GST Exemptions: An In-depth Look at Special Treatment for Certain Entities

Introduction:

Starting from July 1st, 2017, the Indian Government introduced specific criteria that businesses and individuals must meet to register under the GST regulations. However, certain goods and services are eligible for exemption from GST registration. Additionally, some goods or services are subject to a nil tax rate, referred to as exempt supply under GST.

To delve into the details of GST exemptions, it’s important to refer to the GST exemption list. This article aims to make the concept of GST exemptions more understandable and clarify which services or products are excluded from GST registration.

So, without further delay, let’s get started!

What is a GST Exemption?

Understanding how goods and services are taxed also means figuring out if something doesn’t need to be registered for GST. This helps people know what to do. Basically, businesses have a certain amount of money they can make each year without needing to register for GST.

Before, if a business made up to Rs. 20 lakhs a year, it didn’t have to get a GST registration. For some special states, this amount was Rs. 10 lakhs. But in 2019, the government decided to double these limits for smaller businesses.

Also, some things people sell or not, they don’t need GST registration. Let’s learn more about this in the next part.

What is an exempt supply under GST?

The annual aggregate of business or turnover is the main criterion:

• 0% tax or nil tax rate supplies whole exemption and some cases it is partial exemption under CGST or SGST.
• Section 2(78) – exempted supply category

In above cases there is no input tax credit applicable

Difference between nil-rated, zero-rated exempt, and non-GST supplies:

Kind of supplies or goods	Rate of Tax
Supplies with 0% tax rate. e.g. Salt	Nil-rated
Not within the purview of GST. e.g. Alcohol for  human consumption	Non-GST
Export supplies to Special Economic zone (SEZ)  Developers.	Zero-rated
Certain taxable supplies but no GST. e.g. Curd, Fruits.	Exempt

Types of exemptions in GST:

Given below are the three types of exemptions in GST:

• Absolute: Exemptions without any conditions are an absolute exemption. For example, services by the RBI.
• Conditional: Certain conditions are applicable to some exemptions. Services by hotels, clubs, etc., with a statement of accommodation unit less than Rs.1000 per day, fall under a conditional exemption.
• Partial: Unregistered persons supplying goods within states (intrastate) to a registered individual can enjoy tax exemption under reverse charge only if the aggregate value of a supply does not exceed Rs.5000 per day.

GST exemption for new start-ups and small businesses:

• Businesses with < 40 lakhs turnover, exempted
• Businesses with < 1.5 crore annual turnover must go under the composite scheme. Fixed-rate of tax between 1 to 6%.
• Small businesses are exempt from e-invoicing. Businesses with > 5 crore turnover – e-invoicing is mandatory.
• Small businesses with < 5 crore turnover/income can opt for a quarterly filing system.

GST exemption from registration

The following category of taxpayers need not register for GST:

• Individuals belonging to the threshold exemption limit.
• Exempt suppliers of goods and services.
• A person supplying non-GST goods and services.
• Taxpayers engaging in activities other than the supply of goods or services.
• Agriculturists.
• Ones supplying goods covered under reverse charge.

Therefore, if you belong to the above list, you can enjoy a full GST exemption.

Exempted goods under GST:

• Fresh and dry vegetables like potatoes, onions and other leguminous vegetables (bean pods, lentils)
• Fish, egg, fresh milk
• Grapes, melons, ginger, garlic, coffee beans (not roasted), green tea leaves (non-processed)

• Rice,  hulled cereal grains, wheat, corn ,etc. (without branded containers)
• Human blood
• Unspun jute fibers, raw silk, khadi fibre.
• Chalk, slates, handloom, hearing aid parts manufacturing

Some goods which were non-GST before processing become taxable once processed

Services that are Exempt under GST:

•  Agricultural services, including harvesting, packaging, warehouse, cultivation, supply, leasing of machinery are essentially GST exempt services. An exception to these exempted services is the rearing of horses.
• Auto- rickshaws, metered cabs, metro – Public transport services
• Agricultural products and goods transported outside of India
• Farms – labour supply
• < Rs.1,500/- for transport of goods
• Retail packing, pre-conditioning, waxing.
• Foreign diplomatic and government services
• Healthcare and educational services like mid-day meal catering. VET clinics, paramedics, ambulance and charity services are all exempt under GST.
• Services offered by RBI, IRDAI, Central and State Government, NPS
• Basic services like  bank deposit (basic saving bank deposit)

The services related to religious ceremonies, sports organizations, tour guides, and libraries are exempted.     

Reasons for exemption under GST

The government decides on exempting goods from registering under GST in the following cases:

• In case the GST council recommends the exemption.
• The government might find certain exemptions from GST registration to be beneficial for the public.
• Under exceptional or unforeseen situations, the government might grant exemption by special order.
• Upon providing official notification, one can supply specific goods under a full exemption.

Therefore, from the points mentioned above, it is evident that several sectors can qualify for a GST exemption provided they fulfill some prerequisites. Knowing those criterias in detail will help a taxpayer to register under GST without any hassle.

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