Goods & Services Tax was introduced to replace several other indirect taxes which were applicable on goods and services. Several other indirect taxes like VAT, Service Tax, Excise Duty, Central sales tax which has now been replaced by a single tax system i.e. GST.
GST is charged on almost every goods or service in India, subject to few exceptions. There are some goods & services which are non-taxable under GST. It means that supply of goods & services which is not leviable to tax under GST. The same is called as GST Exemption.
In this article, Exemptions under Goods & Services Tax Act is discussed in brief.
Goods & Services Tax Exemptions on Supply
Supplies that does not attract GST (Goods & Service Tax) are Exempted supplies under GST. No GST is charged on these supplies. The following supplies are considered as the exempted supply under GST: –
- Supplies chargeable on the basis of NIL rate tax.
- Partially & wholly exempted from GST by the notifications.(As amendment in the Provision of Section 11 of CGST and Section 6 IGST).
- Supplies under Section 2(78) of the CGST Act, which covers Non-Taxable supplies like Alcoholic liquor for human consumption.
Goods & Services Tax (GST) Exemption from Registration
- Agriculturists-Service involving in agriculture produce, or extension of agriculture and rearing of all life form animal (except horse).
- Individuals or Businesses falling under the specified exemption limit of turnover i.e., Rs 40 lakhs for supply of goods and for Rs 20 lakhs for supply of services and Rs 20 lakhs and Rs 10 lakhs respectively for specified category.
- Exempted Supplies of goods and services or & NIL rated supplies like fresh milk, honey, cheese, agriculture related services, etc.
- Activities included under the supply of goods and services like funeral services, petroleum products
- Supplies under Reverse Charge Mechanism (RCM) like tobacco leave, cashew nut (not shelled and peeled)etc.
Goods & Services Tax Exemption (GST) for Businesses
Small and medium size businesses can avail GST exemptions, if their aggregate turnover is up to a specified limit. When GST was introduced, this limit for individuals and businesses was Rs 20 lakhs and for Hilly and North-eastern States Rs 10 lakhs. However, in the 32nd GST Council Meeting, held in January 2019, the limits were revised. Currently these limits are as follows-
- If aggregate turnover is less than Rs 40 lakhs in the relevant financial year, then GST Exemption can be claimed.
- For Hilly and north-eastern States of India, the aggregate limit for individuals & businesses is revised to Rs 20 lakhs.
- Businesses supplying services, if their aggregate turnover is less than Rs 20 lakhs can claim GST Exemption.
- For Hilly and North-Eastern States, the aggregate limit is revised to Rs 10 lakhs.
- Hilly and North-Eastern States includes Arunachal Pradesh, Tripura, Nagaland, Sikkim, Meghalaya, Mizoram, Assam Manipur, Jammu and Kashmir, Himachal Pradesh &Uttarakhand.
- As per the provisions of CGST Act, Aggregate turnover shall include the aggregate value of all kinds of inter-state supplies, taxable supplies, exempted supplies and the goods and services, which have been exported. However, the following shall be deducted from the value of aggregate turnover –
- IGST, CGST /SGST already paid by the investor
- Taxes which are payable on the basis of Reverse Charge Mechanism
- Value of the inward supply of goods and services
- Non-taxable value of goods and services
Goods & Service Tax (GST) Exemptions on Goods
There is a list of various goods, which does not attract GST as prescribed by the GST Council. However, there are two types of GST General exemptions on goods. They are as follows –
- Absolute Exemption -Under absolute exemption, GST shall be exempted from the supply of specific types of goods without knowing the details of the supplier or recipient & also without considering whether the goods are supplied within the State or outside the State.
- Conditional Exemption –Under Conditional exemption, supply of prescribed goods shall be GST exempted, subject to certain terms and conditions, which shall be specified under the CGST Act or any amendment or notification.
List of GST Exempted Goods**
- Dried & Fresh vegetables including potatoes, onions, sweet potatoes and various legume vegetables etc.
- Fresh milk, Honey, Cheese, eggs in shell, fresh fish etc.
- Unprocessed or WIP green tea leaves, Fresh Ginger, garlic, grapes, melon, unroasted coffee beans, etc.
- Corn, paddy (rice also being other than agriculture under special exemption), wheat, maize, soya bean, hulled cereal grains, etc. not put into branded box.
- Health Services- Human Cord blood and various components of the same.
- Raw silk, silk worm, cocoon, jute fibres (unspun), khadi yarn, khadi fabric, etc.
- Handcrafted, slates, slate pencils, chalk sticks, parts used to manufacture hearing aids, etc.
- Service related to sale of business as going concern
- Charitable institution involving in religious pilgrimage( kumaon Mandal , Hajj Committee)
- Education services provided by Educational Institution ( pre-school ,higher Secondary School or Equivalent, approved vocational courses, any recognized course by Law )
- Distribution &Transmission of Electricity by Electricity and Distribution Utility.
- Entry Ticket for Park, Sanctuary and Museum.
**The above list of goods is indicative and there are many other more goods that qualifies for nil GST
Goods & Service Tax (GST) Exemptions on Services
Just like specific goods as mentioned above, there are specific services which are also exempted from GST. Supply of services are of 3 types, which shall qualify for GST exemption. They are:
- Supplies having Zero% tax rate
- Supplies that does not attract CGST / SGST or IGST due to the provisions specified in the notification amending either Section 11 of CGST Act or Section 6 of IGST Act
- Supplies defined under Section 2(78) of the CGST Act which are non-taxable.
Since these types of supplies are exempted under GST, any Input Tax Credit, applicable on these supplies, shall not be available for utilization or set off of the GST liability.
Furthermore, even under supply of services, there are 2 types of GST exemptions, which are as follows –
- Absolute exemption where the services shall be exempted under GST without any conditions.
- Conditional exemption or partial exemption where the services shall be exempted based on a condition. This condition states that if the service is supplied intra-State or if a registered person to an unregistered one supplies the service, GST would be exempted if the total value of such supplies received by a registered person is not more than 5000 per day exemption,
The short list of services that qualifies for exemption under the GST Act is as follows:
- Services which are related to plants cultivation and animal husbandry (except horse farming) & also Supply of labour for farms.
- Services that are done during the course of farming such as tending, cutting, pruning, sun drying, threshing, sorting, etc. that does not alter the essential characteristics of the product
- A machinery/vacant land on Rent / lease used in agricultural activities
- Loading, unloading, packing, storage, warehousing of agricultural produce and fumigation of warehouses.
- Services which are related to pre-conditioning or pre-cooling, ripening, waxing, retail packing
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