Exemptions under GST

Introduction –

GST exemptions are some specific goods or services that are exempt from the GST. In other words, there are certain goods and services that are not covered under the ambit of the GST Act. The government can grant exemptions for various reasons like alleviating the tax burden on essential goods and services or supporting specific sectors.

Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by notification, exempt generally, either absolutely or subject to such conditions as may be specified therein.

Types of Exemption under GST-

1. Absolute exemptions: These do not have any conditions attached to them.
2. Conditional exemptions: Some exemptions are subject to certain criteria.

Definition of Exempt supply :-

Exempt supply means the supply of any goods or services or both which attracts a Nil rate of tax or which may be wholly exempt from tax under  Section 11 of the CGST Act or under  Section 6 of the IGST Act, and includes the non-taxable supply.

Nil-rated Supply means Supplies subject to 0% tax rate.

Non-taxable supply means a supply of goods or services or both which is not leviable to tax under this Act or under the IGST Act. Like petroleum crude, high-speed diesel, motor spirit (commonly known as petrol), natural gas, and aviation turbine fuel.

GST Exemption for Registration

1. Agriculturists to the extent of supply of produce out of cultivation of land.
2. Taxpayers who fall in the threshold exemption limit of turnover for the supply of goods Rs. 40 lakhs and for the supply of services Rs. 20 lakhs and for specified categories Rs. 20 lakh and Rs. 10 lakh.in special category states.
3. A person who is making NIL-Rated supply and exempt supply of goods and services such as milk, agriculture services, etc.
4. Any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax such as funeral services, Services by any court or Tribunal, Services by an employee to the employer in the course of or in relation to his employment etc.
5. A person making supplies of those goods that are covered under reverse charge such as GTA service provider, Insurance agent, recovery agent tobacco leaves, cashew nuts (not shelled and peeled) etc.

List of Exempted Goods Under GST

Types of Goods	Examples
Live Animals	Cows, sheep, goats, etc.
Meat	Fresh and frozen meat of sheep, cows, goats, pigs, 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, Orange, etc.
Dry fruits	Cashew nuts, walnuts, Almond etc.
Tea, coffee and spices	Coffee beans, tea leaves, turmeric, etc.
Grains	Wheat, rice, oats, 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, 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, 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.

List of Exempted Services Under GST-

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 goods or Passengers, services by a foreign diplomat in India, services offered to diplomats, etc.
Transportation services	Transportation of goods by road, rail, water, etc., payment of toll, transportation of passengers by air,
Judicial services	Services offered by the arbitral tribunal, partnership firm of advocates, senior advocates to an individual or business entity whose aggregate turnover is up to Rs. 40 lakhs
Educational services	Transportation of faculty or students, mid-day meal scheme, examination services, services offered by IIMs,  Services relating to admission to, or conduct of examination etc.
Health Care Service	Like by way of transportation of a patient in an ambulance, charities, veterinary doctors, medical professionals, etc. does not include hair transplants or cosmetic or plastic surgery.
Organizational services	Services offered by exhibition organizers for international business exhibitions, tour operators for foreign tourists, etc.
Entertainment and Sports related Services	Service by way of admission to a museum, national park, wildlife sanctuary. etc.
Renting of Immovable property-related service	Renting of residential dwelling for use as a residence

Reasons for Exemption:-

Under the Goods and Services Tax system, certain goods, and services, are exempt from GST, which means they are not subject to GST. There are various reasons for granting exemptions under GST, and these reasons are based on policy objectives, socio-economic considerations, and administrative simplicity. Here are some of the common reasons for granting exemptions:-

1. For Social Welfare and Public Interest:- Certain essential goods and services that are considered essential for the welfare of society may be exempted from GST. This includes items like basic food items i.e. rice, wheat, milk), healthcare services, transportation services, education services. Entertainment and sports-related services and Agriculture services.
2. For Small Businesses:- To reduce the compliance burden on small businesses and promote ease of doing business, there may be exemptions or concessional rates for businesses with lower turnover. i.e.  Composition Scheme for small tax payers.
3. Export of Goods and Services: Exports are typically zero-rated under GST, which means that while they are subject to GST, the tax rate is set at zero percent. This ensures that exports remain competitive in international markets and do not suffer from the burden of GST

FAQs on exemption under GST :

Q.1 What is zero- rated supply?
Ans. Zero-rated supply means the Export of goods or services or both or Supply of goods or services or both for authorised operations to a SEZ developer or a SEZ unit.

Q.2. What do you mean by GST exemption?
Ans. Government has the power to notify goods or services in the public interest by notification, exempt generally, either absolutely or subject to such conditions as may be specified therein.

Q.3 Example of services that are exempted under GST?
Ans. Some services that are exempted under GST i.e. Government services, health care services, sports-related services, entertainment services, education services, renting of immovable property services, judicial services, transportation services  etc.

Q.4 What is nil-rated supply?
Ans. Nil-rated Supply means Supplies are subject to 0% tax rate.

Q.5 What is Non- taxable supply?
Ans. Non-taxable supply means a supply of goods or services or both which is not liveable to tax under this Act.

Q.6. Example of Goods that are exempted under GST?
Ans. Some goods that are exempted under GST i.e. live animals, meat, fish, live trees and plants, printed items, handicraft goods, pottery, etc.

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