written by | February 21, 2022

Which Items are not Covered under GST?

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Table of Content


GST was introduced in India on 1st July 2017. It was a major reform as it is one taxation system for the whole nation. The GST Council is the sole authority to decide the tax rates for different goods and services.  It decides on the exemption rules and the final date of submission of the GST forms. It is responsible for formulating all the tax-related laws and also specific exemptions applicable to some of the Indian States. There are few supplies of goods and services that are not considered as supplies and are kept outside the scope of GST. These are covered under Schedule III of the GST Act. Since they have been kept outside the scope, GST cannot be levied on them.

Did you know?

France was the first country where GST was implemented.

Difference between Nil Rated, Zero Rated, Exempt, Non-GST, and Schedule III 

 

Nil Rated Supply

Exempt Supply

Zero-Rated Supply

Non-GST Supply

Schedule III Supply

Meaning

These supplies have 0 tax rate notified under the GST Act

These are supplies that are taxable under the GST Act, however specific exemptions have been given to them due to which GST is exempt 

These are those supplies in which sales, as well as input both, are free of GST

These are those supplies that have been kept out of the scope of GST

Those transactions that would have been supplied and chargeable to GST if they would not have been kept in Schedule III. Since they have been kept in Schedule III, hence not considered as supply and thus GST is not levied.

Is it Supply

Yes

Yes

Yes

No

No

Is ITC Available

Available

Not Available

Available

Not Available

Not Available

Examples

Salt, Jaggery, Grains, etc.

Bread, Fresh Milk, Fresh Fruits, etc.

SEZ supplies

Petrol, Natural Gas, High-Speed Diesel, etc.

High Sea Sales, Sale of land and building, services by court or tribunal, etc.

Also read: List Of Goods Exempted Under GST in India with HSN Code

Negative List of GST- Schedule III of the GST Act

The different sectors which are exempted from GST are included in Schedule III and include:

  1. Legal Services
  2. Employment Services
  3. Services in relation to a deceased
  4. Duties performed by officials
  5. Sale of Land and Building
  6. Actionable Claims except for Betting, Gambling, and Lottery
  7. High Sea Sale
  8. Merchant Trade supply

Following are all the relevant details regarding the same:

Legal Services

GST does not apply to legal services provided by any Tribunal or court formed under any law in effect at the time. This means that court and tribunal fees are not subject to GST. Here the court includes the High Court, District Court, and Supreme Court.

Services rendered by an employee to the employer under the regular course of employment

If an employee renders service to their employer which is in the regular course of their employment then that transaction is not considered as supply. Employer-employee relationships are among the related parties, raising worries about whether employment services will be covered by the GST statute. By including it in this list, it has been clarified that the GST is not applicable to employment services. According to the new circular in 2020 Under the reverse charge system, in the hands of the company, remuneration to independent directors or other non-executive directors who are not employees is taxable under GST. In a case where the services were provided by an employer to an employee, these are chargeable to GST except in the case of gifts up to the value of Rs. 50,000.

Services Related to a deceased

Services related to burial, funeral, mortuary, or crematorium including transportation of the deceased are not covered under GST.

Duties performed by officials

The following persons, in positions of power are exempt from paying GST on their duties.

  • Members of Parliament, the State Legislature, Panchayats, Municipalities, and other local governments

  • Any person who is not an employee of the government or a local body and holds the position of Director/Chairperson/Member in a body formed by the government or a local body under the provisions of the Constitution.

However, legal services supplied by the same MLAs/MPs will be chargeable under GST if they're provided to a business entity but will be exempt if they're provided to anyone else.

Sale of Land and Building

Under the Goods and Services Tax Act, proceeds from the sale of land and buildings are not subject to GST. The GST Act, on the other hand, applies to the construction of a new structure. But if any consideration for the sale of a building, complex, or civil structure is received before the completion certificate is issued, the full sale consideration will be subject to GST as a supply of services.

Also read: Types of GST in India - What is CGST, SGST and IGST?

