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Items Not Covered Under GST

Goods and Service Tax (GST) has subsumed 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:

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.

List Of Activities Not covered Under GST

The activities which will not be considered as supply of goods or services are enumerated in the Schedule III of the CGST act. In other words, this schedule lists the activities that are outside the scope of GST.

1. Services by an employee to the employer in relation to his/her employment

The Government has clarified that GST does not apply to employment. However, as per Circular No: 140/10/2020 – GST it has been explained that the remuneration paid to independent directors, or other directors who are not employees of a company, is taxable under GST in the hands of the company, on a reverse charge basis.

2. Services by any court or tribunal established under any law for the time being in force

Fees charged by courts or tribunals are not subjected to GST. Here, the term ‘court’ includes District Court, High Court and Supreme Court.

3. Functions performed by officials

The remuneration paid to:

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

for the duties performed, will not be covered under GST.

4. Services of funeral, burial, crematorium or mortuary including transportation of the deceased

These services are not under the ambit of GST.

5. Sale of land and building

GST is not charged on proceeds from the sale of land and building. However, construction of a new building (being works contract) is subject to GST. Furthermore, if any consideration for the sale of building, complex, civil structure is received before the completion certificate is issued, the entire sale consideration received for this sale will be liable to GST as a supply of services.

6. Actionable claims, other than lottery, betting and gambling

Here, actionable claims are those claims which are enforceable only through legal proceedings. This includes unsecured debt or beneficial interest in movable property which is not in possession of the claimant. Since these claims are in lieu of money and are not products or services, GST will not be applicable.

For example, instruments covered under the Negotiable Instruments Act (Bills of Exchange, Promissory Notes). These can be transferred through endorsement and delivery but cannot be sold.

7. *Supply of goods from a place in the non-taxable territory to another place in the non-taxable territory without such goods entering into India.

This kind of transaction is also called ‘Third–Country Export’. Here, an exporter located in country 1, arranges to supply the order directly from country 3 to the importer (buyer) located in country 2.

Illustration:

Items not Covered under GST

8. *Supply in customs ports before home consumption.

This includes:

  1. Supply of warehoused goods to any person before it is cleared for home consumption;
  2. Supply of goods by the consignee to any other person, by endorsing the documents containing the title to the goods after these goods have been dispatched from the port of origin located outside India but before it is cleared for home consumption in India.

*Out and out supplies (i.e. merchant trading), sale of goods in customs bonded warehouses and high sea sales are not considered as supply under the GST Act and hence, no GST is payable in these transactions.

Apart from the activities mentioned above, these products too are not under the scope of GST:

  • Petroleum products (petroleum crude, motor spirit (petrol), high-speed diesel, natural gas, aviation turbine fuel.)
  • Alcohol for human consumption.