GST Exemption: List of Goods and Services Exempt Under GST

Table of Contents

What is GST Exemption?

GST exemption refers to the exclusion of certain goods and services from the levy of Goods and Services Tax (GST), meaning no GST is charged on their supply. This helps reduce the tax burden on essential items such as basic food products, healthcare, and educational services.

It’s important to note that these exemptions are subject to change based on government policies and regulatory updates. Both the Central and State Governments are empowered to grant GST exemptions.

Types of GST Exemptions

GST exemptions are categorized based on who is exempt and the nature of the exemption. Below are the primary types:

Supplier-Based Exemption

This exemption applies to specific suppliers regardless of what they are supplying. It is usually granted to entities involved in public welfare or nonprofit activities.

Example: Services provided by charitable organizations are exempt from GST, irrespective of the type of service.

Supply-Based Exemption

Certain goods and services are exempt from GST due to their essential nature. This exemption applies regardless of the supplier, focusing solely on the type of supply.

Example: Healthcare services, educational services, and public utility services such as water supply are exempt from GST.

Absolute Exemption

This is an unconditional exemption, where the supply is fully exempt from GST without any terms or conditions.

Example: Transmission or distribution of electricity by an electricity utility company is entirely exempt from GST.

Conditional or Partial Exemption

These exemptions are granted with specific conditions or limitations. They may apply fully or partially depending on the fulfillment of certain criteria, such as threshold limits or usage specifics.

Example: Room charges in hospitals are exempt from GST if they do not exceed ₹5,000 per day (excluding ICUs). Similarly, intra-state supplies from unregistered persons are exempt under reverse charge if the total value does not exceed ₹5,000 per day.

List of Goods Exempted from GST

As per GST guidelines, the following categories of goods are exempted from GST (nil-rated):

Category	Products
Animal Products	Live animals: Asses, cows, sheep, goats, poultry
	Meat: Fresh and frozen meat from sheep, cows, goats, pigs, horses
	Fish: Fresh or frozen fish
Natural and Agricultural Products	Natural products: Honey, fresh and pasteurized milk, cheese, eggs
	Live trees and plants: Bulbs, roots, flowers, foliage
	Vegetables: Tomatoes, potatoes, onions, carrots
	Fruits: Bananas, grapes, apples, oranges
	Dry fruits: Cashew nuts, walnuts, almonds
	Grains: Wheat, rice, oats, barley
	Products of the milling industry: Various types of flour
	Seeds: Flower seeds, oil seeds, cereal husks
Beverages and Spices	Tea, coffee, and spices: Coffee beans, tea leaves, turmeric, ginger, black pepper
	Water: Mineral water, tender coconut water, packaged drinking water
Processed and Baked Goods	Sugar products: Sugar, jaggery
	Baked goods: Bread, pizza base, puffed rice, pastries
Energy and Industrial Goods	Fossil fuels: Electrical energy
	Fertilizers: Goods and organic manure
Health and Personal Care Products	Drugs and pharmaceuticals: Human blood, contraceptives, vaccines
	Beauty products: Bindi, kajal, kumkum, herbal cosmetics
Waste and Recycling	Waste: Sewage sludge, municipal waste, recyclable waste
Accessories and Printed Items	Ornaments: Plastic and glass bangles
	Newsprint: Judicial stamp paper, envelopes, rupee notes
	Printed items: Printed books, newspapers, maps
Textiles and Handicrafts	Fabrics: Raw silk, silkworm cocoon, khadi, cotton, wool, synthetic fabrics
	Hand tools: Spade, hammer, gardening tools
	Pottery: Earthen pots, clay lamps

List of Services Exempted from GST

As per GST guidelines, numerous services are exempt from GST in India. Below is a detailed overview of these services:

1. Agricultural Services

Includes all agricultural-related services except horse breeding.

GST exemption on agricultural services covers:

Cultivation and harvesting.
Farm labor supply.
Fumigation and packaging.
Renting or leasing agricultural machinery.
Warehouse operations.
Sale or purchase services by Agricultural Produce Marketing Committees or Boards.

