Designed to foster uniformity, transparency, and efficiency in the taxation of goods and services, the Goods and Services Tax is a thorough, destination-based indirect tax system in India. Under GST, every supply made in the course of business is categorized as goods, services, or a mix of the two, guaranteeing that all economic activity is covered by a single, integrated tax system. Goods include mobile property of every description, such as foodstuffs, machinery, electronics, agricultural produce, and manufactured articles. Other than products, services include banking, hospitality, professional consultancy, transportation, telecommunications, and digital services.
GST avoids the cascading effect by combining various taxes like VAT, excise duty, service tax, and entry tax into one, thus creating a unified national market. The classification of supplies into goods or services becomes vital because it determines the applicable tax rate, the site of supply, eligibility for input tax credit, and compliance. This helps in the ease of doing business, simplifying taxation, and provides clarity to the suppliers and customers. Basically, the concept of goods and services under GST becomes the basis of a contemporary and harmonised taxing system for economic growth and simplifying the indirect tax regime in India.
What Are Exempted Goods?
Exempted commodities are those commodities that are not liable to pay tax under the GST law of India. In other words, ‘exempt’ means that no GST is payable on the sale of such goods, and a supplier is not required to charge or collect any tax from the customer. Generally, such goods comprise necessities or commodities related to public welfare, agriculture, education, and basic requirements of life. The government exempts these commodities to keep them affordable and lighten the financial burden on the common man; at the same time, it helps poor people, including small farmers and traditional craftsmen.
Exempted commodities include fresh fruits and vegetables, unbranded cereals and pulses, fresh milk, curd, bread, organic manure, unprocessed agricultural produce, printed books, human blood and its derivatives, firewood, and handloom products. Most of these are either of a natural and unprocessed variety or serve a major social, cultural, or educational purpose.
An important feature of exempted goods is that ITC is not available for the inputs used in their manufacturing or rendering services. A person exclusively dealing in exempted goods is not liable for registration under GST.
In other words, exempted products bear a vital relation to keeping the basic commodities reasonably priced and creating socioeconomic well-being.
Types Of Exemption under GST
1. Absolute Exemptions
These types of exemptions, therefore, are absolute and apply uniformly without requiring the taxpayer to satisfy any conditions. Goods or services falling under the category of absolute exemption would remain exempt from GST for all time, regardless of the supplier or the circumstances surrounding the supply. Typical examples include fresh fruits and vegetables, printed books, and human blood, among others. No taxpayer has the option to pay GST on such supplies.
2. Conditional Exemptions
These exemptions apply only when certain conditions imposed by the government are met. In cases where these conditions are not fulfilled, GST is levied. The conditions can be with respect to the type of supplier, the type of buyer, the type of use, the purpose, or the documentation that may be required. For example, services provided to the SEZ units are exempt only when used for authorised operations, and agricultural produce is exempt only when it is unbranded and unprocessed.
3. Partial Exemptions
In this category, only a portion of the supply will be exempt and the rest will be taxable. This category generally relates to supplies where the value of some of its components is exempt. Example: Transportation of goods where the freight amount up to a certain limit may be exempt.
4. Exemptions Based on Threshold Limits
Exemption from GST registration is available for small businesses whose turnover is below the threshold limit. For instance, businesses whose annual turnover is below ₹40 lakh for goods and ₹20 lakh for services are exempted from registration and payment of GST, except when supplying through e-commerce or making inter-state supplies.
5. Exemptions for Particular Entities or Sectors
Certain organisations, like charitable trusts, educational institutions, religious institutions, and government departments, receive GST exemptions for particular services. This encourages public welfare and affordability in sectors that are socially useful.
List of Exempted Goods Under GST
Exempted commodities are those on which no GST is charged, i.e., at a rate of 0%, based on various GST notifications. Basic essentials, important raw materials, commodities of public welfare, and traditional hand-made products attract exemptions to reduce the burden of taxation for the end customer, particularly for lower-income or rural groups. The list of exempted items comes under revision from time to time by the GST Council. Certain items are exempted/ re-classified with effect from Sept 22, 2025. These benefits keep essential items more affordable and lower the GST burden on traditional sectors such as khadi and handloom.
1. Agriculture and Natural Products
(i) Fresh fruits and vegetables are consumed without processing, freezing, or branding.
