GST Exemptions: Limits, Types & Know How to Claim It

This blog covers the different types of GST exemptions, eligibility criteria, and how businesses can take advantage of them. By reading this blog, businesses can gain clarity on navigating exemptions, reducing their tax burdens, and ensuring compliance with the GST framework.

Exemptions from GST help specific goods and services escape taxation thereby lowering the overall costs for the consumers and the businesses. In addition, it is these exemptions that promote social good by ensuring that necessary services are offered at reasonable costs. They also minimize compliance costs for small enterprises so that these can be carried out without great attention being paid towards compliance and while addressing important socio-economic issues at the same time.

Understanding GST exemptions is essential for businesses, service providers, and taxpayers. It ensures compliance and accurate tax filing, preventing penalties. GST exemption limits help businesses avoid overcharging or undercharging for exempt services, making tax management more efficient and ensuring smooth operations. Proper use exemptions can minimize the tax compliance burden and costs to the business thus avoiding unnecessary mistakes and fines.

What is the GST Exemption?

With reference to the Goods and Services Tax commonly referred to as GST, it is said that there is a provision making it possible for certain goods and/or services not to attract gst. Consequently, the seller does not add any GST on sales to the buyer or remit it to the government in such transactions. Such exemptions are however targeted mainly at reducing the burden of taxation on the basic necessities of the people so that they are still available at a lower price to the consumers.

• Exempt Supply: This category contains goods and services where GST is not applicable, and therefore businesses do not claim input tax credit (ITC) on them. This includes fresh milk, fruits, curd and bread.
• Nil-Rated Supply: These supplies have 0% tax associated with them. That is, they do not attract any GST and ITC cannot be claimed on them. Typical examples are salt, wheat flour and jaggery.
• Zero Rated Supply: These supplies are also computed at 0% tax rate, however in contrast to nil rated supplies, ITC can be claimed by the business. This comprises the supply of goods and services which are exported and those supplied to Special Economic Zones (SEZ) or their developers.
• Non-GST Supply: These are the goods and services which are outside the provisions of GST i.e. alcoholic drinks or petrol. No GST is levied on inputs pertaining to these items nor can it be claimed back.

GST Exemption Limit 2024

Currently, an exemption limit under GST in India differs from one sector to another and from one region to another. In 2024, organisations and service sectors have to be cautious of these limitations for correct GST implementation. Here is a complete list of sector-wise GST exempted limits in India with a basic focus on some of the services, rent and profession wise exemption limits.

Category	GST Exemption Limit	Details
GST Exemption Limit on Rent	₹20 Lakhs (for rental income from property)	Rent income below ₹20 Lakhs is exempt from GST registration.
GST Exemption Limit for Service Sector	₹20 Lakhs (₹10 Lakhs for NE & hill states)	Service providers with turnover below ₹20 Lakhs are exempt from GST.
GST Exemption Limit in Tamil Nadu	₹40 Lakhs (₹20 Lakhs for Service Providers)	Tamil Nadu follows the general GST exemption thresholds.
GST Exemption Limit for Business	₹40 Lakhs (₹20 Lakhs for Service Providers)	Businesses with turnover below ₹40 Lakhs are GST-exempt.
GST Exemption Limit for Service Providers	₹20 Lakhs (₹10 Lakhs for NE & hill states)	Service providers earning below ₹20 Lakhs are exempt from GST.
GST Exemption Limit for Commercial Rent	₹20 Lakhs (for landlords renting out property)	Landlords with rent income below ₹20 Lakhs are exempt from GST.
GST Exemption Limit for Professionals	₹20 Lakhs (₹10 Lakhs for certain states)	Professionals like doctors and lawyers with turnover below ₹20 Lakhs are exempt.

Types of GST Exemptions

There are different types of GST exemptions depending on certain circumstances or the nature of the supply. These categories encompass Absolute Exemptions, Conditional Exemptions and Non-Taxable Supplies with their own specific conditions on which the applicability of these can be based under the GST law.

• Absolute Exemptions

This exemption is granted straightforwardly and without any stipulations.  

