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.
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.
Individuals or businesses meeting any of the following criteria are exempt from GST registration:
Start-ups and small businesses are eligible for the following benefits under the GST regime:
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.
This means that the supply of particular goods or services is fully exempt. For example, the distribution of electricity.
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.
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.
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.
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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.
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.