2. Transportation Services

GST exemption on transportation services include:

Road or bridge transportation upon toll payment.
Goods transportation by road (excluding courier agencies).
Inland waterway goods transportation.
Passenger air transport in northeastern states and Bagdogra.
Non-AC horse or contract carriage transport.
Transportation of agricultural produce, milk, salt, newspapers, or wood grains.
Goods transport with a gross charge under INR 1500.
Hiring services for state transport undertakings for vehicles carrying over 12 passengers.

3. Government and Diplomatic Services

GST is exempted on Government Services provided by:

Foreign diplomatic missions in India.
The Reserve Bank of India.

Excludes:

Postal services (e.g., speed post, express parcel post).
Services related to aircraft/vessels within or outside port or airport boundaries.
Transportation of goods or passengers.

4. Judicial Services

GST exemption on judicial services include:

Services by arbitral tribunals to non-business entities.
Legal services by partnership firms and senior advocates to non-business or small business entities.

5. Educational Services

GST exemption on educational services covers various services, including:

Transportation and mid-day meal catering.
Admissions and examinations.
Security and housekeeping for educational institutions.
Services by Indian Institutes of Management (excluding Executive Development Programmes).
Coaching under the central sector scheme for ‘Scholarships for Students with Disabilities.’

6. Medical and Healthcare Services

GST exemption on medical and healthcare services Includes:

Veterinary clinic services.
Healthcare by clinics or paramedics.
Ambulance services.
Charitable medical services.
Services related to religious pilgrimage facilitation.

7. Organizational and Event Coordination

Exempt services include:

Services by exhibition organizers for international business exhibitions.
Tour operator services for foreign tourists conducted entirely outside India.

8. Miscellaneous Services

GST exemption on miscellaneous services includes:

Electricity transmission or distribution by authorized personnel.
Services by recognized sports bodies.
Services by journalists and news agencies (e.g., Press Trust of India).
Library services.
Public convenience services (washrooms and toilets).
Vehicle rentals by State Transport Undertakings.
Overloading charges at toll plazas.

9. New Exemptions

Recent additions include:

Services by the GST Network (GSTN) to governments and Union Territories.
Exemptions for the back-office sector.
Services related to property rentals for residential purposes and room rentals under INR 1000 per day.
IGST exemption on imports under lease agreements for goods transferred to a new lessee in India.
Export of goods via air or sea extended until September 30, 2022.
Admission to entertainment events, museums, parks, and wildlife sanctuaries with charges under INR 250 per person.

Related Read: GST on Transport Services

What is an Exempt Supply Under GST?

Exempt supplies under GST refer to transactions that have zero GST rate.

These supplies fall into three categories:

Supplies taxed at a ‘NIL’ rate of tax (0% tax), which means no tax is levied on these items.
Supplies that are fully or partially exempted from CGST or IGST under specific notifications amending Section 11 of the CGST Act or Section 6 of the IGST Act.
Supplies classified as non-taxable under Section 2(78) of the Act, such as alcoholic liquor for human consumption, which are explicitly excluded from GST.

For these exempt supplies, no GST is charged, and businesses cannot claim ITC on the taxes paid for these transactions. It’s important to note that zero-rated supplies, such as exports, are distinct and not classified as supplies taxable at a ‘NIL’ rate of tax.

GST Exemption from Registration

In the context of GST, certain individuals and entities are exempt from the requirement to register based on their turnover and the nature of their activities. Below are the key points outlining who qualifies for GST exemption from registration:

Individuals whose annual turnover does not exceed:
- INR 40 lakhs for goods
- INR 20 lakhs for services
- INR 10 lakhs for specific categories in special category states
Certain individuals and entities, including agriculturists, are exempt from GST registration.
Individuals making Nil Rated and Exempt supplies (e.g., fresh milk) are also exempt.
Those engaged in activities not covered under the supply of goods and services (e.g., petroleum products) do not require GST registration.
Individuals supplying goods under reverse charge mechanisms do not need to register for GST.

