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.
Exempt supplies comprise the following three types of supplies:
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:
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.
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 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 |
Notification No. | Particulars |
02/2017 Central Tax (Rate) dated 28.06.2017 | Exempted supplies of around 149 items of goods in terms of Section 11(1) of the CGST Act, 2017. Ex. Electricity, Salt, fresh fruits, plastic bangles, passenger baggage etc. Amended vide Notification No.28/2017, 35/2017,42/2017, 7/2018, 19/2018 – Central Tax (Rate) |
12/2017 Central Tax (Rate) dated 28.06.2017 | Exemption to supply specified services under the CGST Act. More or less, all the exemptions were available earlier under the erstwhile service tax law Amended vide Notification No.21/2017, 25/2017, 32/2017 and 47/2017, 2/2018 – Central Tax (Rate) |
Click here to view the complete list of exempted goods.
In the case of exempt supplies, the amount of credit attributable to exempt supplies shall be reversed.
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
Common Credit | Total input tax in a period |
Less: | Tax attributable exclusively for the non-business purpose |
Less: | Tax attributable exclusively for exempt supplies |
Less: | Ineligible credits as per Section 17(5) Works contract, Rent a cab etc. |
Less: | Tax attributable exclusively for taxable supplies (including zero-rated supplies) |
“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: It must also be noted that such supplies are not out of the scope of GST. Also, one must not confuse non-taxble suppplies with non-GST supplies. Alcoholic liquor for human consumption, and following goods are listed in section 9(2) are covered by this definition.
The GST rate on the above has not yet been announced or notified to them.
Supplies that are outside the scope of GST fall under non-GST supplies.The activities or transactions which are exceptions to the definition of supply should be included under non-GST supplies. These activities are similar to the negative list under the erstwhile Service Tax regime. Such transactions are classified under Schedule III of the GST Act as “Neither goods nor services”:
Supply Name | Description |
Exempt | Supplies are taxable but do not attract GST and for which ITC cannot be claimed. Example: Fresh milk, Fresh fruits, Curd, Bread etc. |
Zero-Rated | Exports Supplies made to SEZ or SEZ Developers. |
Nil Rated | Supplies that have a declared rate of 0% GST. Example: Salt, grains, jaggery etc. |
Non-Taxable | Supplies are not out of the scope of GST. However, the GST rate has not yet been announced or notified to them. Example: Alcohol for human consumption, Petrol etc. |
Non-GST | Supplies are outside the scope of GST. Example: Money and security |