Understanding the taxability in India is very important in identifying tax-exemption items. Actually, GST exemptions are of three different types: exemption granted to individuals or businesses, GST exemption granted to goods, and exemption 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, businesses or individuals with an annual turnover of less than Rs. 20 lakhs were considered a GST exemption. There are some more exemptions in GST exemption like the annual turnover limit for hill states and northeastern states such as Uttarakhand, Himachal Pradesh, Manipur, Assam, Jammu & Kashmir, Tripura, Sikkim, Mizoram, Meghalaya, Nagaland, as well as Arunachal Pradesh is about Rs.10 lakhs.
The exemption limit for businesses after the 32nd GST Council meeting which is held on 10th January 2019 has been doubled, that is the exemption limit for businesses is increased to Rs. 40 lakhs, and for hilly states and northeastern states, the new GST exemption limit for goods alone has increased to Rs. 20 lakhs but the GST exemption for businesses which deals with 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, which excludes the charges paid on reverse charge mechanism, exempt supplies, inter-state and exported supply of goods and services. However, there are a few notable exceptions when figuring the aggregate turnover of businesses/individuals. The following payouts are exceptions from figuring 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
There are a number of goods that come under GST exemption, and there is also a list of goods that are not taxable. 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, etc., come under GST exemption, but the same products or goods, once processed, such as silk sarees, and readymade apparel made from silk then those goods are taxable. GST exemptions are usually announced by the government, but the GST exemption items are recommended by the GST council.
GST Exemption for Supplies
Supply of a product or good is GST exemption in the following cases:
- The good which comes under non-taxable as per GST rules. This rule is applicable to goods like petrol and alcohol for human intake are not taxable under the GST Act. This may be changed in future.
- The good comes under the zero-rated list of GST rules, i.e. the products whose tax rate has been fixed at 0%, like fresh vegetables, fresh milk, and so on.
- The supply of the good is considered GST-exempt after getting the notification from the government.
The supply of the above-mentioned goods 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 grant 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 specific 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 for IGST exemption. It has to be specified by the GST Act, amendment or notification that the supply of a specific good is IGST exemption, too.
Examples of GST Exempt for 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, there are many more goods that come under nil GST.
GST Exempt for Services
There are a number of services available that fall under GST exemption. Importantly, the GST exemption for businesses that deal with the supply of services is about Rs. 10 lakh annual turnover for hilly states and northeastern states and about Rs. 20 lakh for other states in India. Here is a short list of services which 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 includes tending, pruning, cutting, threshing, sun drying, sorting, and so on, the work which does not alter the basic characteristics of the good or product
- The business that deals with renting or leasing the agro machinery/vacant land to do agricultural activities
- Loading, packing, storage, unloading, warehouse for agricultural products and 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 GST Rules are as follows:
- Transportation services include public transport, auto rickshaws, metered cabs, tramways, etc.
- Transportation of goods aboard, transport of agricultural products, dairy products like milk, salt, rice, and so on.
- Various services offered by the Reserve Bank of India, central government, NPS, IRDAI, state government etc.
- 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.