Example: The transmission or the distribution of electricity by a utility engaged in either of the two activities.

• Conditional Exemptions

This exemption is only valid in certain circumstances.  

Example: Healthcare provision rendered within a clinical establishment incurring room charges other than ICU/CCU/ICCU/NICU exceeding Rs. 5000 per day.

• Non-Taxable Supplies

A non taxable term means those goods or services which are not taxed using the provision of either CGST Act or the provisions of IGST ACT. However, in order for a transaction in GST to be regarded as a non-taxable supply, the transaction must first be considered a ‘supply’ for the purposes of the laws governing GST.

Exempted Goods Under GST

Enhancing social welfare and promoting economic pursuits, different classes of goods are exempted from GST. These include, but are not limited to, Food Products, Agricultural Produce, or Healthcare Products which are all free from goods and services tax so that they can be affordable and accessible promoting public health.

• Food Products

Within this framework, frozen food and basic commodities are span tax-free, fresh fruits, vegetables, cereals, milk, and even bread bestowed on consumers. These exemptions are justified due to the desire to discourage malnutrition within the population by enhancing access to healthy food.

• Agricultural Produce

Loading, unloading, storage, warehousing of agricultural goods and equipment rental services are free of GST as far as these services relate to agriculture. Such provisions are aimed at strengthening the agriculture industry and assisting farmers as well as businesses connected with them in running their activities efficiently.

• Healthcare Products

Health care goods such as blood, limbs, and various types of contraceptives are tax-exempt so that people may access these services more. These tax-free allowances help to ensure 

that useful medical care equipment is provided at a low-cost price whoever is in need.

Categories of GST Exempted Services

In order to further encourage social welfare and some essential industries certain services are exempted to the GST. This involves, Educational Services, Healthcare Services, Transportation Services and Financial Services, which to mention solely relieve education, health, transport and finance respectively.

• Educational Services

Transport services available to faculty or students, mid day meal scheme, assessment services, and services offered by IIMs, fall within this category.

• Healthcare Services

Services rendered by ambulance, charitable institutions and practitioners of veterinary and human medicine are included in this exemption save for the case of hair transplant or cosmetic and reconstructive surgery procedures.

• Transportation Services

Transportation of goods by land, air or water transport, payment of tolls or use of air travel and the conveyance of goods for a transport cost of less than INR 1500 falls under this category.

• Financial Services

Certain financial services are exempt, including interest income (excluding credit card interest), inter-bank transactions, and services provided by the Reserve Bank of India (RBI). These exemptions support the financial sector’s stability and accessibility.

GST Exemption for Specific Sectors

To encourage the provision of basic services in certain sectors and encourage some economic activities, there are GST exemptions. These exemptions assist Educational Institutions, Start-ups, Advocates, and Law Firms at large in tax burden alleviation in fields such as education, small-scale businesses, and legal services.

• GST Exemption for Educational Institutions

As per the provisions of the GST Act, the educational institutions which provide education from pre-school to high secondary school or its equivalent are exempt from the goods and services tax (GST). Furthermore, auxiliary services offered to such educational institutions for teaching-related activities below the higher secondary level are also exempt from goods and services tax (GST).

• GST Exemption for Startups

While a startup’s total turnover stays below 40 lakhs for goods and 20 lakhs for services, the startup is exempt from registering for and charging GST. In addition, it also calls for startups who only supply exempted goods or services to be exempt from registration under GST.

• GST Exemption for Advocates and Law Firms

To clarify the GST law on legal services, every type of legal services, whether rendered by a practicing advocate or by a law firm, attract the Reverse Charge Mechanism (RCM) in respect of the payment. Lawyers and law firms do not have any other GST liability on the of their services and as such, they are not expected to register for GST because of the nature of their business activities.

• GST Exemption for SEZ Units

A Special Economic Zone (SEZ) operation comes with several tax benefits. Supplies of goods or services to an SEZ developer or unit are excluded from tax under GST and attributed as exports. This enables the suppliers to

(a) Provide against bond or a Letter of Undertaking (LUT) without payment of IGST and avail input tax credit (ITC) or

(b) Provide upon payment of IGST and request reimbursement of the IGST paid for the supply.

