GST

What are the exemptions under GST?

Non-application of GST is called GST exemption. The exemptions under GST is granted in 3 cases:

• Businesses or individuals;
• Goods; and
• Services.

The article talks about the exemption under GST in depth.

What are exemptions under GST?

Exemptions under GST mean that the supply does not attract goods & services tax. In simpler words, no GST is charged on the supply of these goods or services exempted under GST.

The ITC paid on these supplies will not be utilized.

The types of supplies that are exempted under GST are:

• Supplies chargeable to nil rate tax;
• The supplies that are wholly or partially exempted from the GST charged by the notification that amended Section 11 of the CGST (Central Goods and Services Tax) and Section 6 of IGST (Integrated Goods and Services Tax); and
• The supplies that come under the Section 2(78) of the Act are not taxable under Act, such as alcoholic liquor for human consumption.

Types of exemptions

There are 2 types of exemptions specified under the GST Act:

• Absolute exemption:  Under this exemption, specific types of goods & services supply will be exempted without looking in the details of supplier & receiver and on whether the goods & services are supplied within or outside the State.
• Conditional exemption: Under this exemption, specific goods & services supply will be exempted subject to certain conditions specified under the GST Act^[1].

Exemptions under GST

Exemptions under GST from registration:

• Agriculturist
• Persons whose threshold exemption limit of turnover of Rs. 40 lakhs for goods and Rs. 20 lakhs for services & Rs. 20 lakhs and Rs. 10 lakhs for special category.
• Persons who manufacture NIL rated & exempt supply of goods & services such as fresh milk, honey, cheese, etc.
• Activities that are not covered under the supply of goods & services such as funeral services, petroleum, etc.

Exemptions under GST for businesses

Small or medium scale businesses whose aggregate turnover as per the 32^nd GST council meeting held in January 2019 are:

• Businesses or individuals supplying goods whose aggregate turnover is less than Rs. 40 lakhs in an FY can claim GST exemption.
• The turnover limit is Rs. 20 lakhs for hilly & north-eastern states.
• Businesses or individuals supplying services whose aggregate turnover is less than Rs. 20 lakhs in an FY can claim GST exemption.
• The turnover limit is Rs. 10 lakhs for hilly & north-eastern states.

Exemptions under GST for goods

List of goods that do not attract GST recommended by the GST council.

Here is a list of some of the most common goods which are GST exempt:

Types of goods	Examples
Fish	Fresh or frozen
Meat	Fresh or frozen
Natural products	Honey, milk, cheese, eggs, etc.
Vegetables	Onions, potatoes, etc.
Fruits	Apples, bananas, etc.
Seeds	Oil seeds, flower seeds, etc.
Sugar	Jaggery, sugar, etc.
Baked goods	Pizza base, bread, etc.
Water	Tender coconut water, mineral water, etc.
Dry fruits	Walnuts, cashew nuts, almonds, etc.
Live animals	Cows, sheep, goat, etc.
Live trees & plants	Roots, flowers, foliage, etc.
Grains	Wheat, oats, rice, etc.
Tea, coffee & spices	Turmeric, tea leaves, coffee beans, etc.
Milling industry products	All kinds of flour
Fabrics	Raw silk, khadi etc.
Pottery	Clay, lamps, earthen pots, etc.
Hand tools	Hammer, spade, etc.
Drugs & pharmaceuticals	Human blood, contraceptive, etc.
Fertilizers	Organic manure
Waste	Municipal waste, etc.
Beauty products	Kajal, bindi, etc.
Ornaments	Plastic & glass bangles, etc.
Printed items	Newspapers, books, etc.
Newsprint	Envelopes, judicial stamp papers, etc.
Fossil fuels	Electrical energy

Exemptions under GST on services

Here is a list of the services which enjoy GST exemption:

Types of services	Examples
Government services	·        Cultivation ·        Harvesting ·        Warehouse related activities ·        Renting or lending agricultural machinery, etc.
Agricultural services	·        Portal services ·        Transportation services for people or goods ·        Services by the foreign diplomat in India ·        RBI’s services in India, etc.
Judicial services	Services offered by: ·        Arbitral tribunal ·        Partnership firm of advocates ·        Senior advocates ·        Individual or business entities whose turnover is Rs. 40 lakhs, etc.
Educational services	·        Transportation of faculty or students ·        Mid-day meal ·        Examination services ·        Services offered by IIMs, etc.
Medical services	Services offered by: ·        Ambulance ·        Medical professionals ·        Veterinary doctors, etc.
Organizational services	Services offered by : ·        Exhibition organizer for international business exhibitions ·        Tour operators, etc.
Transportation services	·        Transportation of goods ·        Toll payment ·        Passenger’s transportation by air ·        Goods transportation (where the cost of transport is less than Rs. 1500, etc.)

Why is there a need of exemptions under GST?

The Government can implement exemptions under GST on the following grounds:

• GST councils recommend the exemption.
• The Government, through special order, may grant the exemption in special circumstances.
• The exemption is granted when it is deemed to be in the public interest.
• The exemption is done through an official order.

How will ITC be treated if the supply is exempted?

The amount of credit as accountable to exempt the supplies must be reversed. Let us see how to determine the credit accountable to the supplies exempted.

Credit accountable to supplies exempted = (A / T) * C

Where,

A = Aggregate value of exempt supplies (it includes all supplies other than taxable & zero-rated supplies)

T = Total turnover of the person in the tax period

C = Common Credit

What is a non-taxable supply and is not subject to exemptions under GST?

A non-taxable supply means a supply of goods or services that does not come under GST law. There must be a supply of goods or services or both to have qualified under the non-applicability of GST. The supplies that are excluded from the scope of GST must be covered within this definition.

For example alcoholic liquor for human consumption, articles listed in section 9(2) or Schedule III.

It is important to note that certain items are not out of the scope of GST. The GST rate for such items has not been announced or notified.

These include:

• High-speed diesel;
• Petroleum crude;
• Natural gas;
• Petrol; and
• Aviation turbine fuel.

Conclusion

Non-application of GST is called exemptions under GST.

The exemption under GST is granted in 3 cases; businesses or individuals, goods and services.

As per the 32^nd GST council meeting held in 2019, the exemptions under GST can be when the threshold limit has been changed to Rs. 40 lakhs for businesses & individuals and hilly areas & north-eastern states, it is 20 lakhs.

The threshold limit for services has been changed to Rs. 20 lakhs and for hilly areas & north-eastern states, it is 10 lakhs.

Read our article:GST Exemption: Agriculturist and Small Traders