Last Updated on July 8, 2021
GST Exemption 2021
GST and other taxes are complex to understand for many people but knowing which items/services are exempted as per GST Exemption, is equally important. Moreover, the government has made utmost efforts to define the GST exemption list to make laymen understand clearly, but the categories are broad and somewhat confusing. Besides, there are many terms & conditions involved, like ITC (Input Tax Credit) reversing, making it difficult to understand.
Apart from this, clearly understanding the terms, like zero-rated, nil rated, exempted, and non-GST & differences between them are also crucial. One needs properly arranged data in one place to understand all the ins & outs, and here, we have tried our best to do so. Meanwhile, the write-up would help you understand Goods and Service Tax exemption 2021 in detail, including the GST limit, list of supplies, differences, and more.
Table of Contents
- What is Exempt Supply under GST Exemption?
- Top Reasons for GST Exemption
- 3 Types of GST Exemption
- GST Exemption Limit on Aggregate Turnover/Business
- GST Exemption on Goods
- GST Exemption on Services
- Difference between Nil Rated, Exempt, Zero Rated, and Non-GST supplies
- Final Words
- Frequently Asked Questions
What is Exempt Supply under GST Exemption?
Exempt supply in Goods and Service Tax (GST) stands for supplies that draw no GST and include the following three types of goods, services, or products:
- Firstly, supplies chargeable at a 0% tax rate;
- Secondly, goods/supplies that are not chargeable under section 2(78) of the Act;
- And finally, supplies partially or wholly exempted from the charge of IGST or CGST, under the notification amending Section 6 of IGST or Section 11 of CGST Act.
In simple words, the Exempt supplies are goods/services, on which GST is not charged. Note that ITC (Input Tax Credit) applicable on these supplies wouldn’t set off.
Top Reasons for GST Exemption
There are many reasons under which government or administration facilitates GST exemption limit on supplies, primary of which are:
- GST Exemption is in the public interest;
- Recommendation by GST Council for exemption;
- Administration provides exemption through a special order under unprecedented situation;
- Exemption on specific goods/services supply of particular description through special order by government or administration.
3 Types of GST Exemption
- Absolute Exemption: Clear exempted supplies without any conditions, i.e. doesn’t matter whether the supply is Intra/interstate and who is the supplier/receiver.
For instance, services by the Central Bank of India (RBI) & distribution of electricity by the Electricity Supply Board.
- Conditional Exemption: It includes exempted supplies that are subject to some terms & conditions mentioned in the Goods & Service Tax Act, notification, or amendment.
For example, services by hotels, clubs, guest houses, or other residential lodging having accommodation charges of less than Rs. 1000 a day.
- Partial Exemption: Intrastate supplies received by a registered person to an unregistered person are exempted from Goods & Service Tax if the total supply value doesn’t exceed Rs. 5000 per day.
GST Exemption Limit on Aggregate Turnover/Business
Above all, when the GST Act was introduced in 2017, the GST exemption limit on aggregate turnover value was up to Rs. 20 Lakh (Rs. 10 lakh for hilly areas & northeastern states of India). However, recently in January 2019, during the 32nd GST council, the limit was doubled for businesses supplying goods.
- The GST exemption limit for businesses & individuals supplying goods is now Rs. 40 lakh;
- Similarly, the GST exemption limit for businesses supplying goods is Rs. 20 lakh for northeastern states & hilly areas.
- Similarly, the exmeption limit for businesses supplying services is Rs. 20 lakh.
- And for the northeastern states, the limit for businesses supplying services is Rs. 10 lakh.
