GST Exemption and Registration: All You Need to Know
GST Exemption: All You Need to Know
Since July 1, 2017, the Government of India introduced specific criteria requiring businesses and individuals to adhere to GST Registration regulations. However, particular categories of goods and services are eligible for GST Exemption. Some goods or services also fall under the nil tax rate, commonly called exempt supply within the GST framework. It is essential to refer to the GST exemption list to gain a comprehensive understanding of GST exemptions. Hence, this article simplifies the concept of what falls under the purview of GST exemption and which services or products are not required to be registered under GST.
GST registration, short for Goods and Services Tax registration, is mandatory in many countries, including India, requiring businesses and individuals to register under the GST system. It is a legal requirement for entities engaged in the supply of goods and services to collect and remit GST to the government.
GST registration involves providing essential business details, such as the entity’s name, address, type of business, and annual turnover. Once registered, the business is assigned a unique GST identification number (GSTIN) by the tax authorities. This GSTIN is used to file GST returns, claim input tax credits, and comply with GST regulations.
Failure to register for GST when required can result in penalties and legal consequences. Therefore, businesses and individuals need to understand their GST obligations and complete the registration process as per the rules and regulations of their respective country’s GST system.
Understanding GST Exemptions
GST exemptions pertain to goods or services not subject to Goods and Services Tax (GST) imposition. In more straightforward language, certain goods and services fall outside the scope of the GST Act’s taxation framework. These exemptions can fluctuate over time and may vary from one country to another. Governments institute exemptions, including alleviating tax responsibilities on essential commodities and services or extending support to specific industries and sectors.
Types of GST Exemptions in India
Within the Indian GST framework, there exist three distinct categories of exemptions:
Absolute exemptions entail the complete omission of GST on specific goods or services without imposing any conditions or limitations. An illustrative example of this category is the exemption granted to certain services the Reserve Bank of India (RBI) provides.
Conditional exemptions come with particular limitations, conditions, or restrictions that define the scope and extent of the exemption. For instance, hotel services may receive a partial exemption, subject to specific terms, and not a comprehensive exemption.
Unregistered suppliers who furnish goods to a registered entity within a state can benefit from GST exemption under the reverse charge mechanism. However, this exemption is applicable only if the total value of the supply does not exceed Rs. 5000 per day.
List of GST Exemptions
GST Exemption on Goods
India grants GST exemptions to various common goods, including but not limited to:
|Types of Goods||Examples|
|Live Animals||Asses, cows, sheep, goats, poultry, etc.|
|Meat||Fresh and frozen meat of sheep, cows, goats, pigs, horses, etc.|
|Fish||Fresh or frozen fish|
|Natural Products||Honey, fresh and pasteurized milk, cheese, eggs, etc.|
|Live Trees and Plants||Bulbs, roots, flowers, foliage, etc.|
|Vegetables||Tomatoes, potatoes, onions, etc.|
|Fruits||Bananas, grapes, apples, etc.|
|Dry Fruits||Cashew nuts, walnuts, etc.|
|Tea, Coffee, and Spices||Coffee beans, tea leaves, turmeric, ginger, etc.|
|Grains||Wheat, rice, oats, barley, etc.|
|Products of the Milling Industry||Flours of different types|
|Seeds||Flower seeds, oil seeds, cereal husks, etc.|
|Sugar||Sugar, jaggery, etc.|
|Water||Mineral water, tender coconut water, etc.|
|Baked Goods||Bread, pizza base, puffed rice, etc.|
|Fossil Fuels||Electrical energy|
|Drugs and Pharmaceuticals||Human blood, contraceptives, etc.|
|Fertilizers||Goods and organic manure|
|Beauty Products||Bindi, kajal, kumkum, etc.|
|Waste||Sewage sludge, municipal waste, etc.|
|Ornaments||Plastic and glass bangles, etc.|
|Newsprint||Judicial stamp paper, envelopes, rupee notes, etc.|
|Printed Items||Printed books, newspapers, maps, etc.|
|Fabrics||Raw silk, silkworm cocoon, khadi, etc.|
|Hand Tools||Spade, hammer, etc.|
|Pottery||Earthen pots, clay lamps, etc.|
The Central Board of Indirect Taxes and Customs (CBIC) has granted GST exemption on specified medicines used in the treatment of COVID-19
GST Exemption on Services
Numerous services fall within the ambit of GST exemptions. The following list provides an overview of services exempt from GST:
- Agricultural Services: This category covers a wide range of services, including harvesting, packaging, warehousing, cultivation, and machinery leasing, except horse rearing.