High Sea Sale

High sea sale Supply is a type of supply in which commodities are sold while in transit, that is, after they have been dispatched from the port of origin but before they arrive in Indian territory/home custom clearance. The following items are included in the High Sea Sales: Supply of goods by the importer of goods to any other person/entity, by the endorsement of documents of title, after the goods have been dispatched from the port of origin located outside India but before clearance from the customs for home consumption.

Merchant Trade supply

The supply of products from one location in a non-taxable region to another location in a non-taxable territory without the items entering India is beyond the jurisdiction of GST. Third–Country Export is another name for this. As a result, GST applies only if the requirement of goods "entering India" is met for a supply from a non-taxable territory  Out-and-out supplies (i.e. merchant dealing), sales of goods in customs bonded warehouses, and high-sea transactions are not considered supplies under the GST Act and are not subject to the tax.

Actionable Claims (except Lottery, Betting, and Gambling):

Actionable claims are those that can only be enforced by legal action or a lawsuit. For example, bill of exchange, a promissory note, a beneficial interest in movable goods not in the claimant's possession. A book debt is not good because though it can be transferred, it cannot be sold under the Transfer of Property Act. Under the Negotiable Instruments Act, a bill of exchange or a promissory note can be delivered or endorsed, but not sold. Neither the delivery of products nor the provision of services are actionable claims. They can be thought of as a kind of money substitute. As a result, these activities will be exempt from GST. Lotteries, betting, and gaming, on the other hand, are subject to a higher GST rate as exceptions in actionable claims. Gambling and betting are services, whereas the lottery is good.

Items not covered under GST

Some of the items not covered under GST include bread, and milk products like  fresh milk, fresh fresh curd, lassi and buttermilk. Some of the other goods include fresh vegetables like onions, tomatoes, potatoes, garlic, cereals, jaggery, coffee beans, as well as tender coconut.

Non-inclusion in terms of goods under GST

 Supply of the following items not included under GST: 

  1. Natural Gas
  2. Alcohol used for human consumption
  3. Petrol, crude oil, high-speed diesel, aviation turbine fuel, etc.
  4. Electricity

Also read: Know About GST On Labour Charges In India

Conclusion

Although most of the things are covered under GST, there are still certain items that are excluded from GST. The negative list of GST forms a very important part of the GST Act, as these are the transactions on which GST is not levied. The complete knowledge of these items is necessary so that the wrong GST is not charged on these transactions. Also, it is important to know which items are not included under GST. 

Do you have issues with payment management and GST? Install the Khatabook app, a friend-in-need and one-stop solution for all issues related to income-tax or GST filing, employee management and more. Try it today!

FAQs

Q: Which are the items not included under GST?

Ans:

Supply of the following items not included under GST are:

  1. Natural Gas
  2. Alcohol used for human consumption
  3. Petrol, crude oil, high-speed diesel, aviation turbine fuel, etc.
  4. Electricity

Q: Are services related to a deceased taxable under GST?

Ans:

Services related to burial, funeral, mortuary, or crematorium including transportation of the deceased are not covered under GST.

Q: Are high sea sales taxable under GST?

Ans:

High sea sale Supply is a type of supply in which commodities are sold while in transit, that is, after they have been dispatched from the port of origin but before they arrive in Indian territory/home custom clearance. Since they are covered under Schedule III and hence they are not included in supply under GST and thus are not taxable.

Q: What is exempt supply? Give some examples.

Ans:

Exempt supplies are supplies that are taxable under the GST Act, however, they are specifically exempted from GST. Some examples include Bread, Fresh Milk, Fresh Fruits, fresh curd, lassi, buttermilk, fresh vegetables like onions, tomatoes, potatoes, etc.

Q: What is Schedule III of the GST Act?

Ans:

The Schedule III of the GST Act contains those activities that are not considered as supply under GST. These are transactions that would have been supplied and chargeable to GST if they would not have been kept in Schedule III. Since they have been kept in Schedule III, they are not considered as supply and thus GST is not levied.

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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.