GST Exemption List for Services

Updated: 02-04-2024 11:17:28 AM

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Typically GST exemption is applicable in three cases – exemption granted to businesses/individuals, exemption granted to goods and GST exemption on services. Businesses and individuals are exempt from GST if their annual aggregate turnover is less than a specific amount. At the time of GST implementation in July 2017, businesses/individuals with annual aggregate turnover of less than Rs. 20 lakhs were allowed GST exemption. A lower limit of Rs. 10 lakhs was in effect for hill states and northeastern states such as Uttarakhand, Himachal Pradesh, Tripura, Sikkim, Nagaland, Mizoram, Meghalaya, Manipur, Assam, Jammu & Kashmir as well as Arunachal Pradesh.

As per decision of the 32nd GST Council meeting held on 10th January 2019, the exemption limit for businesses involved in the supply of goods has been doubled to Rs. 40 lakhs, while for hilly and northeastern states, the new GST exemption limit for goods suppliers is Rs. 20 lakhs. The GST exemption for businesses engaged in supply of services has remained at Rs. 10 lakh for hilly and northeastern states/20 lakhs for all other states.

GST Exemption Based on Aggregate Turnover 

The GST Act defines “aggregate turnover” as the aggregate value of all taxable supplies (excluding charges paid on reverse charge mechanism), exempt supplies, inter-state supply of goods as well as all goods and services exported. There are however a few notable exclusions when calculating the aggregate turnover of businesses. The following payouts are excluded from calculation of aggregate turnover:   

•         Any IGST, CGST or SGST paid by the investor.
•         Value of inward supplies of goods and services
•         Taxes payable on the basis of reverse charge mechanism.
•         Value of non-taxable supplies of goods/services.

GST Exemption for Goods

A number of goods are not taxable under GST and the list of goods eligible for GST exemption is liable to change periodically. However, the reasons for exemption of a good under GST rules may vary depending on whether the good is zero rated, GST exempt, nil rated or considered as a non-GST supply. In a majority of cases, unprocessed goods such as raw silk, etc. are GST exempt however once processed, goods such as readymade apparel made from silk are taxable. Exemption from GST though announced by the government is usually in line with recommendations made by the GST council.

GST Exempt Supplies

Supply of a good may not attract GST in the following cases:

• The good is non-taxable under GST rules. This applies to goods such as petrol and alcohol for human consumption which are not taxable under the GST Act. This can change at a later date.
• The good is part of the zero rated list i.e. the tax rate for the good has been fixed at 0%. Examples include fresh milk, fresh vegetables, etc.
• The supply of the good has been declared GST exempt through a notification from the government. Such as exports and supply of goods made to a SEZ (Special Economic Zone) or SEZ developer.

In the above cases, the supply of these goods attract zero GST, however, no input tax credit benefit is available to GST registered individuals/businesses for these goods.

Reasons for GST Exemption on Goods

Government may decide to implement GST exemption on goods in the following cases:

• The exemption is recommended by the GST council
• Such exemption from GST is deemed to be in public interest.
• In exceptional circumstances, government may grant exemption through special order
• Exemption on supply of specific goods is done through an official notification

Types of GST Exemption

The GST Act specifies three types of exemption from GST for goods:

Absolute exemption: Supply of the specific good is GST exempt irrespective of who the supplier/receiver is and whether the good is supplied intrastate/interstate.

Conditional exemption: Supply of such goods is GST exempt subject to some specific terms and conditions specified in the GST Act, amendment or notification.

It is notable that SGST or CGST exemption does not immediately grant IGST exemption to the supply of a specific good unless otherwise specified by GST Act, amendment or applicable notification.

Examples of GST Exempt Goods

The following are some key examples of GST Exempt Goods*:

• Fresh and dried vegetables including potatoes, onions, sweet potatoes and various leguminous vegetables etc.
• Live fish, fresh fish, bird’s eggs in shell, fresh milk etc.
• Fresh ginger, garlic, grapes, melon, unroasted coffee beans, unprocessed green tea leaves, etc.
• Corn, rice, wheat, maize, soyabean, hulled cereal grains, etc. not put into branded containers.
• Human blood and various components of the same.
• Raw silk, silk worm, coccon, jute fibres (unspun), khadi yarn, khadi fabric, etc.
• Slates, slate pencils, chalk sticks, parts used to manufacture hearing aids, handloom, etc.   

*The above list is indicative and there are many more goods that qualify for nil GST. The applicable list is as per GST rates correct as of the 1st of January 2019. Use Paisabazaar’s handy GST rate finder tool for the complete list of zero GST goods.

GST Exempt Services

A number of services too are exempt from GST. It is notable that the GST exemption for businesses involved in the supply of services is Rs. 10 lakh annual turnover for hill/northeastern states and Rs. 20 lakh for other states. The following is a short list of services that qualify for exemption under the GST Act and are classified under the heading “support services to agriculture, forestry, fishing and animal husbandry”:

•         Services related to cultivation of plants and animal husbandry (except horse farming)
•         Supply of labor for farms
•         Services carried out in the course of farming such as tending, cutting, pruning, sun drying, threshing, sorting, etc. which do not alter the essential characteristics of the product
•         Renting/leasing of agro machinery/vacant land for use in agricultural activities
•         Loading, unloading, packing, storage, warehousing of agricultural produce and fumigation of warehouses.
•         Services related to pre-conditioning/precooling, ripening, waxing, retail packing

Some other services that qualify for GST exemption under existing GST Rules are*:

•         Transportation of passengers public transport/metered cabs/auto rickshaws/metro/tramway, etc.
•         Transportation of goods outside of India, services related to transport of agricultural produce, milk, salt, rice, etc.
•         Various Services provided by the Reserve Bank of India, IRDAI, central government, state government, NPS, etc.
•         Banking services on Basic Saving Bank Deposit (BSBD) account opened under the Pradhan Mantri Jan Dhan Yojana (PMJDY).
•         Services provided by veterinary clinic with respect to healthcare of animals/birds.
•         Services by an artist through performance in classical or folk art forms of music, dance, theatre, etc.

*The above list of nil GST services in indicative and subject to periodic change. Use Paisabazaar’s handy GST rate finder tool for the complete list of nil GST services.