GST exempted supplies under GST are crucial for taxpayers, businesses, and consumers to understand. These supplies are transactions where no GST is charged. They help lower costs on essential goods and services, support public welfare, and simplify compliance for small suppliers. It’s important to know what counts as exempt and how it affects tax credit, compliance, and pricing.
What Are Exempted Supplies Under GST?
Under Indian GST law, exempted supplies refer to goods and services that do not attract any GST levy. These supplies may be:
- Nil‑rated supplies (0% tax)
- Supplies wholly or partially exempted by government notification
- Non‑taxable supplies as defined in the GST Act
When a supply is exempted, sellers do not collect GST from buyers. However, businesses cannot claim ITC on inputs used to produce or provide these supplies. This limitation on ITC is a key compliance point for registered taxpayers dealing in exempt supplies.
Exempt supplies differ from zero‑rated supplies, such as exports, where the GST rate is also 0% but ITC can be claimed and refunded.
Key Categories of Exempted Goods:
Several everyday items are exempted from GST to make essentials affordable and promote public welfare. These include:
- Agricultural & Food Products:
- Fresh vegetables, fruits, and unprocessed food grains (rice, wheat, pulses).
- Fresh milk, curd, eggs, honey, jaggery; subject to conditions like no packaging under a brand.
- Daily Essentials & Household Goods:
- Salt, unprocessed cereals, and unbranded staples.
- Certain handloom fabrics, raw silk, and khadi products.
- Books & Educational Materials:
- Textbooks, printed maps, newspapers, and educational charts — often kept tax‑free to support learning.
- Medical & Health Supplies:
- Human blood, contraceptives, vaccines, and some life‑saving medicines.
- Many health services provided by clinical establishments remain GST‑free.
These exemptions ensure that basic commodities remain tax‑free for consumers. However, branded and packaged versions of some products may attract GST depending on classification and notification.
Exempted Services Under GST:
Besides goods, many services are exempt from GST to support affordable access. Some major exempt service categories are:
- Healthcare services: Many medical services are exempted or partially exempt, with recent expansions to include life‑saving drugs and some medical supplies.
- Educational services: Tuition provided by educational institutions remains tax‑free.
- Transportation: Certain passenger transport services are exempted.
- Small value supplies: Supplies under a threshold (e.g., under ₹5,000 in a day from unregistered persons) may be exempt under reverse charge provisions.
- Government and civic public services
- Charitable and religious activities
For example, hospital room services with charges below specific limits could be exempt.
Why Exempted Supplies Matter for Compliance:
From a compliance perspective, it’s important for businesses to classify supplies accurately in GST returns. Misclassifying exempt supplies as taxable (or vice versa) can trigger notices from tax authorities. Using proper invoices like Bill of Supply instead of a tax invoice is mandatory for exempt transactions.
Businesses dealing in exempt supplies must also pay attention to input tax credit rules. ITC cannot be claimed on inputs used for exempt supplies, which affects costing and pricing. Many insurance and financial service firms have adjusted commissions and operational costs after GST exemptions due to loss of ITC.
Exempt supplies also play a role in economic policy; recent GST reforms simplified slabs and expanded exemptions, potentially impacting government revenues by an estimated ₹48,000 crore annually.
Conclusion:
Understanding exempted supplies under GST in India helps both consumers and businesses benefit from tax reliefs and stay compliant. From essential food items to key services, these exemptions balance affordability with tax policy goals. Explore more GST insights now!
– Ketaki Dandekar (Team Arthology)
Read more about Exempted Supplies Under GST here – https://cleartax.in/exemptions-gst-goods