Tax exemption power allows public-interest exemptions, clarifications by explanation, and limits tax collection on absolute exemption.

Power to grant exemption from tax authorises the Central Government, on the recommendations of the Council and in the public interest, to exempt specified goods or services or both by notification or special order. The exemption may be absolute or subject to conditions, and may cover the whole or part of the tax leviable. The Government may insert an explanation within one year to clarify scope or applicability, and absolute exemption prevents collection of tax above the effective rate.

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