GST Exemption: A Detailed List Of Exempted Goods and Services

With the expansion of taxable supplies, not every good and service is taxable. The government clearly defines (goods and services tax) GST exemptions.

A goods and services tax is set on the goods and services value. Understanding taxability also requires having complete knowledge of the exempted goods and services. Business owners can’t claim an input tax credit (ITC) for selling those goods and services.

Let us look at the details list of the GST exemption list for services and goods.

What Is A GST Exemption? 

A GST exemption refers to goods and services exempt from a country’s goods and services tax (GST). GST is not charged for selling these exempt goods and services.

Identifying goods and services exempt from GST registration is another aspect of understanding their taxability. This information can help applicants understand several other factors, such as the GST exemption limit, which is determined by the annual aggregate turnover of a business. 

It was previously unnecessary for companies to register for GST if their revenues were below INR 20 lakhs; for the northern part of India and the mountain regions, the price was Rs.10 lakhs. According to the GST council meeting on 10th January 2019, both values have doubled.

Additionally, specific supplies of goods are exempt from GST registration. Next, let’s examine this topic in more detail.

GST Exemption For Start-Ups And Small Businesses 

People looking to establish a new business can greatly benefit from the current GST regulations. The following are some essential aspects to remember regarding GST exemption for start-ups:

1. Businesses with a turnover below Rs. 40 lakhs are regarded as GST-exempt.
2. Companies with an annual aggregate turnover under Rs. 1.5 crores can access the composition scheme under GST, which permits tax payment at a fixed rate based on turnover. The rate ranges from 1% to 6%.
3. Small businesses are not required to follow e-invoicing under GST, but those with a turnover exceeding Rs. 50 crores must mandatorily adopt e-invoicing.
4. Small businesses earning less than Rs. 5 crores can select a quarterly filing system.

What Are The Types Of Exemptions In GST? 

A major component of understanding taxability is knowing whether the item is exempt under GST. GST has broadened the scope of taxable supplies, so exemptions have been defined clearly. Here are 3 types of GST exemptions:

1. Absolute Exemption

   Here, the supply of goods is wholly exempted without considering the details of the supplier or receiver and whether the goods are supplied within or outside the State.

2. Conditional Exemption

   Here, the supply of certain goods is exempt from GST subject to certain conditions specified under the GST Rules or any official order.

3. Conditional or Partial Exemption

   Suppose a registered individual receives goods and services from an unregistered person within the state. In that case, they are exempt from paying tax under reverse charge if the total value of these supplies from all or any suppliers is not more than Rs 5000/- per day.

What Are The Goods Exempted Under GST? 

Particular goods and services, called exempt supplies under GST, attract nil tax rates. To comprehend the more refined details of GST exemption, you must know what is included in the list of exempted goods. 

There are certain reasons for GST exempted goods. The reasons for exempting those goods might include one of the following –

• In the interest of the public
• As per the GST Council’s recommendation
• Through Government’s special order
• Through an official notification

It is  important for businesses to be aware of the various exempted GST goods. Below is the list of exempted goods under GST for your reference:

1. Food

   Meat (fresh and frozen meat of sheep, goats, pigs, etc.), fish, natural products (honey, cheese, fresh milk, horses, etc.), fruit and vegetables (bananas, grapes, tomatoes, potatoes, etc.), dry fruits, tea, coffee beans, spices, grains, sugar, jaggery, baked goods (pizza base, puffed rice, etc.), and seeds.

2. Tools/Instruments

   Hand tools (spades, hammers, shovels, etc.), handmade musical instruments, tools used for agricultural purposes, and aids and implements used by physically challenged people (hearing aids, etc.)

3. Raw Materials

   Fabrics include raw silk, silk, wool (not processed), the cotton used for khadi yarn, raw jute fiber, khadi fabric, firewood, charcoal, and handloom fabrics

4. Miscellaneous

   Pottery items (earthen pots, clay lamps, etc.), printed items (printed books, maps, newspapers, etc.), pharmaceuticals human blood, bangles, props used in puja (kumkum, bindi, idols, etc.), kites, beehives, and vaccines.

