GST Exemptions

GST Exemptions

• GST exemptions are specific goods or services that are

exempt from the application of GST. In other words,
there are certain goods and services that are not
covered under the ambit of GST Act. These exemptions
change from time to time and vary from country to
country. The government can grant exemptions for
various reasons like alleviating the tax burden on
essential goods and services or supporting specific
sectors.
 Exemption Under GST
• After 1st July 2017, the Government of India set up some
criteria upon fulfilling which businesses and individuals have
to register under GST norms.
• Understanding the taxability of goods and services also
includes knowing whether a good or service is exempted from
GST registration. Upon knowing this, applicants can get clarity
on several other factors. Essentially, the GST exemption limit
for businesses depends on their annual aggregate turnover.
• Businesses with an annual turnover of up to Rs.20 lakhs need
to register for GST. The amount was Rs.10 lakhs for North-
eastern or hilly states like Meghalaya, Sikkim, Mizoram,
Arunachal Pradesh, Nagaland, Himachal Pradesh, Manipur,
Assam, Tripura, Uttarakhand, and Jammu & Kashmir.
 Types of GST Exemptions
• Absolute: Absolute exemptions are those exemptions that are
provided on the full amount and do not come with any
conditions or restrictions, whatsoever. A good example is the
exemption on the services of RBI.
• Conditional: Conditional exemptions are those exemptions
that have a certain limit, condition, or restriction on the nature
and extent of the exemption. For example, hotel services are
exempt up to a certain extent and not exempt fully.
• Partial: Unregistered people who supply goods within the state
to a registered person are exempt from GST under reverse
charge only if the aggregate value of supply is not more than
Rs.5000 per day.
 Exempted goods under GST
• Fresh and dry vegetables like potatoes, onions, and other
leguminous vegetables.
• Non-GST goods include fish, egg, fresh milk, etc.
• Grapes, melons, ginger, garlic, unroasted coffee beans,
green tea leaves that are not processed, and more.
• Food items that are not put into branded containers like
rice, hulled cereal grains, wheat, corn, etc.
• Components like human blood.
• Unspun jute fibres, raw silk, khadi fibre, etc.
• Hearing aid manufacturing parts, chalks, slates, handloom,
etc.
 Exempted services under GST
• Agricultural services, including harvesting, packaging, warehouse,
cultivation, supply, leasing of machinery, are essentially GST
exempt services. An exception to these exempted services
includes the rearing of horses.
• Public transportation services, auto-rickshaws, metered cabs,
metro, etc.
• Transportation of agricultural products and goods outside of
India.
• Labour supply for farms.
• Goods transportation where the charges are less than Rs.1500.
• Services like retail packing, pre-conditioning, waxing, etc.
• Foreign diplomatic and government services.
List of GST Exemption on Services
 Exempt supply under GST
• Exempt supply under GST means supplies that do not
attract goods and service tax. In these supplies, no GST is
charged. Input tax credits paid on these supplies cannot
be used. These are the following three types of supply that
are considered exempt supply:-
– supplies which are chargeable to nil rate tax.
– supplies that are partially and wholly exempt from the charge
of GST by the notifications which amended section 11 of CGST
and section 6 of IGST.
– supplies which comes under the sec 2(78) of the Act. which
covers the supplies which are not taxable under the Act like
alcoholic liquor for human consumption.
 GST exemption for businesses
• Businesses and individuals who are supplying goods can
claim GST exemption if their aggregate turnover is less
than INR 40 lakhs in a financial year.
• For the hilly and north-eastern States of India, the limit
has been revised to INR 20 lakhs.
• For businesses and individuals involved in the supply of
services, the limit for claiming GST exemption is INR 20
lakhs
• In the case of hilly and north-eastern States, if the
aggregate turnover is up to INR 10 lakhs, businesses and
individuals supplying services can claim GST exemptions.
Reasons for exemption under GST
• 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
(e.g., rice, wheat, milk), healthcare services, and education services.
• 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.
The Composition Scheme, for example, provides for lower GST rates
for small businesses with turnover limits.
• 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.
 Reasons for exemption under GST
• Interstate Supplies: Supplies between states (interstate supplies) of certain
specified goods and services may be exempt or taxed at a concessional rate to
promote the free movement of goods and services across state borders.
• Agriculture: Many agricultural products and related services are exempt from
GST. This is done to support the agriculture sector, which is a significant
contributor to India's economy.
• Government Services: Certain services provided by the government or local
authorities may be exempt from GST to avoid double taxation and simplify
accounting.
• Financial Services: Some financial services like banking, interest on loans, and
insurance services may be exempt or have special provisions to determine GST
liability.
• Cultural and Religious Significance: Goods and services used for cultural,
religious, or charitable purposes may be exempt to respect the cultural and
social values of the society.
 Right to provide exemption
• Section 11 of CGST Act 2017
Power to Grant Exemption