If SEZs sell/utilize their goods or services to any other party, it is treated as a simple interstate supply and would attract IGST. On the other hand, if an SEZ is providing goods or services to a Domestic Tariff Area (DTA), such a transaction is considered an export to the DTA. In this scenario taxes and tariffs are only bearable by the DTA recipient and not the SEZ itself.

• GST Exemption for Healthcare Professionals

The 47th meeting of the GST Council had assured that doctors’ services in relation to Assisted Reproductive Technology (ART) are held to be non-GST services as they fall under health care services.

In addition, the GST on ostomy and orthopedic appliances which will include artificial slices has also been reduced from the previous rate of 12% to 5%. Supplies by the operators of bio-medical waste treatment facilities to clinical establishments will therefore be subject to a 12% GST rate with a right of ITC being available.

• GST Exemption for Co-operative Societies

Co-operative societies undertaking activities related to agriculture, banking, and lending to their members are eligible for GST exemptions. These exemptions facilitate co-operatives in providing these services to their members with no increase in costs due to taxes.

How to Claim GST Exemptions?

Claiming GST exemptions involves specific steps for businesses handling exempt supplies:

• Documentation Requirements

The following documents are required for claiming the GST concession:

• • Aadhar Card
  • PAN Card
  • Unique Disability ID card (UDID) issued by the Ministry of Social Justice and Empowerment, or a Disability Certificate issued by the Central, State, or District Government, with the issuing authority’s signature, seal, and registration number.
  • Income Tax Returns for the last three years.
  • A Self-Declaration confirming that the applicant has not availed of this concession in the past five years and agrees not to sell the vehicle within five years of purchase, as per the format in Annexure C.
  • Details of the vehicle model they wish to purchase, including the dealer’s name and the RTO where the vehicle will be registered.

• Reporting in GST Returns

• • Exempt Supplies: Report exempt supplies in the relevant columns of GSTR-1 and GSTR-3B.
  • Supplies At Nil Rate: Place supplies charged at zero percent in the correct section.
  • Non-GST Supplies: Ensure that these types of supplies are well documented in the return form.
  • Record Keeping: Keep proper records of exempt and nil-rated supplies for adherence to the set regulations. 
  • GST Filing: Ensure that every detail is in conformity with the GST submission requirements so as to facilitate the correct filing of the report.

GST Exemption from Registration

Specific persons and organizations, for example, farmers, are not mandated to register for the Goods and Services Tax. Also, individuals providing NIL Rated or Exempt goods like fresh milk do not have to register for GST. Moreover, participants of activities that are not covered by VAT such as supplying petroleum products do not require to register for VAT.

Turnover-Based Exemptions

Certain types of businesses and service providers, however, may also qualify for GST exemption depending on their annual turnover.

• Goods: Any business with an aggregate turnover not exceeding ₹40 lakh is not required to those provisions of the GST Act that seek registration.
• Services: Service providers with an annual turnover of less than ₹20 lakh are not liable to register for GST.
• Special Category States: For special category states, the threshold limits are further decreased to ₹20 lakh for trade in goods and ₹10 lakh for trade in services.

Therefore, the comprehension of these turnover-based exemptions is very important for these companies to ease the burden of tax compliance on them.

Exemption for Agriculturists

• Individuals involved solely in furnishing unrefined agricultural produce are not required to obtain gst registration. 
• This exemption aids in lowering the tax liability for farmers thereby promoting growth within the agricultural sector.
• This exception alleviates the strain of the burdening process on the farmers and ensures that there is no extra tax burden imposed on them.

Key Notifications and Updates on GST Exemptions

Here is the key notifications and updates on GST exemptions, including recent council decisions and procedural changes for compliance:

Major Notifications

This is a brief recap of important GST notifications focusing mainly on exemptions of certain goods and services due to Notification No. 12/2017-Central Tax (Rate), that brings out certain categories like: 

• All the products are exempted under tax which include the primary agricultural produce, health and medical supplies, basic commodities such as milk and salt, etc therefore they are listed as goods which attract a nil rate of tax. 
• Clinical services, educational services and services rendered by non profit organizations get exempted, appreciating the importance of such sectors and also reducing compliance costs. 

