Since its introduction in 2017, the Goods and Service Tax (GST) has become an inseparable part of our daily lives. Nowadays, whether we make purchases online, settle our mobile bills, or stay in luxurious hotels, we pay GST at varying rates. Conversely, some specific goods and services fall under GST exemption and attract no tax.

As a supplier, being aware of the exemption under GST is crucial, as it decides whether you are required to register under GST or not. Similarly, as a consumer, it is essential to know about the exempt items to avoid being unfairly charged by sly suppliers.

Overview of Exemption Under GST

Although some goods and services are specifically exempt from GST, others are categorised as nil-rated and attract 0% tax. Additionally, the concept of exemption also applies to the registration process and small businesses.

Exemption from GST Registration

Individuals or businesses meeting any of the following criteria are exempt from GST registration:

• Their supply value falls below the threshold limit.
• They supply goods and services exempted under GST.
• They supply goods and services not covered under GST laws.
• They are agriculturists.
• They are covered under reverse charge, where the recipient of goods or services is liable to pay the tax.
• They are engaged in activities other than the supply of goods or services.

Exemption for Start-Ups and Small Businesses

Start-ups and small businesses are eligible for the following benefits under the GST regime:

• Exemption from GST if their annual turnover is less than Rs. 40 lakhs.
• The option to go for Composition Scheme if their turnover is below ₹1.5 crores.
• Exemption from the requirement of e-invoicing if their turnover is below ₹50 lakhs.
• The ability to file quarterly returns instead of monthly if their turnover is below ₹5 crores.

Exempted Goods and Services under GST

Exempted supply of goods and services refers to a broad category of items that are not subject to GST, such as nil-rated or zero-rated items, as well as non-taxable goods and services.

Thus, to understand the exemption of goods and services, it is important to learn the difference between exempt supply, nil-rated supply, zero-rated supply, and non-GST supply.

Types of Supplies under GST

3 Types of GST Exemptions

Absolute Exemption:

This means that the supply of particular goods or services is fully exempt. For example, the distribution of electricity.

Conditional Exemption:

As the name suggests, this includes supplies that are exempt upon fulfilment of certain conditions. For instance, exemption of hotel room tariffs below ₹1,000.

Partial Exemption:

Some supplies are partially exempt and partially taxable. For example, an unregistered person supplying footwear to a registered person in the same state for a total value of less than ₹5,000 per day.

List of Exempted Goods and Services under GST

In Conclusion

Suppliers of goods and services can undoubtedly make the most of GST exemption. This is particularly true for start-ups and small businesses that enjoy additional benefits such as quarterly returns and no mandatory e-invoicing. If you are considering starting your own supply business, Fi can help you get started.

Simply open an account with Fi and become eligible for pre-approved personal loans, with a 100% paperless process and competitive interest rates. Furthermore, Fi’s RBI-licensed partner Federal Bank assigns each user an eligible loan amount of up to ₹5 lakhs. Check out now and take advantage of these great benefits.

FAQs

What is the exemption limit for GST?

The GST exemption limit for suppliers of goods is ₹40 lakhs, whereas that for the suppliers of services is ₹20 lakhs. However, if the supplier is located in special states or union territories, the exemption limit is ₹20 lakhs for goods and ₹10 lakhs for services.

How do I claim GST exemption?

To claim a GST exemption, you must first complete the registration process and get the GST number (GSTIN). Once done, you can file a GST return with the necessary details to claim exemption.