GST was introduced in the country to make tax calculations and procedures easier and more straightforward. It combines a number of smaller indirect taxes and duties under a single umbrella, making it easier for businesses to charge them and the consumers to pay them.
However, it is important to know that not all goods and services are taxable under the regime of GST in the country. There is a range of supplies, goods, and services that do not fall under the list of taxable events under GST.
Let us have a look at these items on which GST is not applicable.
(Before we have a look into these items, it is important to note that they are currently listed under the GST rules and are subject to change if the council suggests so. Also, the list of items of not exhausted and there may be other goods or services that are not taxable under GST.)
Supplies Exempted From GST
In terms of GST, a ‘supply’ is referred to any taxable event. Here are the supplies that are not taxable under GST:
- The sale of goods like alcohol, petrol, etc. for the purpose of human consumption
- The supply of goods to a Special Economic Zone or SEZ developer.
- The supply of goods that fall under the zero-rate list. The zero-rate list consists of goods whose tax rate is 0%.
Goods Exempted From GST
Here are some of the most noteworthy goods that are not taxable under GST:
Food items such as cereals, vegetables, meat, fish, edible tubers, roots, tender coconut, potatoes, jaggery, tea leaves, ginger, turmeric, coffee beans, milk, curd, etc. are not taxable under the GST regime.
Tools or Instruments
Hardware tools or instruments like spades, shovels, handmade musical instruments, agricultural tools, tools used by/for physically challenged individuals, hearing aids, etc. are not taxable under the GST regime.
Raw materials such as raw silk, silk waste, unprocessed wool, the cotton used in khadi yarn, raw jute fibre, handloom fabrics, firewood, charcoal, etc. are not taxable under GST.
Apart from the goods mentioned above, items such as vaccines, contraceptives, human blood, semen, earthen pots, organic manure, living animals except for horses, beehives, books, maps, journals, non-judicial stamps, pooja props, kites, etc. are not taxable under GST.
Services Exempted Under GST
Here are some of the most noteworthy services that are exempted under the regime of GST:
- Transportation of passengers via metered cabs, auto-rickshaws, metro, and other means of public transport.
- Transportation of goods, provided the total charges amount to less than ₹1,500.
- All agricultural services, including cultivation, harvesting, supply of the produce, warehousing, packaging, renting or leasing of machinery, etc. However, please note that the rearing of horses does not fall under this category.
- Transportation of agricultural produce.
- Transportation of goods outside the geographical limits of India.
- Government and foreign diplomacy services
- Services offered by the Reserve Bank of India (or any other foreign diplomatic mission in the country)
- Services offered to international diplomats (including the United Nations)
- A few educational and healthcare services such as services offered by a vet, clinic, paramedics, ambulances, charities, catering services at schools/hospitals, mid-day meals at schools, etc.
- Services offered by libraries operating in the country
- Services provided by tour guides to tourists who do not belong to India
- Services offered for conducting religious ceremonies
- The distribution of electricity
- Services offered by authorized sports organizations
Now that we are discussing items that are not taxable under GST, it is important to throw some light on Schedule III supplies as well.
What Are Schedule III Supplies?
Schedule III supplies are the supplies under GST that are not taxable just because they have been included under the schedule. In other words, these are the supplies that would have otherwise been considered taxable for taking place.
Schedule III of the CGST Act mentions supplies that can neither be treated as a supply of services or products. Here are the entries in the schedule discussed briefly:
Employee Services Under Employment Agreement
These are the services offered by an employee to their employer based on their respective job and contract. Employee services were exempted from being taxable under the GST regime after a lot of debates and discussions.
However, it is important to note that events like giving remuneration to independent directors or non-executive directors that are not the employees of the concerned company are not taxable under GST. Moreover, if an employee offers any service to their employees, it is considered to be a taxable event under GST.
Services By Court or Tribunal
In the case of court or tribunal services offered by the Supreme Court, a High Court, or a District Court, the courts cannot charge GST for the same.
Services Offered By MPs Or People In A Constitutional/Government Post
The duties performed and services offered by the following individuals fall under Section III supplies and are not taxable under GST:
- Members of Parliament, Gram Panchayats, State Legislature, Municipalities, and other relevant local authorities
- Chairpersons, Members, or Directors in a local body or a body established by the Government (provided they are not the employee of the same organization)
- Any individual holding a post under the Indian Constitution
Funeral And Related Services
All the funeral and other related services pertaining to any religion fall under Schedule III and are not taxable under GST.
Sale Of Land And/Or Completed Buildings
Income generated by the sale of a piece of land or a completed building is not taxable under GST. However, the construction services offered for buildings are taxable.
Actionable Claims Except Lottery, Etc
Actionable claims refer to claims that are enforced only via legal suits and related actions. As lottery falls under the category of ‘goods’ in terms of GST, claims for a lottery, betting, and gambling are taxable under GST.
Sale To And From Non-taxable Territories
If there is the transportation of goods from a non-taxable territory to another non-taxable territory without the goods entering India (third-country exports), the event is not taxable under GST.
Transactions In Customs Port
The following transactions carried out in Customs Port fall under Schedule III and are not taxable under GST:
- Supply of goods from a warehouse to any individual before there is clearance for home consumption.
- Supply of goods by a consignee to any individual through an endorsement of documents of title to the concerned goods after they are dispatched from a port located outside India but before there is clearance for home consumption.
These were some of the most common and important exclusions from GST when it comes to charging and paying the tax. Before you levy the tax as a business or pay it as a customer, make sure the concerned supply does not fall under any of the categories discussed in this blog.