It is appropriate to acknowledge that these exemptions are meant to help financially and ease operations of those sectors considered vital or beneficial to society under the rules of the GST.

• Recent Updates on Exemption Policies

Keep yourself updated with the latest changes in the policies concerning the exemptions of GST, which includes the following aspects.

• • Sectoral Capping-Attained Revamping: In which there are redefined turnover limits imposed on the start-ups and the smaller organizations so that they can be exempted depending on the revenue turning over annually and the area, such limitations being relaxed for the special category states.
  • The Healthcare and Education was Exempted- New developments are extending the exemptions from a few healthcare services, especially in the provision of services like assisted reproductive technology ART services, and changes in education services exemption to include services rendered by registered institutions.

These changes have been made primarily in order to help in the easing of GST regulations to the businesses classified as essential, in an effort to reduce taxes on such businesses while still being in sync with the current state of the economy.

Differences Between Exempt, Nil-Rated, Zero-Rated, and Non-GST Supplies

GST, a nil rated supply implies a tax rate of 0% however such suppliers cannot claim any input tax credit. A non-GST supply or a non- taxable supply does not attract any GST whatsoever, whereas an exempt supply is one that is given special considerations as being free of payment of GST. 

Exempt Supply in GST

An exempt supply refers to the provision of goods or services that do not attract GST (Goods and Services Tax). Businesses dealing with exempt supplies are not required to charge GST on these transactions. However, they are also not allowed to claim Input Tax Credit (ITC) on the inputs used for providing these supplies.

Examples of Exempt Supplies:

• Bread
• Fresh fruits
• Fresh milk
• Curd

These exemptions are primarily aimed at ensuring essential goods remain affordable for consumers, reducing their overall tax burden.

Exempt vs. Nil-Rated Supplies

• Exempt Supplies: This refers to basic necessities, which are used every day, that are not subject to GST at all. ITC cannot be availed for exempted goods like bread, fresh fruits and vegetables, and milk.
• Also, Nil-Rated Supplies: These are the supplies which bear a GST rate of 0% without therefore allowing the supplier any ITC. For instance, these supplies include grains, salt and jaggery.

Zero-Rated vs. Non-GST Supplies

• Zero-Rated Supplies: This denotes goods or services which are sold outside of the country and or Special Economic Zones (SEZs) as well as SEZ Developers where the applicable GST rate is 0%. Transactions of this sort qualify for a claim for Input Tax Credit (ITC). 
• Non-GST Supplies: These are goods or services that fall outside the GST framework but may still incur other taxes based on state or national regulations. Common examples include petroleum products and alcohol.

Conclusion on GST Exemptions

Understanding GST exemptions is very important for all, including businesses, service providers, and taxpayers, as it helps in compliance, reducing the tax burden, and avoiding penalties. Different categories of exemptions, like exempt, nil-rated, and zero-rated supplies, as tools for effective tax management and operations of the business. 

In addition, the government provides GST exemptions in this country to encourage participation in key economic sectors such as healthcare, education, agriculture, and so forth, which helps in providing these services at low costs. OEMs must update their information on existing regulations regularly to remain compliant and not incur additional expenses. It’s important for businesses to regularly assess their activities to ensure they are fully compliant with the GST exemption rules. For further guidance, consult tax professionals to ensure your business stays on track with the latest regulations.

FAQs on GST Exemptions

Can startups benefit from GST exemptions?

Yes, startups can benefit from GST exemptions if their turnover is below the specified threshold.

How to issue invoices for exempt supplies?

For exempt supplies, use a Bill of Supply instead of a regular tax invoice.

Do SEZ supplies qualify for zero-rating?

Yes, SEZ supplies are eligible for zero-rating under GST, and Input Tax Credit (ITC) can be claimed on related inputs.