Exempt supply under GST

By CA Somil Bhansali   on 12 April 2017


Exempt supply is defined in section 2(47) of GST Act.

(47) "Exempt supply" means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply.

It thus includes the supply of following type of goods and services:

(a) Non-taxable supply; (b) Supply attracting nil rate of tax; (c) Supplies exempt under Section 11 of the GST Act excluding IGST and under Section 6 of the IGST Act;

The scope of each of the term is discussed below :

(a) Non-taxable supply

The Schedule III & activities or transaction notified by Government under section 7(2)(b) of the CGST Act defines the transactions which are neither considered as supply of goods nor supply of service.

The activities described therein will not be chargeable to GST. Hence, they will be considered as a non-taxable supply.

(b) Supply attracting nil rate of tax

NIL rates means that the goods or services are taxable but at Nil Rate.

(c) Supplies exempt under Section 11 of the GST Act excluding IGST and under Section 6 of the IGST Act

It includes non-taxable supply and supply which have been exempt under section 11. As discussed above, non-taxable supply are goods on which no tax is leviable under section 9 of GST Act. The Government has power under section 11 to specify by notification products which are exempt either absolutely or subject to conditions the goods or services from the whole or part of tax leviable thereon. The section further provides that such goods or services will be exempted on the recommendation of GST Council. It, therefore, appears that identical goods or services will be exempt in all the States. Once GST Council recommends exemption from payment of tax on any goods or services, the same will be applicable to all the States and Union Territory of the country. However, each State will have to issue notification for the purpose of exempting goods or services from payment of GST under the respective SGST Act.  

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