(ii) Cereals and pulses like rice and wheat, when consumed unbranded or unpackaged, are unprocessed.
(iii) Planting material encompasses seeds, bulbs, and roots of plants, together with living plants and cut flowers.
2. Dairy & Animal Products
(i) Fresh milk (non-UHT), pasteurised milk, and separated milk with no added sugar or concentration.
(ii) Unbranded curd, lassi, buttermilk, birds’ eggs, and natural honey not pre-packed or labelled.
(iii) Live animals (cows, goats, chickens, etc.) are used by farmers. Fish and aquatic products: The fish may be fresh, chilled, or even living. Human hair: Unprocessed human hair.
(iv) Semen: Even frozen, for breeding or agricultural purposes.
3. Raw Materials & Traditional / Hand-made Items
(i) Raw silk, silk waste, and silk cocoon.
(ii) Khadi fabric, khadi yarn (in particular, when certified by Khadi Institutions).
(iii) Unprocessed wool, jute fibre – traditional raw textile materials.
(iv) Firewood, charcoal (non-processed) for fuel.
(v) Hand tools range from spades, shovels, and sickles, which are used in agriculture, to handcrafted musical instruments.
4. Miscellaneous Category
(i) Public goods include printed books, Braille books, maps, newspapers, and journals.
(ii) These include hearing aids designed for people with physical impairments.
(iii) Non-precious glass bangles.
(iv) Contraceptives: These include condoms and birth control pills.
(v) Human blood and its components- plasma, platelets are used for medical treatment.
(vi) Religious artefacts principally comprise the following Pooja Samagri: clay lamps, idols, tulsi malas, vibhuti, and sacred threads.
(vii) Organic manure and compost (unbranded or in unit containers).
Slate pencils, chalk sticks, and slates have been traditionally used in schools.
Why Are These Goods Exempt?
(I) The government grants exemptions to basic food and farm products to keep them affordable for consumers.
(II) Exempting raw agricultural products reduces the burden of tax and other costs to farmers.
(III) Exemptions on handloom, khadi, and handicrafts create incentives for traditional industries and strengthen the rural economy.
(IV) Exemptions include welfare items like hearing aids, blood, contraceptives, and religious material, which will promote public health, social welfare, and preservation of culture.
(V) Organic manure and compost exemptions promote environmentally friendly agricultural practices.
Important things to note:
(I) Conditions Apply: A lot of goods are exempt only if they are unbranded, unpackaged, or not pre-labelled. For example, raw cereals like rice or pulses are exempt purely if they are not enclosed in registered-brand packaging.
(II) Classification-Based Exemptions: These would be HSN-based and differ depending on HSN codes. For instance, live bovine animals fall under HSN 0102.
(III) Exemptions: In general, the GST Council updates its list of exemptions quite regularly. For example, the exemption list was updated in September 2025.
(IV) Distinction With “Zero-Rated”: Goods that are zero-rated, for instance, exports, would fall into a different category from “exempt” goods. While in the case of zero-rated goods, GST is charged at a nil rate, and ITC can be availed, in the case of ‘exempt’ goods, normally, input credit on purchases liable to pay GST cannot be claimed.
Conclusion
Goods exempt from GST are fundamentally helping to keep commodities at an affordable and accessible level for all sections of society. The GST regime maintains socio-economic equity for the benefit of consumers and producers alike by keeping the GST-free list filled with basic necessities like fresh produce, unprocessed agricultural products, dairy products, literature, and public welfare products. These exemptions would facilitate easing the burden of farmers, small traders, traditional artisans, and the underprivileged sections, thereby stimulating economic inclusion.
Moreover, these exempted items stabilise the market dynamics as there is a reduction in inflationary pressures on basic commodities. Simultaneously, they facilitate traditional industries, ecologically friendly agriculture, and other socially useful sectors that depend on price-sensitive markets. Though input tax credits are not available for such exempt supplies, welfare rather than revenue is the principal purpose of many such exemptions.
In other words, the exempted goods reflect the government’s commitment to a proper balance between tax revenue on the one hand and public welfare on the other. This maintains GST as a progressive, consumer-friendly taxation system that ushers in equitable growth by keeping basic necessities of life affordable. Equitable tax regimes have been provided for in the GST system through strategic exemptions.
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