Understanding taxability in India is crucial for identifying tax-exempt items. Actually, GST exemptions are of three different types: exemptions granted to individuals or businesses, exemptions granted to goods, and exemptions on services. Any individual or any business is exempt from GST if the annual turnover of the business is less than a particular amount. The GST registration implementation was done in July 2017, and at that time, companies or individuals with an annual turnover of less than Rs. 20 lakhs were considered for GST exemption. There are additional exemptions in GST, such as the annual turnover limit for hill states and northeastern states, including Uttarakhand, Himachal Pradesh, Manipur, Assam, Jammu & Kashmir, Tripura, Sikkim, Mizoram, Meghalaya, Nagaland, and Arunachal Pradesh, which is approximately Rs. 10 lakhs.
The exemption limit for businesses, as announced after the 32nd GST Council meeting held on January 10, 2019, has been doubled; that is, the exemption limit for businesses has been increased to Rs. 40 lakhs. For hilly states and northeastern states, the new GST exemption limit for goods alone has risen to Rs. 20 lakhs, but the GST exemption for businesses that deal with the supply of services has continued at Rs . 10 lakhs.
GST Exemption – Aggregate Turnover
The GST Act of the Indian Government defines “aggregate turnover” as the aggregate value of all taxable supplies, excluding charges paid under the reverse charge mechanism, exempt supplies, inter-state and exported supplies of goods and services. However, there are a few notable exceptions when calculating the aggregate turnover of businesses and individuals. The following payouts are exceptions from the calculation of aggregate turnover:
- Any SGST, CGST, or IGST paid by the capitalist
- Value of concave supplies of goods and services
- Taxes payable, depending on the reverse charge mechanism
- Value of non-taxable supplies of services and goods.
GST Exemption for Goods
Several goods are exempt from GST, and a list of non-taxable goods is also available. The liability of these lists may change periodically. The reasons for GST exemption of goods may vary depending on whether the good is GST-exempt, the good is zero-rated, or the good is nil-rated or counted as a non-GST supply. In most cases, unprocessed products, such as raw silk, are exempt from GST. However, the same products or goods, once processed, such as silk sarees and readymade apparel made from silk, become taxable. The government typically announces GST exemptions, but the items eligible for GST exemption are recommended by the GST Council.
GST Exemption for Supplies
Supply of a product or good is GST-exempt in the following cases:
- The good that comes under non-taxable as per the GST rules. This rule is applicable to goods such as petrol and alcohol intended for human consumption, which are not taxable under the GST Act. This may be changed in the future.
- The good comes under the zero-rated list of GST rules, i.e., products whose tax rate has been fixed at 0%, such as fresh vegetables, fresh milk, and others.
- The supply of the good is considered GST-exempt after receiving the notification from the government.
The supply of the goods mentioned above attracts zero GST, and there is no input tax credit benefit available for GST-registered businesses for these goods.
Reasons for GST Exemption on Goods
The government grants GST Exemption on goods in the following cases
- The good which is recommended by the GST council
- The exemption is considered in the public interest.
- In exceptional cases, the government can grant GST exemption via a special order.
- GST Exemption on the supply of certain goods is executed via an official notification
Types of GST Exemption in India
The GST Act defines three types of GST exemption for goods:
- Absolute Exemption from GST: Supply of the specific good is GST exempt regardless of who the supplier of the good or the receiver of the good is and whether the good is supplied within the state or out of the state.
- Conditional exemption from GST: The supply of specific goods is GST-exempt under some particular terms and conditions notified in the GST Act amendment.
One thing you have to note is that goods under SGST or CGST exemption do not get immediately granted IGST exemption. It has to be specified by the GST Act, amendment, or notification that the supply of a specific good is an IGST exemption, too.
Examples of GST Exempt Goods
Here are some key examples of GST Exempt Goods:
- Fresh and dried vegetables, including onions, potatoes, sweet potatoes, various leguminous vegetables, and more.
- Live fish, bird’s eggs in shell, fresh fish, fresh milk, etc.
- Fresh ginger, garlic, unroasted coffee beans, grapes, melon, unprocessed green tea leaves, and so on
- Corn, rice, soybean, wheat, maize, hulled cereal grains, etc, which are not packed in the branded containers.
- Human blood and various parts of the same.
- Raw silk, cocoon, silkworm, jute fibres (unspun), khadi fabric, khadi yarn, and so on
- Slates, chalk sticks, slate pencils, parts which are used to produce hearing aids, handloom, etc.
Apart from the above list, many more goods are exempt from GST.
GST Exempt for Services
There are several services available that fall under the GST exemption. Importantly, the GST exemption for businesses dealing with the supply of services is approximately Rs. 10 lakh per annum for hilly states and northeastern states, and Rs. 20 lakh for other states in India. Here is a short list of services that are eligible for tax exemption under the GST Act
- Services that are related to the cultivation of crops and animal husbandry, excluding horse farming
- Supply of farming workers
- Services related to farming that include tending, pruning, cutting, threshing, sun drying, sorting, and so on, the work that does not alter the basic characteristics of the good or product
- The business that deals with renting or leasing agricultural machinery/vacant land for agrarian activities
- Loading, packing, storage, unloading, and warehouse management for agricultural products, as well as fumigation of warehouses.
- Services like pre-conditioning/precooling, waxing, ripening, and retail packing are also eligible for tax exemption under the GST Act.
Some other services that are eligible for exemption from GST under the GST Rules are as follows:
- Transportation services include public transportation, auto-rickshaws, metered cabs, tramways, and more.
- Transportation of goods abroad, transport of agricultural products, dairy products like milk, salt, rice, and so on.
- Various services are offered by the Reserve Bank of India, the central government, the National Pension System (NPS), the Insurance Regulatory and Development Authority of India (IRDAI), and the state government, among others.
- Banking Services are provided by the Basic Saving Bank Deposit (BSBD) account created under the Pradhan Mantri Jan Dhan Yojana (PMJDY).
- Services offered by veterinary clinics for animals and birds.
- Services by an artistic performance in classical or folk art forms of dance, music, theatre, and so on.