GST Exemption for Business

Small and medium-scale businesses are integral to the economy, and the Goods and Services Tax (GST) framework provides specific exemptions to ease their compliance obligations. These exemptions are determined based on the annual aggregate turnover of the business, as outlined below:

1. For Goods

Businesses supplying goods can benefit from GST exemption if their aggregate turnover is below INR 40 lakhs during a financial year. In the hilly and northeastern states, this threshold is adjusted to INR 20 lakhs to accommodate the unique challenges faced by businesses in those regions.

2. For Services

For businesses engaged in providing services, the GST exemption limit is set at INR 20 lakhs. In hilly and northeastern states, the threshold is further lowered to INR 10 lakhs, supporting local service providers.

3. Aggregate Turnover Definition

The term “aggregate turnover” refers to the total value of all taxable supplies, inter-state supplies, exempt supplies, and exported goods and services. However, certain deductions are made from this value, including:

GST (CGST, SGST, or IGST) already paid
Taxes payable under the reverse charge mechanism
The value of inward supplies of goods and services
The value of non-taxable goods and services

The Negative List Under GST

Under the Goods and Services Tax (GST) framework, the negative list identifies specific goods and services that are exempt from GST obligations. Defined in Schedule III of the CGST Act, these exclusions clarify which items do not fall within the GST tax regime.

Key Items on the Negative List:

Employment-Related Services: Services rendered by employees to their employers during the course of employment are excluded from GST, reinforcing the nature of the employer-employee relationship.
Funeral and Burial Services: Services associated with funeral, burial, cremation, or mortuary activities are exempt, acknowledging the sensitive nature of these services.
Sale of Land: Transactions involving the sale of land are not subject to GST, which helps streamline the process for property transactions.
Completed Buildings: The sale of entirely constructed buildings is also excluded, distinguishing between the sale of real estate and construction services.
Actionable Claims: Actionable claims, with the exception of lottery, betting, and gambling, are listed as exempt, highlighting the difference between financial and non-financial transactions.
Judicial Services: Services provided by courts and tribunals fall under the negative list, recognizing their role in the judicial process.
Constitutional Duties: Official duties performed by Members of Parliament (MPs), Members of Legislative Assemblies (MLAs), and individuals holding constitutional posts are exempted from GST.

Difference between Exempt, Nil Rated, Zero Rated, and Non-GST supplies

Supplies can be categorized into Exempt, Nil Rated, Zero Rated, and Non-GST supplies. Though they sound similar, there are subtle differences and uniqueness in their purpose that make them relevant.

Here’s a breakdown:

Exempt	Those supplies that are not charged GST. No ITC can be claimed in these cases. For example: essential supplies like milk or vegetables fall under this category
Nil Rated	Those supplies that are specifically taxed at 0% GST are called Nil Rates supplies
Zero Rated	Zero Rated supplies are similar to Nil Rated supplies but are specifically intended for the export of goods and services, including supplies made to Special Economic Zones (SEZs) or SEZ developers
Non-GST	Supplies that do not come under the purview of GST. For example, petroleum.

How Are These GST Exemptions Granted?

Exemptions under the Goods and Services Tax (GST) framework are determined by the Central and State Governments to promote public welfare and economic growth. Here’s how the process works:

Official Notifications: Exemptions are formally announced through official notifications, ensuring transparency and clarity regarding the items or services eligible for relief.
GST Council Recommendations: Before any exemption is granted, it must be recommended by the GST Council, which is composed of representatives from both the Central and State Governments.
Special Orders: In rare instances, exemptions may be granted through a special order, allowing for flexibility in unique situations.

What are reasons for exemption under GST?

GST exemptions are guided by policy objectives, socio-economic factors, and the need for administrative ease.

Here are some common reasons:

1. Supporting public wellbeing

Essential goods and services, like basic food items (rice, milk), healthcare, and education, may be exempt to make them more affordable for everyone.

2. Empowering small businesses

To reduce compliance burdens and simplify operations, businesses with lower turnover thresholds may be exempt from GST or benefit from lower rates.

3. Boosting exports

Since exports generally have a zero GST rate, they remain competitive in the global market without the burden of domestic taxes.

