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?
- Types of GST Exemptions
- List of goods exempt
- Difference between Nil Rated, Exempt, Zero Rated and Non-GST supplies:
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
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
- 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:
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.
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:
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.
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