What Is The GST Exemption List For Services? 

GST exemption is also available for specific services, just like specific goods. There are three types of supplies of services that qualify for this exemption. These include:

• Supplies that have a 0% tax rate
• Supplies defined under Section 2(78) of the GST Act
• Supplies that do not attract CGST or IGST due to the provisions stated in a notification, amending either Section 11 of the CGST Act or Section 6 of the IGST Act

GST-exempt supplies can’t be used to offset the GST liability, so any Input Tax Credit on these supplies can’t be used. Below is a detailed list of some of these GST-exempt services:

1. Agricultural Services

   It includes all agricultural services except the rearing of horses. These exempt supplies are cultivation, farm labor supply, harvesting, warehousing-related activities, fumigation, packaging, renting or leasing agricultural machinery, and the services provided by an Agricultural Produce Marketing Committee or a commission agent for buying or selling agricultural produce, etc.

2. Government Services

   All services by the government are exempted from GST except for the following: 

   • Government services postal services like express parcel post, speed post, and agency services provided to a person.
   • Services in relation to a vessel/aircraft, within or outside the boundaries of an airport or a port.
   • Transport of goods or passengers; or services offered by the Reserve Bank of India
   • Any other service, except those covered under (i) to (iii) above, provided to business entities

3. Judicial Services

   • Services offered by an arbitral tribunal to any individual other than a business entity or to a business entity with a turnover of not more than INR 20 lakhs in the preceding financial years;
   • Services offered by a senior advocate (legal services) to any individual or to a business entity with an aggregated turnover of up to INR 20 lakhs in the preceding financial year; 
   • Services offered by a partnership firm of advocate(s) to an advocate or partnership firm of advocates, any individual that is not a business entity, or a business entity with a turnover up to INR 20 lakhs in the preceding financial year.

4. Educational Services

   • Services related to transportation of students and faculty, examination services, mid-day meal scheme, and security and housekeeping services.  
   • Services offered by Indian Institutes of Management (except the Executive Development Programme). 

5. Medical Services

   Services offered by ambulances, charities, veterinary clinics, veterinary doctors, health-care services provided by clinics or paramedics, medical professionals, and organizations facilitating religious pilgrimage.

6. Organizational Services

   Services offered by exhibition organizers for international business exhibitions, tour operators to foreign tourists (including tours conducted outside India), etc.

7. Transportation Services

   • Transportation of goods by inland waterways;
   • Payment of toll;
   • Transportation of passengers by air (in the states of Meghalaya, Manipur, Arunachal Pradesh, Assam, Nagaland, Sikkim, Tripura, and Bagdogra);
   • Transportation of goods by road (except when carried out by a transportation agency or courier agency);
   • Transportation of goods where the cost amount is less than INR 1500;
   • Transportation by non-AC horse or contract carriages; 
   • Transportation of salt, agricultural produce, newspapers, milk, or woodgrains.

8. Other Services

   • Services offered by GSTN to the Central or State Government or Union territories;
   • Services offered by libraries;
   • Services offered by slaughterhouses;
   • Admission fees are payable to theaters;
   • Services provided for public conveniences, such as lavatories, urinals, & toilets.

   These exemptions help reduce the GST burden and contribute to the country’s socioeconomic development. 

   You can have more details about other services exempted from GST under the CBEC’s official list.

Bottom Line

GST exemptions are crucial in providing relief to certain sectors and individuals from the burden of indirect taxes. While the GST regime aims to create a uniform tax structure across the country, exemptions are necessary to ensure that certain sectors are not adversely affected.

By understanding the GST registration exemptions available, which depend on factors like annual revenue and the types of goods/services supplied, businesses can ensure they are taking full advantage of the exemptions they are entitled to. This can help reduce costs and increase financial stability in the crucial early stages of a business.

Amaey Anand

Amaey Anand is a certified accountant with over 10 years of experience in the finance industry. He has worked with various organizations to streamline their petty cash management processes and reduce inefficiencies. He has also written several articles on financial management for leading publications such as Zensuggest and The Wall Street Journal.