- Public Transportation Services: Services such as auto-rickshaws, metered cabs, and metro services are GST-exempt.
- Export of Agricultural Products and Goods: Transportation of agricultural products and goods beyond India’s borders is exempt from GST.
- Labor Supply for Farming: Services involving labor supply for agricultural purposes are exempt.
- Goods Transportation: When the transportation charges are below Rs. 1500, goods transportation services are GST-exempt.
- Retail Packing and Pre-conditioning: Services like retail packing, pre-conditioning, and waxing fall under the GST exemption.
- Diplomatic and Government Services: Foreign diplomatic and government services are not subject to GST.
- Healthcare and Educational Services: This category encompasses mid-day meal catering, VET clinics, paramedics, ambulance services, and charitable healthcare services.
- Services by Regulatory Bodies: Services offered by entities like the Reserve Bank of India (RBI), Insurance Regulatory and Development Authority of India (IRDAI), Central and State Governments, and the National Pension System (NPS) enjoy GST exemption.
- Banking Services: Banking services, notably the Basic Savings Bank Deposit (BSBD) account operable under the Pradhan Mantri Jan-Dhan Yojana (PMJDY), are GST-exempt.
Services Related to Religious, Sports, and Libraries: Services linked to religious ceremonies, sports organizations, tour guides, and libraries also fall under the purview of GST exemptions.
Exempt Supply under GST
Exempt supply under GST includes three types:
- Supplies with a nil tax rate: These supplies are subject to GST, but the tax rate is 0%, meaning no tax is charged.
- Supplies partially or wholly exempt by government notifications: Certain supplies are exempt from GST, either fully or partially, based on government notifications.
- Supplies not taxable under the Act: Some supplies are explicitly excluded from GST and are not taxable.
GST Exemption from Registration
Specific individuals and businesses are exempt from GST registration, including:
- Agriculturists (GST Exemption for Farmers)
- Individuals and businesses with an annual turnover below INR 40 lakhs for goods and INR 20 lakhs for services (INR 20 lakhs and INR 10 lakhs for specified categories)
- Individuals making supplies of NIL-rated or fully exempt goods and services.
- Individuals engaged in activities not covered under the supply of goods and services.
- Individuals making supplies of goods are covered under the reverse charge mechanism.
GST Exemption for Small and Medium-Scale Businesses
Small and medium-scale businesses can benefit from GST exemptions based on their aggregate turnover:
- If the aggregate turnover of a company or individual supplying goods is less than INR 40 lakhs (INR 20 lakhs in certain hilly and northeastern states), they can claim a GST exemption.
- The exemption limit for businesses or individuals supplying services is INR 20 lakhs (INR 10 lakhs in certain hilly and northeastern states).
- The hilly and northeastern states, as defined, encompass regions such as Arunachal Pradesh, Jammu and Kashmir, Himachal Pradesh, Uttarakhand, Tripura, Nagaland, Sikkim, Meghalaya, Mizoram, Assam, and Manipur.
- As per the GST Act, the aggregate turnover comprises the combined value of all categories of taxable supplies, inter-state supplies, exempt supplies, and the goods and services that have been exported.
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Reason for GST Exemptions
The government determines exemptions from GST registration under various circumstances:
- Recommendation by the GST Council: The GST Council, comprised of representatives from the central and state governments, plays a pivotal role in suggesting exemptions from GST registration. Their recommendations carry substantial weight in the decision-making process.
- Public Benefit: The government may identify certain exemptions as advantageous for the general public. These exemptions are designed to alleviate the tax burden on essential goods and services, making them more affordable and accessible.
- Extraordinary Circumstances: In exceptional or unforeseen situations, the government can grant exemptions through special orders. These exemptions are typically enacted to address specific, time-sensitive issues.
- Official Notifications: The government can declare full exemptions for specific goods by issuing official notifications. These notifications provide legal clarity on which items are exempt from GST.
A thorough understanding of these criteria is essential for taxpayers seeking to register under GST seamlessly.
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