4. Enhancing interstate trade

To encourage the free flow of goods and services across state borders, certain interstate supplies may be exempt or taxed at a lower rate.

5. Promoting agriculture

Numerous agricultural products and related services are exempt to support the agricultural sector’s growth.

6. Streamlining government operations

Specific government or local authority services are exempt to avoid double taxation and simplify accounting procedures.

7. Facilitating financial services

Certain financial services, like banking and insurance, may be exempt or have special GST liability rules.

8. Respecting cultural and religious practices

Goods and services used for cultural, religious, or charitable purposes may be exempt.

9. Simplifying tax administration

Exempting specific goods or services can make the GST system easier to understand and administer for both businesses and taxpayers.

10. Managing transition

During the initial implementation of GST, specific exemptions or lower rates may be offered to ease the transition process for businesses

Important Notifications Regarding GST Exemptions

Several key notifications outline GST exemptions for goods and services under the CGST Act. Here are the notable ones:

1. Notification 02/2017-Central Tax (Rate) dated 28.06.2017 for Goods

Exempts around 149 items from GST, including electricity, salt, fresh fruits, and passenger baggage.
Amended by Notifications 28/2017, 35/2017, 42/2017, 7/2018, and 19/2018.

2. Notification 12/2017-Central Tax (Rate) dated 28.06.2017 for Services

Provides exemptions for specific services, largely reflecting previous service tax exemptions.
Amended by Notifications 21/2017, 25/2017, 32/2017, 47/2017, and 2/2018.

Recent Changes in GST Exemption Policies

In recent years, the GST Council has made several noteworthy changes to exemption policies to enhance the tax framework and provide relief to various sectors

Below are highlights from two significant GST Council meetings:

1. 53rd GST Council Meeting (2024)

SEZ Incentives: The Council exempted Compensation Cess on imports for authorized operations by Special Economic Zones (SEZs), effective from July 1, 2017, providing a significant boost to these zones.
Relief for Rail Passengers: To alleviate travel costs, specific services provided by Indian Railways and internal railway supplies were exempted from GST.
Accommodation Exemptions: Targeted exemptions were introduced for accommodation services, benefiting students and working professionals.

Read More About: 53rd GST Council Meeting

2. 47th GST Council Meeting (2022)

Rationalization of GST Exemption List: The Council streamlined the list of GST-exempt items to simplify the tax structure and potentially broaden the tax base.
Public Input on GSTR-3B Format: The Council invited public suggestions for modifications to the GSTR-3B format, enhancing stakeholder participation and aiming for a more user-friendly return filing process.

FAQs

1. Who is exempted under GST?

Individuals and entities below the threshold limit, those making Exempt/Nil Rated supplies, and those in excluded activities.

2. What are exempt GST examples?

Examples for goods and services that are exempt from GST include fresh milk, basic food items, healthcare, educational services.

3. What is the GST exemption limit?

Rs. 40 lakhs for goods (Rs. 20 lakhs in special states), Rs. 20 lakhs for services (Rs. 10 lakhs in special states).

4. Is salary exempt from GST?

Yes, salaries are exempt from GST as they are not a supply of goods or services.

5. Which businesses are exempt from GST?

Businesses that are below threshold limit, making Exempt/Nil Rated supplies, or in excluded activities (e.g. petroleum).

6. How do GST exemptions benefit businesses?

GST exemptions benefit business in a number of ways. For example it could reduce compliance burden and lower the tax rates.

7. Can businesses claiming GST exemptions still register under GST?

Yes, businesses can undertake voluntary registration.

8. Are there any conditions attached to GST exemptions?

Exemptions can be absolute (no conditions), conditional (meeting specific criteria), or partial (limited exemption).

9. How often are GST exemptions updated?

The GST Council reviews and updates exemption policies periodically. The lastest one was the 53rd GST Council Meet held in New Delhi on 22nd June 2024.

10. Is the GST registration limit 20 lakhs or 40 lakhs?

The threshold for mandatory registration is Rs. 40 lakh annually for most businesses, with some special category states having a lower threshold of Rs. 20 lakh.