Items Not Covered Under GST

Prakash Matre
Prakash Matre at May 09, 2022
Items Not Covered Under GST

Goods and Service Tax (GST) has subsumed the majority of indirect taxes in India since 1 July 2017. However, some goods and services are not under the purview of GST. In this article, we will help you understand products not under GST, products out of GST, goods not covered under GST and much more.

Differences Between Exempted Supply, Zero-Rated Supply, and Activities Not covered Under GST

  Zero Rated Supply Exempt Supply Non-GST Activity
Meaning The rate of tax as per the GST act is ‘0’. These supplies are taxable as per the GST act but are particularly exempted from GST. These supplies are not under the purview of GST law.
ITC Availability Available Not Available Not Available
Example Supplies made to SEZ or SEZ Developers Fresh milk, fruits and vegetables, curd, bread, meat etc. Alcohol for human consumption, petroleum products, etc.

 

ITEMS NOT COVERED UNDER GST

The GST Act covers most goods and services taxable under GST. In this Article we will cover topics like items not included in GST, and items on which GST would not be applicable to, Items not under GST / GST not applicable items/ Which items are not included in GST and much more.

As per Schedule III, the following are the sectors where GST is not applicable and GST is not levied on which of the following:

  1. Employment services
  2. Legal services
  3. Duties/Functions performed by officials
  4. Services related to a deceased
  5. Sale of land and building
  6. Actionable claims (do not include lottery, betting and gambling)
  7. Merchant Trade supply
  8. High Sea Sale supply

Employment services

Employment services are not subject to tax under GST. In other words, GST does not apply to services by employees to the employer in the course of their employment. However, as per Circular No. 140/10/2020-GST dated 10th June 2020 it has been clarified that GST is leviable on remuneration paid by companies to the independent director defined as per Section 149(6) of the Companies Act, 2013 or other directors who are not the employees of the said company. Above circular no. 140/10/2020-GST dated 10th June 2020 also clarifies the leviability of GST on remuneration that is subject to TDS u/s 194J of Income Tax Act, 1961 as Fees for Professional or Technical services, to directors who receive remuneration other than “salaries”. The liability to discharge the applicable GST is on a reverse charge basis which is in the hands of the recipient of the services, i.e. company.

Legal services

GST does not apply to legal services, where such services are rendered by any Tribunal or court established under any law for the time being in force. This means that fees charged by court or tribunals are not subject to GST. The word COURT includes the following:

  1. High Court
  2. Supreme Court
  3. District Court

Duties/Functions performed by officials

Duties/Functions performed by officials: The remuneration paid to the following members or persons performing their duties or functions is not covered under GST.

  1. Members of Parliament, State Legislature, Panchayats, Municipalities and other local authorities;
  2. Any person who holds any post in pursuance of the provisions of the Constitution in any capacity;
  3. A Member or a Director or Chairperson in a body established by the Central Govt. or a State Govt. or local authority and who is not an employee or deemed as an employee.

Services related to a deceased

Services related to a deceased: Services of funeral, burial, crematorium or mortuary, including transportation of the deceased, are not subject to part of GST.

Sale of land and building

Sale of land and building: Proceeds on sale of land and building are not subject to charge GST under the Goods and Services Tax Act. However, GST on the construction of a new building is applicable under the GST Act. It is important to note that if any consideration for the sale of a building, complex, civil structure, wholly or partly, is received before issuance of the completion certificate, the entire sale consideration received on this sale will be liable to GST under supply of services.

Actionable claims

Actionable claims include unsecured debt or any interest in immovable property that is not in the claimant's possession. Since these are monetary claims, which does not fall under the category of goods or services, GST is not applicable. However, it is important to note that actionable claims do not include claims related to lottery, betting and gambling.

Merchant Trade Supply

Merchant Trade Supply: Supply of goods from a place situated in a non-taxable territory to another place situated in a non-taxable territory without such goods entering into India. Example: I Ltd. from India issues a Purchase Order (here it is called importer of goods) to G Ltd. in Germany (here it is called shipper of goods). I Ltd. advised G Ltd. to ship the goods to B Ltd. in Bangladesh (here it is called recipient of the goods). So, in the case of merchant trade transactions, goods do not enter the Indian territory and hence GST is not applicable.

High Sea Sale Supply

High Sea Sale Supply is the category of supply where goods are sold while in transit, i.e. after the dispatch of goods from the port of country of origin but before arriving into the Indian territory/home custom clearance. High Sea Sales also include:

  • Goods stored in a warehouse which do not enter the territory of India and are not cleared from Customs port for home consumption;
  • Supply of goods by the consignee/importer of goods to any other person/entity, by the endorsement of documents of title, after the goods have been dispatched from the port of origin located outside India but before clearance from the custom for home consumption.

Goods exempted from GST: Such goods fall under the scope of GST but do not attract GST, which means the tax rate is NIL, i.e. 0%. Supply of following goods are exempted from GST: Here's the example of which of the following goods will not be covered under the GST bill.

Examples: Fresh milk, fresh curd, buttermilk, lassi, fresh fruits, bread, fresh and chilled vegetables like potatoes, tomatoes, onions, shallots, garlic, cereals, jaggery, coffee beans, tender coconut, meat & fish, other edible tubers & roots etc.

What is not included in the term goods under GST law?

Supplies related to the following goods are not covered under GST:

1) Petrol, high-speed diesel, aviation turbine fuel, crude oil.

2) Electricity

3) Alcohol used for human consumption

4) Natural Gas

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