Equipping Modern Enterprises with Powerful GST, E-Way Bill & E-Invoicing Solutions

logo image
  • GST Filing & Reconciliation
  • E-Way Bill Automation & E-Way Bill APIs
  • E-Invoicing Simplified
  • GSTIN Search
  • Expert Assistance

All About Exempt Supply under GST

1. What is Exempt Supply under GST?

Exempt supplies include the following types of supplies:

Nil rated supplies that attract 0% GST

Any supply that is wholly or partially exempted from the CGST via notification amending section 11 of CGST Act

Any supply that is wholly or partially exempted from the IGST via notification amending section 6 of IGST Act

Any supply that comes under the bracket of Non-taxable category as Section 2(78) of the GST Act Such as liquor for human consumption. Now the question arises what shall be the treatment of ITC in case of exempt supply?

2. Treatment of Input Tax Credit in case of exempt supply

In the case of exempt supplies, any Input Tax Credit (ITC) amount that is attributable to such supply shall be reversed. Now the question arises on how to determine the ITC attributable to exempt supplies?

How to determine the credit attributable to exempt supplies in the above case?

Input Tax Credit attributable to exempt supplies = (Aggregate value of exempt supplies not including taxable and zero-rated supplies / Total turnover of the taxpayer during the taxable period) X Common Input Tax Credit

Where common ITC is: Total Input Tax Credit attributable – Tax attributable exclusively for exempt supplies – ITC that are not eligible as per Section 17(5) Works contract, Rent a cab and so forth – Tax attributable exclusively for taxable supplies (including zero-rated supplies)

3. What do you understand by non-taxable supply?

A non-taxable supply is a supply of goods or/and services that do not attract any tax either as per the CGST Act or the IGST Act.

To qualify as a non-taxable supply the transaction must meet the requirement of the term supply mentioned under GST law.

4. List of non-taxable supply

Commonly non-taxable supply includes all those products or/and services on which GST rate is not yet been confirmed such as

(i) Crude oil

(ii) High-speed diesel

(iii) The motor spirit or Petrol

(iv) natural gas and

(v) aviation turbine fuel

However, it also includes some items that are excluded from the scope of taxation under GST such as liquor or alcohol for human consumption.

5. GST Negative List

Here is the negative list under GST

1) Any services rendered by an employee to the employer in the course of employment

2) Funeral, burial, crematorium or mortuary services

3) Sale of land or sale of completed buildings

4) Actionable claims not including lottery, gambling, and betting.

5) Any services offered by court or tribunal

6) Duties performed by the Member of Parliament (MPs), Member of Legislative Assemblies (MLAs) and so forth.

7) Services by government, local authority or a governmental authority by way of any activity relating to any function entrusted to a municipality under Article 243 W of the Constitution

8) Services received by the Reserve Bank of India (RBI)

9) Services offered by the government or local authority as per the function entrusted to a municipality under Article 243 W of the Constitution

10) Service performed by any other person holding any post in pursuance of the constitutional provisions.

11) Services provided by IRDA (Insurance Regulatory and Development Authority of India) to the insured person as per the IRDA Act, 1999

12) Services provided by SEBI (Securities and Exchange Board of India) as per the SEBI Act, 1992 to protect the interests of investors in securities and to regulate and promote the development of the securities market.

13) Services offered by a foreign diplomatic mission located in India.

14) Services provided by the UN (United Nations) or any other international organization.

15) Services provided by transporting the goods

(i) via road not including any transportation agency and courier agency

(ii) by inland waterways