Section 2(47) of CGST Act: exempt supply
(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 nontaxable supply
An exempt supply is a transaction
where goods or services, or both, are either completely exempt from GST or
attract a nil rate of tax. This means that no GST is charged on the supply and,
consequently, no input tax credit (ITC) can be claimed on the inputs used in
providing such supply.
Components of Exempt Supply
According to Section 2(47) of the Central Goods
and Services Tax (CGST) Act, exempt supply includes:
- Nil
Rated Supply: Supplies attracting a zero tax rate (0%).
- Exempt
Supplies under Section 11 of CGST: Supplies specifically
exempted by the Central Government through notifications under Section 11
of the CGST Act.
- Exempt
Supplies under Section 6 of IGST: Supplies exempted under
the Integrated Goods and Services Tax (IGST) Act.
- Non-Taxable
Supplies: Supplies that are explicitly excluded from the
scope of GST (e.g., alcoholic liquor for human consumption).
Key Points about Exempt Supplies
- No
GST Liability: There is no GST payable on exempt supplies.
- No
Input Tax Credit: Input tax credit cannot be claimed on
purchases related to exempt supplies.
- Specific
Exemptions: The list of exempt supplies is specified in
notifications issued by the government.
Examples of Exempt Supplies
- Agricultural
products: Most agricultural produce is exempt from GST.
- Services
provided by government: Many government services are
exempt from GST.
- Specific
goods and services: Certain goods and services may be
exempted under specific notifications.
Importance of Exempt Supplies
Understanding exempt supplies is crucial for businesses as it affects their tax liability, input tax credit claims, and overall GST compliance. Correct identification of exempt supplies helps in avoiding unnecessary tax burdens and penalties.