What Are The Goods Exempted Under GST?

To fully understand the implications of Goods and Services Tax (GST), you will need to know if the item or product is charged to tax under GST or under the GST exempted category. The GST tables of taxable goods and supplies are clearly defined and have been widened while clearly defining the list of exempt of GST goods. The implication of GST tax exemption is important because conditions for the reversal of ITC or Input Tax Credit are closely linked to it. It is also possible that missing the taxation list and exempt list of products could mean that certain items could be charged higher shortly as the exempt list is conditional and time-limited. Thus categorizing the various taxation slabs as non-GST goods, Zero Tax Rated, Nil Tax Rated and Tax Exempt is imperative.

What Is Meant By Exempt Goods/Supply?

Exempted goods under GST either partially or wholly imply that these supplies are not taxed. Businesses cannot use the ITC or Input tax credits due to these exempt supplies to set off their tax liability.

Three types of exempt supplies under GST are considered ‘Exempt supplies’.They are

• Those supplies that bear a ‘NIL’ or 0% tax rate. The Zero % tax rated supplies like exports are not treated like supplies taxable at the ‘Nil’ GST rates of tax. 
• Those supplies that are only partially exempt or wholly exempt from Integrated Goods and Services Tax (IGST) or Central Goods and Services Tax (CGST) U/S 6 of IGST Act or U/S 11 of the CGST Act;
• Those supplies that are non-taxable U/S 2(78) under the GST Act like human consumption alcoholic liquors.

List of Goods Under The 0 GST Tax Rates

Here’s a list of goods charged @0% GST rates.

• Cereals, edible tubers, roots and vegetables, fresh vegetables and fruits that are unprocessed or frozen, fresh and unprocessed turmeric and ginger;

• Fish that are not processed or frozen;

• Human blood & its components;

• All kinds of contraceptives;

• Organic manure with no brand name;

• Unprocessed green tea leaves, unroasted coffee, all kinds of plant seeds;

• Live animals excluding horses;

• Cotton yarn for khadi making and in Gandhi topis, coir and coconut fibres, unspun raw jute fibres, raw silk & its waste, wool that is uncombed and uncarded, laying silkworm cocoons;

• Tender coconut water, cane jaggery;

• Meat that is unfrozen and not in unit containers;

• Pooja items.

Also Read: SAC (Services Accounting Codes) List & GST Rates on Services

The Exemption Process And Rules

The State and Central Governments grant exemptions from GST under certain conditions.

The conditions are listed below.

• The GST Council must recommend the exemption.
• Partial, conditional or absolute exemptions can be given to services/ goods of a specified description under the GST Act through a notification U/S 11 (1).
• The exemption may be made using a special order rather than a notification U/S 11 (2) in exceptional circumstances.
• The exemption should be granted by way of notification and should be in the interest of the public U/S 11 (3).
• Registered taxpayers under the GST Act cannot collect tax at higher than the effective rates when such services/ goods have a total exemption.

Exemption Classifications

The classification of exempt supplies could be of the following two types.

Where the supplier is exempt: Here, the supplier (person making the supply) has GST exemption immaterial of the outward supply items or their nature. For example, the services of charitable organizations to any person or services rendered by SEBI - Securities and Exchange Board of India to the Stock Exchange because the SEBI and charitable organizations are tax-exempt under GST.

Where certain items supplied are exempt: In this case, only certain goods supplied are GST exempted goods due to their type and nature. All such items notified in the GST exemption list fall under this category. The exemption is on the goods/ services and is not supplier dependent. For example, services rendered by way of public conveniences or Sulabh toilets.

Exemption Types

Exemptions fall into the following three categories.

Cases of absolute exemption: This GST exemption list category covers exemptions from GST that are unconditional. For example, the services rendered by RBI or Reserve Bank of India or the distribution and transmission of electricity by BESCOM. These are services that are public conveniences and hence exempt from GST.

Cases of conditional exemption: In this category, cases of conditional exemption are covered, i.e. goods and services which are not unconditional but subject to one or more conditions. For example, hotel services, guest houses, clubs, inns, campsites etc., where the declared rate for the accommodation is Rs 1000 or less per day per unit.

Cases of partial and/or conditional exemption: Here, the exemption may not be absolute and may also be conditional. For example, the intra-state services or goods received from a GST unregistered person by a registered GST taxpayer is tax-exempt under the RCM or reverse charge mechanism, if the total aggregate value per day of such supplies goods/ supplies received by the GST registered taxpayer is not greater than Rs 5000/-.

GST Laws effects

Exemptions under one GST Law may differ from the other GST Laws in its effects. At times, the goods that are exempt under the CGST are not automatically exempt under the IGST Act. However, it may be exempt in some cases under the UTGST and/or SGST.

Similarly, all exemptions under the IGST Act do not make it automatically applicable under the CGST.

Important exemption from GST payment notifications

Here’s a list of the important GST notifications and the goods they exempt from GST for quick reference.

Also Read: GST Payment Online How to Pay GST Online?

How ITCs are treated when the supply is GST exempt

In the case of exempt supplies, the ITC or credit amount is reversible. But, how do you determine the attributable credit on the tax-exempt supplies? 

The Attributable credit is computed as -  (A / T ) X C where  A is the total aggregate value of the tax-exempt supplies and excludes zero% supplies and other taxable supplies.T is the total turnover in the specific tax period, and C is the common credit.

What is meant by a non-taxable supply?

A supply of services and/or goods is a “non-taxable supply” or no GST items meaning it is not levied tax under the IGST and CGST Acts. The item or ‘supply’ must be as per the GST Act to qualify for an exemption under the GST Act. It is also important to note that this applies only to the items exempted for taxation Schedule III or U/S 9(2) like human consumption alcohol supplies.

Also, note that certain items mentioned below are under the GST Act’s scope, but their rates are neither notified nor announced. 

These items are

• High-speed diesel
• Petroleum crude
• Petrol or motor spirit 
• Aviation turbine fuel
• Natural gas 

Items under the negative list under GST

These items are classified under the negative list for GST taxation. Namely

• Crematoriums, burial, mortuary and funeral services.
• MLAs and MPs in the functions.
• Duties of a person in a post who performs under that capacity under Constitutional provisions.
• Employment services from employee to employer.
• Land sale
• Gambling, lottery, betting and such actionable claims.
• Completed building sale.
• Tribunal or court’s services.

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

Here’s an easy table for quick reference that helps understand the differences between the various tax rates.

Also Read: Types of GST Returns: Forms, Due Dates & Penalties

Conclusion

It is important to be GST compliant, and more often than not, the details of items under the various lists are not very clear to most taxpayers. Hence a thorough understanding of the list of exempted supply under GST goods and supplies under the Nil, exempt supply under GST, Zero Rate, Non-taxable supply lists is crucial when filing the GST Return Forms, reflecting the exempt supply or claiming ITCs. If you are a small trader, then try the Khatabook app for your accounting needs and GST compliance as it is a useful app covering all your business needs and is accessible from your mobile phone anytime.