GST Exemption – Exempt Supply and Other Details

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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. 

About Exempt Supply 

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. 

About Non-Taxable Supply 

It includes goods/services to be supplied and non-levied under CGST Act or IGST Act. The supply should be included in the transaction under GST law to be classified as a non-taxable unit under GST exempted category. It includes only supplies excluded from taxation under GST, such as products mentioned in section 9(2) and alcoholic liquor for consumption, or under schedule III. 

It should also be noted that these items are not out of GST’s scope. Hence, GST rates are not notified or announced yet for them – 

  • Motor spirit (petrol) 
  • Petroleum crude 
  • Aviation turbine fuel 
  • Natural gas

Keep in mind that once the exemption is levied under the CGST Act, it is not allowed under the IGST Act. In Inter-state sales transactions, GST exemption cannot be the same as exemptions offered in intra-state transactions. 

 

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