GST Exemption – Exempt Supply and Other Details

With the increasing scope of taxable items under GST, the exemptions under GST have been defined well. You need to know the list of goods and services exempted from GST and understand their implications as some conditions are associated with it, such as ITC reversal. One thing which is rated Nil today may be charged higher in the future. So, it is important to mark items like Exempt, Nil Rated, Zero-rated, and Non-GST supplies.

Exempt supplies include the following types of supplies – 

• Supplies which are partially or wholly exempted from IGST/CGST, due to notification amending Section 6 of IGST Act or Section 11 of CGST Act,
• Supplies taxable at NIL (0% tax),
• Non-taxable supplies under section 2(78), such as alcoholic drinks

The input tax credit is subject to exempt supplies and it won’t be available for setoff/utilization. These supplies are exempted. It is worth noting that supplies that are rated 0% tax won’t be treated as “Nil” rated products.

State or Central Governments are encouraged to allow the GST exemption limit. Here are some of the conditions – 

• With the issue of notification
• In public interest
• Recommended by GST Council
• Conditional or absolute exemption for any services and/or goods of the given description
• Exemption with special order might be granted with great circumstances
• A registered individual providing goods/services cannot collect tax higher than the given rate, while supplies have a complete exemption.

Types of GST Exemptions 

Partial Exemption – Goods and/or services supplied within the state from an unregistered supplier to unregistered receiver are also exempted. There is an exceed limit of Rs. 5000 in a day levied on the value of those supplies from a registered person.

Absolute Exemption – It includes exemptions with no conditions, such as distribution or transmission of electricity by distribution utility or transmission services by RBI.

Conditional Exemption – There are certain conditions fall under this category. Some services provided by the guest house, club, hotel, inn or other service providers for staying or lodging are exempted from accommodation under Rs. 1000/day.

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