Exemptions Under GST – Exempted Goods

Exemptions Under GST – Taxed @ 0%

Understanding the taxability also involves knowing whether an item is exempt or not under GST. Due to the scope of taxable supplies being widened under GST, GST Exemptions have clearly been defined. Not just knowing the Exemption list, but also understanding the implication of 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 to 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!



What is Exempt Supply

Exempt supplies comprise the following three types of supplies:
  1. Supplies taxable at a ‘NIL’ rate of tax* (0% tax);
  2. Supplies that are wholly or partially exempted from CGST or IGST, by way of a notification amending Section 11 of CGST Act or Section 6 of IGST Act;
  3. Non-taxable supplies as defined under Section 2(78) – supplies that are not taxable under the Act (For Example Alcoholic liquor for human consumption.
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. Conditions are:
  1. The exemption should be in the public interest
  2. By way of issue of notification
  3. Must be recommended by the GST Council
  4. Absolute exemption or conditional exemption may be for any goods and/or services of any specified description.
  5. Exemption by way of a special order (not notification) may be granted exceptional circumstances.
  6. Registered person supplying the goods and/or services is not entitled to collect tax higher than the effective rate, where the supply enjoys an absolute exemption.


Classification of Exemptions

Supplier may be exempt – Exemption to the person making supplies- i.e.  supplier, regardless of the nature of outward supply. Ex: Services by Securities and Exchange Board of India, 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.

Types of Exemptions

Absolute exemption: Exemption without any conditions. Ex: Transmission or distribution of electricity by an electricity transmission or distribution utility, Services by Reserve Bank of India. Conditional Exemption: Exemption subject to certain conditions. Ex: Services by a hotel, inn, guest house, club or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation less than ` 1000/- 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 ` 5000/- in a day.

Exemption under one GST Law and the effect on another GST Law

Exemption under CGST ActDeemed to be exempt under SGST / UTGST Act
No auto-application of exemption under IGST Act
Exemption under IGST ActNo auto-application of exemption under CGST Act


Treatment of ITC if supply is exempt

In the case of exempt supplies, the amount of credit as attributable to exempt supplies shall be reversed.

How to determine the credit attributable to exempt supplies in the above case?

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 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)


What is a non-taxable supply?

“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: Only those supplies that are excluded from the scope of taxation under GST are covered by this definition – i.e., alcoholic liquor for human consumption, articles listed in section 9(2) or in schedule III. It must also be noted that the following items are not out of the scope of GST. That means GST Rate has not yet been announced or notified for them. 
  1. petroleum crude
  2. high-speed diesel
  3. motor spirit (commonly known as petrol)
  4. natural gas and
  5. aviation turbine fuel


The negative list under GST

  • Services by an employee to the employer in the course/ relation to employment
  • Services of funeral, burial, crematorium or mortuary
  • Sale of land
  • Sale of completed buildings
  • Actionable claims (other than lottery, betting and gambling)
  • Services by any court or Tribunal
  • Functions performed by the MPs, MLAs etc.
  • Duties performed by any person who holds any post in pursuance of the provisions of the Constitution in that capacity.


Difference between Nil Rated, Exempt, Zero Rated and Non-GST supplies

Supply NameDescription
Zero RatedExports Supplies made to SEZ or SEZ Developers.
Nil RatedSupplies that have a declared rate of 0% GST. Example:  Salt, grains, jaggery etc.
ExemptSupplies are taxable but do not attract GST and for which ITC cannot be claimed. Example:  Fresh milk, Fresh fruits, Curd, Bread etc.
Non-GSTThese supplies do not come under the purview of GST law. Example: Alcohol for human consumption, Petrol etc.




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Posted By Ramesh Kumar Gupta

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