST Act or Section 6 of IGST Act;
- Non-taxable supplies as defined under Section 2(78) – supplies that are not taxable under the Act (For Example Alcoholic liquor for human consumption.
Tax need not be paid on these supplies. Input tax credit attributable to exempt supplies will not be available for utilization/setoff.
*Zero-rated supplies such as exports would not be treated as supplies taxable at ‘NIL’ rate of tax;
Central or the State Governments are empowered to grant exemptions from GST. The conditions for granting an exemption are:
- The exemption should be in the public interest
- By way of issue of notification
- Must be recommended by the GST Council
- Absolute exemption or conditional exemption may be for any goods and/or services of any specified description.
- Exemption by way of a special order (not notification) may be granted under exceptional circumstances.
- The registered person supplying the goods and/or services is not entitled to collect tax higher than the effective rate, where the supply enjoys an absolute exemption.
Classification of Exemptions
Supplier may be exempt – Exemption to the person making supplies – .i.e, supplier, regardless of the nature of outward supply.
Ex: Services by Charitable entities.
Certain Supplies may be exempt – Certain supplies due to their nature and type are exempted from GST. All supplies that are notified would be eligible for the exemption. Here, irrespective of who the supplier is, the exemption is allowed. not very much relevant.
Ex: Services by way of sponsorship of sporting events, Services by way of public conveniences.
Types of Exemptions
Absolute exemption: Exemption without any conditions.
Ex: Transmission or distribution of electricity by an electricity transmission or distribution utility.
Conditional Exemption: Exemption subject to certain conditions.
Ex: Health care services by a clinical establishment by way of providing room [other than Intensive Care Unit (ICU)/ Critical Care Unit(CCU)/ Intensive Cardiac Care Unit (ICCU)/ Neonatal Intensive Care Unit (NICU)] having room charges exceeding Rs. 5000 per day.
Conditional or partial exemption: Intra-State supplies of goods and/or services received from an unregistered person by a registered person is exempted from payment of tax under reverse charge provided the aggregate value of such supplies received by a registered person from all or any of the suppliers does not exceed `Rs 5000/- in a day.
Exemption under one GST Law and the effect on another GST Law
| Exemption under CGST Act | Deemed to be exempt under SGST / UTGST Act |
| No auto-application of exemption under IGST Act | |
| Exemption under IGST Act | No auto-application of exemption under CGST Act |
Important Notifications issued for exemption from payment of GST
What goods are exempted from GST? (List of exempted goods)
Click here to view the complete list of exempted goods.
Treatment of ITC if supply is exempt
In the case of exempt supplies, the amount of credit attributable to exempt supplies shall be reversed.
How to determine the credit attributable to exempt supplies?
Credit attributable to exempt supplies = (A/T) x C
Where,
A = Aggregate value of exempt supplies (all supplies other than taxable and zero-rated supplies)
T = Total turnover of the person in the tax period
C= Common Credit
What is a non-taxable supply?
“Non-taxable supply” means a supply of goods or services or both which is not leviable to tax under the CGST Act or under the IGST Act. A transaction must be a ‘supply’ as defined under the GST law to qualify as a non-taxable supply under the GST.
Note: Only those supplies that are excluded from the scope of taxation under GST are covered by this definition – i.e., alcoholic liquor for human consumption, articles listed in section 9(2) or in schedule III.
It must also be noted that the following items are not out of the scope of GST. However, the GST rate has not yet been announced or notified to them.
- petroleum crude
- high-speed diesel
- motor spirit (commonly known as petrol)
- natural gas and
- aviation turbine fuel
The negative list under GST
Items that are not covered under GST are called a negative list. Also, these items are notified under Schedule III of the CGST Act. The following items are on the negative list under GST:
- Services by an employee to the employer in the course/ relation to employment
- Services of funeral, burial, crematorium or mortuary
- Sale of land
- Sale of completed buildings
- Actionable claims (other than lottery, betting and gambling)
- Services by any court or Tribunal
- Functions performed by the MPs, MLAs etc.
- Duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity.
