written by Khatabook | September 24, 2021

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 goodsZero 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.

​​​​​​​

Notification No.

Particulars

28.06.2017 No: 02/2017 of the rates of CGST or Central Tax  

This notification exempts 149 goods U/S 11(1) of the CGST Act of 2017. For example, the supply of salt, electricity, fresh fruits, passenger baggage, plastic bangles, etc. The notification was amended by Notification No. 35/2017, 28/2017, 42/2017, 19/2018 and 7/2018 of the CGST rates of Central Taxes.

28.06.2017 No: 12/2017 of the rates of CGST or Central Tax 

This notification exempts certain specified services supplied under the CGST Act, which were previously exempt under the previous regime. It was amended by Notification No. 25/2017, 21/2017, 2/2017, 2/2018 and 47/2017 of the CGST rates of Central Taxes.

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.

Common Credit C

Total Tax input in the period

Less:

The attributable tax is used for non-business purposes only.

Less:

The attributable tax is used for exempt supplies only.

Less:

Credits that are ineligible U/S 17(5) like Rent a cab or Works contracts etc.

Less:

The attributable tax is used for 0 rated and taxable supplies only.

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. 

Supply type

Description

Zero tax rate

Export of goods/supplies made to SEZ developers and SEZs.

Nil rated supply 

Supplies that carry a 0% GST in the list.  For example, cereals, salt, jaggery etc.

Exempt tax rate

These goods exempted from GST are taxable, and no ITC can be claimed for them. For example, Fresh fruits, curds, milk, bread etc.

Non-GST supplies

These non GST items are not under the GST law. For example, Petrol, diesel, aviation fuel etc.

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 Khata Book 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.

FAQs

1. Who can grant GST tax exemptions?

Only the Government grants GST tax exemptions, based on the GST Council’s recommendations via a notification. Only under special circumstances, a special order is issued instead of a notification U/S 11 (10, (2), and (3) of the GST Act.

2. Does the exemption apply from the date of notification or its publication?

Exemption notifications typically specify the date of its becoming effective.

3. Should I register under GST if I am a trader with a turnover greater than 20 lakhs and dealing with tax-exempt supplies?

If you are dealing with absolutely tax-exempt supplies, there is no need to register under the GST Act or claim ITCs. This exemption is immaterial of your turnover limits.

4. Are exempt goods non-taxable or taxable supply?

The nil rated supply in GST exempt goods is non-taxable. The dealer need not register under the GST Act or claim ITC under it.

5. I sell exempt goods to a single customer. Should I issue a bill of supply or a tax invoice?

If you are a GST registered dealer supplying exempt services or goods or services, you should issue a bill of supply and not a tax invoice. For example, if you are a GST registered taxpayer and supply raw silk, you should issue a Bill of Supply and not a tax invoice since raw silk is totally exempt from GST tax.

6. Are Aviation fuel and Petrol non-taxable or exempt GST goods?

Both aviation fuel and petrol are under the non-taxable goods list as they are, for the time being, exempt from the GST tax levy. The situation regarding tax rates can change in the future.

7. Is an e-way bill required for the movement of GST exempt supplies?

U/R 138 (14) of CGST Rules, no e-way bill needs to be generated as these goods are specified exempt under the 28.06.2017 notification no. 2/2017-Central Tax Rates.

8. Should my GSTR-1 Return list exempt supplies? If so, under which table?

Exempt supplies are to be listed in the GSTR-1 Return Form. You should provide the consolidated details of each type of such supplies under tables 8-A, B, C, D.

9. Should my GSTR-3B Return reflect exempt supplies? Where?

Taxpayers are required to reflect details of nil and exempt GST outward supplies U/S 3.1 or Tax on reverse charge inward and outward supplies” and the exemption details as Nil or inward Non-GST supplies and U/S 5 for Non-GST, Nil and Exempt inward supplies.

10. Can a taxpayer claim ITC on capital goods used for both exempt and taxable supplies?

No, the taxpayer cannot claim ITC on capital goods used both for exempt and taxable supplies.

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