Hello, in this post we will look into what is GST exempt supply.

We cover the following topics in this post:

What is GST exempt supply?

GST exempt supply is the supply of goods and services which do not attract goods and service tax, also has no claim on ITC. for e.g., Bread, fresh fruits and fresh milk etc.

Section 2(47) under the GST Act defines the concept of exempt supply. Exempt supply is the supply of any goods/services which have nil tax rate or fully exempted tax under Section 11 or under section 6 of the Integrated Goods and Services Tax Act (IGST). It also includes the non-taxable supply.

Types of GST Exemptions

The 3 types of supply which are considered as exempt supply are given below:

  • Non-taxable supply
  • Supply attracting nil rate of tax
  • Exempted supplies under Section 11 excluding IGST and under Section 6 of the IGST Act

Non-taxable supply 

As per Section 7(2)(b) of the CGST Act, the transactions which are neither considered as supply of goods nor supply of service are not chargeable under GST.

Supply attracting nil rate of tax 

The goods and services are taxable but have a nil tax rate.

Exempted supplies under Section 11 excluding IGST and under Section 6 of the IGST Act

This includes non-taxable supply and supply exempted as per Section 11.

Non-taxable supply is goods on which no tax as per Section 9 of the GST Act. The Government can specify the products which are fully or partially exempted through notification.

It is applicable to all the states and but they can also make amendments if they could specify the reason.

List of goods exempt

GST exemption from registration

  • A person under the exemption limit of turnover for the supply of goods Rs. 40 lakhs and for the supply of services Rs. 20 lakhs and for specified category Rs. 20 lakh and Rs.10 lakh.
  • A person who makes NIL Rated and exempt supply of goods and services like fresh milk, honey, cheese, agriculture services etc.
  • Person involving in activities that are not covered under the supply of goods and services like the funeral services, petroleum products etc.
  • A person who makes supplies that are covered under reverse charge like tobacco leaves, cashew nut (not shelled and peeled ) etc.

GST exemption for businesses

To enjoy the GST exemption, the aggregate turnover limit is Rs. 20 lakhs for individuals and businesses and Rs.10 lakhs for hilly states and the North-eastern states of India.

As per the 32nd GST Council Meeting, the limits have been changed and they are:

  • For businesses and individuals who supply of goods, the aggregate turnover should be less than Rs.40 lakhs in an FY.
  • In hilly and north-eastern states of India, the limit is Rs. 20 lakhs.
  • For businesses and individuals who supply services, the limit is Rs. 20 lakhs
Note:
  • For hilly and north-eastern States, if the aggregate turnover for businesses and individuals supplying services is INR 10 lakhs, then they can claim GST exemptions.
  • Hilly and north-eastern States includes Arunachal Pradesh, Jammu and Kashmir, Himachal Pradesh, Uttarakhand, Tripura, Nagaland, Sikkim, Meghalaya, Mizoram, Assam and Manipur.
  • Aggregate turnover includes the aggregate value of all types of taxable supplies, inter-state supplies, exempt supplies and the exported goods and services.

The following is deducted from the value of aggregate turnover:

  • CGST, SGST or IGST paid by the investor
  • Taxes payable under reverse charge mechanism
  • Value of the inward supply of goods and services
  • Value of non-taxable goods and services

Exemption of GST for goods

The reasons for the GST exemption on goods are:

  • The interest of the public
  • According to the GST Council’s recommendation
  • Through a special order by the Government, the exemption is allowed
  • Through an official notification, the exemption is allowed for specific goods

Two types of GST exemptions on goods:

Absolute exemption

The supply of specific types of goods GST exempted without considering the details of the supplier or receiver and whether the good is supplied within or outside the State.

Conditional exemption

The supply of specific types of goods would be GST exempt subject to certain terms and conditions as specified under the GST Act or any amendment or notification.

List of some of the most common GST exempt goods

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, oilseeds, 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 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

There are three types of services under GST exempt supply and they are:

  • Supplies with 0% tax rate
  • The supplies which do not attract CGST or IGST due to the provisions as per the notification amending either Section 11 or Section 6 of IGST Act
  • Supplies which is not taxable under Section 2(78) of the GST Act.

So, if any applicable ITC would not be available to utilise or set off the GST liability.

For the under supply of services, there are two types of GST exemptions:

Absolute exemption

The service would be exempted from GST without any conditions.

Conditional exemption or partial exemption

The exemption is granted based on a condition.GST would be exempted if the service is supplied intra-State or supplied by a registered person to an unregistered one. The total value of the supplies received by a registered person should not be more than Rs. 5000 per day.

List of some of the GST exempted services are as follows:

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 Rs.
Judicial services Services offered by an arbitral tribunal, a 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, 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 Rs. 250

Difference between Nil rated, Exempt, Zero-rated and Non-GST Supplies

Now let us see the difference between Nil Rated, Exempt, Zero Rated and Non-GST supplies:

For e.g.,  Fresh milk, Fresh fruits, Curd, Bread etc.

Supply Name Description
Zero Rated Exports
Supplies made to SEZ or SEZ Developers.
Nil Rated Supplies that have 0% GST.
Example:  Salt, grains, jaggery etc.
Exempt Supplies that are taxable but do not attract GST and ITC cannot be claimed.
Non-GST These supplies do not come under the GST law.
Example: Alcohol for human consumption, Petrol etc.

This ends the post on GST exempt supply. Let us know your opinion by commenting below

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