Different factors need to be considered when starting a business or owning a business, and you must understand what they are. Nobody can run a business successfully unless they are familiar with basic information such as taxes, accounting, and registration procedures, among other things. The GST Exemption List and Limit are something that you need to consider. To know more regarding what is an exempt supply under GST, you can peruse the details given below. Moreover, after reading this guide, you will understand various classifications of the GST exemption list and the types as well.
What is Exempt supply under GST?
Supplies that are not subject to the services and goods tax are known as exempt supplies. These purchases are exempt from the GST.
GST Act’s Section 2(47) defines an exempt supply. (47) “Exempt supply” includes the non-taxable supply of any services or goods that attracts a nil rate of tax or is wholly tax exempted under section 11 or 6 of the Integrated Goods and Services Tax Act (IGST).
As per the definition it includes,
- Taxable supplies that are taxed at zero percent.
- The notifications that changed sections 11 and 6 of the CGST/IGST exempted partial and entire supplies from the GST charge.
- Alcoholic beverages for personal consumption that fall within section 2(78) of the act, which includes supplies that aren’t taxable under the act.
Types of exemption list under GST?
GST exemption from registration
- INR 40 lakhs serves as the threshold GST exemption limit for the supply of goods; INR 20 lakhs serves as the threshold exemption limit for the supply of services, and the threshold exemption limit for specified categories serves as the threshold exemption limit for specified categories.
- Those who do not make any money create ZERO VALUE. Fresh milk, honey, cheese, agribusiness services, and other items that are both rated and exempt are provided.
- Funeral services, petroleum products, and other similar products are examples of activities that fall under the category of supply of goods and services. Supplies are provided in the form of tobacco leaves, cashew nuts (not shelled and peeled), and other similar products, all of which are covered by a reverse charge exemption for reverse charge activities.
Examine the exemptions that are available in each of the following situations:
GST exemption for businesses
Small and medium-sized firms (SMEs) might benefit from GST exemptions provided their total annual revenue does not exceed a certain threshold. It was INR 20 lakhs for individuals and enterprises when the GST Act was first implemented and INR 10 lakhs for hilly areas and North-eastern states when the GST Act was first implemented. The GST Council amended the restrictions at its 32nd meeting, which took place in January 2019, and the new limits were implemented. These restrictions are as follows:
- GST exemption is available to businesses and individuals that supply goods and have an annual turnover of less than INR 40 lakhs.
- The maximum has been raised to INR 20 lakhs for hilly and northeastern Indian states.
- The GST exemption limit for organizations and people involved in the supply of services is INR 20 lakhs.
- Businesses and individuals delivering services in hilly and northeastern states can claim GST exemptions if their total sales are less than INR 10 lakhs.
Hilly and north-eastern states include Arunachal Pradesh, Jammu and Kashmir, Himachal Pradesh, Uttarakhand, Tripura, Nagaland, Sikkim, Meghalaya, Mizoram, Assam, and Manipur.
As defined by the GST Act, aggregate turnover is the entire value of all taxable supplies, interstate supplies, exempt supplies, and exported goods and services. The following items, however, would be deducted from the total turnover value:
- CGST, SGST, or IGST has already been paid by the investor.
- Reverse charge taxes are those that are assessed via a reverse charge system.
- Value of inward supply of goods and services
- Value of non-taxable goods and services#
GST exemptions for goods
A list of GST-exempt commodities has been approved by the GST Council. A goods exemption could be granted for any of the following reasons:
- In the best interests of the public
- The GST Council recommended the exception.
- The exemption is granted by special orders from the government.
- Formal notification is used to give the exemption on a case-by-case basis.
Furthermore, there are two types of GST exemptions for items. Some of them are as follows:
- Absolute exemption – under this sort of exemption, the supply of specific types of commodities would be exempt from GST regardless of the details of the supplier or receiver or whether the products were delivered within or outside the State.
- Conditional exemption – under this sort of exemption, some types of products are exempt from GST but are subject to specific conditions and limitations laid out in the GST Act or any amendment or notification.
GST Exemption on services
A lot of services are also GST-free. It’s worth noting that the GST exemption for service providers is Rs. 10 lakh for hill/northeastern states and Rs. 20 lakh for the rest of the country. The following is a list of services that qualify for GST exemption and are classified as “support services to agriculture, forestry, fishery, and animal husbandry” under the GST Act:
- Services relating to plant cultivation and animal husbandry (except horse farming)
- Labour supply for farms
- Services such as caring, cutting, pruning, sun drying, threshing, sorting, and other agricultural activities that do not change the product’s core features
- Agricultural machinery and vacant land are rented or leased for use in agricultural activities.
- Agricultural produce loading, unloading, packing, storage, and warehousing, as well as warehouse fumigation.
- Pre-conditioning/precooling, ripening, waxing, and retail packing services
Basis in which services are categorized under exemption list under GST
A decision was reached by the GST Council on May 19th, 2017 about service GST rates as well as the GST exemption list for services. According to the GST Council, five major GST rate categories for services such as commodities have been authorized, with rates ranging from 0 % to 5 %, 12 %to 18 %, and 28 %. Take, for example, the GST Exemption List for Services, are given below;
- Agricultural GST Exemption List
- Tribunal/Partnership/Legal Services GST Exemption List
- Educational GST Exemption List
- Journalism, Hire, Transport of Passengers, Insurance GST Exemption List
- Incubateorders, Trade union GST Exemption List
- Services from the non-taxable territory GST Exemption List
- EPFO, IRDA, and SEBI GST Exemption List
- MOT, NSTEDB, TBI, and VGF GST Exemption List
- National Skill Development Corporation GST Exemption List
- Insurance Schemes GST Exemption List
FAQ’s related to GST Exemption
- Who is qualified to provide GST exemptions?
The government may provide GST exemptions. After receiving proposals from the GST Council, the government issues a notification announcing the exemption.
- Are exempt supplies included individually on the GSTR-1 form?
Yes, a consolidated detail of nil rates, GST exemption, and non-GST supplies should be entered individually when filing a GSTR 1 return.
- Is it true that IGST exemption automatically translates to CGST exemption?
Between the two Acts, there are no such correlated sections. As a result, an IGST exemption does not always imply a CGST exemption.
- Is it probable for a taxpayer to claim an input tax credit for capital goods that are used both for taxable and nontaxable purposes?
No. Taxes paid on capital goods used for both taxable and exempt purposes are ineligible for reimbursement.