Stay updated on the latest ‘Exemptions under GST’ with insights into power provisions, notifications, and points to ponder. Understand exempt supply implications, composite supply, mixed supply, and more. Ensure compliance and avoid penalties with accurate interpretation of exemption notifications.
Goods and Service Tax law in India is a multi-stage, comprehensive, destination – based tax that is levied on every value addition. GST Law is extremely dynamic and is prone to frequent changes is not a matter of surprise and is known to all and sundry. This article is basically an attempt to make everyone abreast with the latest law on ‘Exemptions under GST‘.
The Power to Grant Exemption from payment of tax has been provided to the Government under Section 11 of the CGST Act and Section 6 of IGST Act, 2017. Deriving power from these provisions, numerous notifications have been issued till date exempting various supplies of goods or services from payment of tax either wholly or partially.
When we talk about Exemptions, commonly understood means a privilege (i.e. preclude from being chargeable, immune from liability and so on). Exempt supply defines as “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 and includes non-taxable supply.
Points to Ponder : Supply of Exempted Goods or Services
When any person supplies exempted goods or services he cannot avail input tax credit on purchase of such goods or services and correspondingly he cannot charge tax on such supplies which was exempt from levy of tax. Every Supplier claiming benefit of exemption in relation to goods and services then onus to prove the exemption was on the assessee and not on the Revenue authorities as exemption notification should be interpreted strictly and the burden of proving applicability would be on the assessee.
Let us quickly recall some of the instances:
a. In Case of Composite Supply : Where Supplier supplying goods or services or both which are naturally bundled and supplied in conjunction with each other during the course of business such supply shall be classified as composite Supply. In case of Composite Supply the principal supply will decide the nature of the entire package i.e. Exempt or Taxable.
Example: Mr X Supplying Fruits worth Rs 2,000/- and Charge Rs 120/- as Delivery Charges for supplying such Fruits to the vendors at his location. When we look at the Individual supply then Fruits was exempt and Delivery charges were taxable @ 18%. Thereby, in case of composite supply, the Entire Supply was not chargeable to tax because the Principal Supply i.e. Fruits was exempt from levy of GST.
b) In Case of Mixed Supply : In Case of Mixed Supply, the highest tax rate becomes the rate for the entire package.
Example: Mr X Supplying Diwali Gift Hamper comprises of Packaged Box of Kaju Katli i.e. sweets and Fresh Fruits. The Tax rate on Kaju Katli was 5% and Fresh Fruits was exempt from tax. In case of Mixed Supply highest tax rate needs to be considered and the entire package will be taxable @ 5% being the highest tax rate.
c) E way Bill in Case of Exempted Supplies : Sec 68 of CGST Act 2017, requires every person in case of movement of goods whose value exceeding Rs 50,000/- needs to generate E Way Bill on the common portal (i.e. https://ewaybill.nic.in) in respect of such supply. Whereas, in case of pure supply of Exempted goods no E-way bill is required to generate by the supplier.
d) Export of Exempted Supplies: Circular No 45/19/2018 dated 30-May-2018, clarifies that in case of export of exempted goods or non GST goods without payment of IGST, LUT/bond is not required. Thereby, suppliers are getting big relief in case of export of Exempt and Non GST Goods without furnishing LUT/Bond.
e) Input Tax Credit in Case of Export of Exempted Supplies : Sec 16 sub section (2) of IGST Act, 2017, implies that credit of input tax credit may be availed for making Zero rated supplies notwithstanding that such supply may be an exempt supply. Thereby, any export of exempted goods or services will also be treated as “Zero Rated Supplies” and eligible for refund.
Conclusion: It’s onerous responsibility of Every supplier that language of exemption notification needs to be strictly constructed before availing the exemption. In case exemption were availed wrongly, output tax will be recovered along with Interest and penalty as and when the mistake comes to the light of the department. However, Input tax Credit that was not availed due to exemption mistake, would stand lost as and when time Limit lapses for availing such Input tax credit.
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Disclaimer: The information cited in this article has been drawn from various sources. The information contained in this document is intended solely for dissemination of information and doesn’t aim at soliciting work in any manner. Though meticulous care has been taken but the author assumes no liability in respect of any loss/damage incurred while acting on the basis of information provided.
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