GST Exemption on Goods
All the categories listed below qualify for GST exemption:
|Type/Category of Goods||Examples|
|Live animals||Goat, sheep, poultry, asses, etc.,|
|Meat||Fresh/frozen meat of cow, pigs, horses, sheep, goat, etc.|
|Fish||Fresh or frozen fish, fillets|
|Natural products||Milk, buttermilk, butter, eggs, cheese, honey, etc.|
|Live trees and plants||Flowers, roots, stems, foliage, bulbs, etc.|
|Vegetables||Onions, cauliflower, potatoes, tomatoes, etc.|
|Fruits||Orange, bananas, mango, apples, grapes, etc.|
|Dry fruits||nuts, cashew, walnuts, etc.|
|Tea, coffee, and spices||Tea leaves, coffee beans, ginger, turmeric, etc.|
|Grains||Oats, Rice, Wheat, barley, etc.|
|Products of the milling industry||Atta, Maida, & other Flours|
|Seeds||Husks, Oilseeds, Flower seeds, etc.|
|Sugar||Jaggery, Refined sugar, etc.|
|Water||coconut water, mineral water, etc.|
|Baked goods||Pizza bread, maida bread, puffed rice, etc.|
|Fossil fuels||Energy Sources, electricity|
|Drugs and pharmaceuticals||contraceptives, Lab samples, blood, etc.|
|Beauty products||Eye kajal, bindi, etc.|
|Waste||Municipal sludge, sewage waste, etc.|
|Newsprint||Currency notes, stamps, envelopes, etc.|
|Printed items||Newspapers, books, maps, etc.|
|Fabrics||Cotton, Raw silk, khadi, etc.|
GST Exemption on Services
All the below-listed services are qualified for GST exemption if the aggregate turnover is less than 20 lakhs:
- Agricultural Services: Services related to farm activities like the cultivation of plants, supply of labour for agriculture, and related activities like loading, unloading, warehousing of farm produce. Besides, it also includes animal husbandry.
- Transportation Services: Transport of people through public transport, trains, metro, cabs, auto, etc. & transportation of goods where the cost of transport is less than Rs. 1500.
- Educational Services: Services offered by educational institutions, for example, IIMs, mid-day meal schemes, examinations, faculty transportation, etc.
- Organizational Services: Similarly, services offered by businesses for overseas operations and international tourists are also exempted from GST.
- Government Services: Services provided by several state & central government departments, for example, RBI, IRDAI, banks, postal services, etc.
- Judicial Services: Service supplies offered by partnership firms, tribunal, & advocates to a business of turnover less than 40 lakhs,
- Medical Services: Services offered by medical professionals, ambulance, charities, animal doctors, etc.
- Other Services: Apart from all previously mentioned, some additional services are also exempted, like payment to theatres, sports events, etc., up to Rs. 250.
Difference between Nil Rated, Exempt, Zero Rated, and Non-GST supplies
|Nil Rated||Supplies that attract 0% GST.||Salt, Grains, Jaggery, etc.||0%|
|Non-GST||GST is not applicable to these supplies, and ITC can’t be claimed for it. However, other taxes might apply.||Alcohol, Petrol, etc.||NA|
|Exempted||All the basic essential commodities.||Milk, butter, bread, curd, etc.||NA|
|Zero Rated||It mainly includes exports, overseas supplies, and supplies made to Special Economic Zones (SEZ). ITC can be claimed.||_||0%|
In conclusion, the government is trying to simplify India’s taxation system by eliminating all surcharges and taxes, and going with one, i.e. GST. Therefore, we must start understanding them, exemptions provided, reasons, and other things.
Frequently Asked Questions
1. What is the GST Exemption Limit?
Organizations that have an annual total turnover less than the specified limit are GST exempted. Currently, the firms and businesses having less than Rs. 40 lakh turnover are exempted from the GST registration. However, the GST exemption limit on services is still at Rs. 20 Lakh. Note that the limit of GST exemption for a hilly area is Rs. 20Lakh (for goods) and 10 Lakh (for services).
2. Is GST applicable to Individuals?
Yes, if the annual turnover is more than Rs. 20 Lakhs, then it applies to individuals, LLPs, societies, trusts, AOPs, HUF, etc. However, for a businesses, the limit is now Rs. 40,00,000.
3. Is the GST exemption limit applicable to the interstate?
It depends on the goods/services you are supplying. If all the supplies are GST exempted, then you need not register for GST.
4. Who need not register GST?
Firstly, manufacturers of particular exempted goods, notified by the government, and a person supplying goods through an E-com operator are not eligible. Also, suppliers of services (except restaurants), and interstate suppliers of goods, that are not taxable under the IGST/CGST/UTGST/SGST Act, are not required to register for GST.
5. I supply GST-exempt goods; is the tax invoice mandatory?
Not only a tax invoice, but also a supply bill should be issued while a registered dealer facilitates exempted services or goods.