EXEMPTION FROM GST

In GST there is no separate meaning for goods or service.  Supply is common for both of the goods and service.  Section 3 defines the term ‘supply’.  The provisions of Finance Act, 1994 and Central Excise Act, 1944 and State Value Added Tax laws give powers to the respective Government to exempt any goods/service.  The exemption may be full or partial; permanent or for a particular period.  The Government may review the exemption given to such goods/services and do necessary action on exemption according to the situation requires.

Many a notification is being issued for exemption in respect of service tax as well as central excise duty by the CBE&C and also by the State Governments for their respective VAT.  All exemptions under these Acts will come to an end on the introduction of GST regime.

The Model GST law and IGST law also provides for exemption from GST.

Section 2(44) of the Act defines the term ‘exempt supply’ as supply of any goods and/or services which are not taxable under this Act and includes such supply of goods and/or services which attract NIL rate of tax or which may be exempt from tax under Section 11.

Exemption under GST Act

Section 11 gives powers to grant exemption from tax.  Section 11(1) provides that if the Central or a State Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendation of the Council, by notification, exempt generally either absolutely or subject to such conditions as may be specified in the notification, goods and/or services of any specified description from the whole or any part of the tax leviable thereon with effect from the date of issue of notification or any subsequent thereto as may be specified in the said notification.   Where an exemption in respect of any goods and/or services from the whole of tax leviable thereon has been granted absolutely, the taxable person providing such goods and/or services shall not pay the tax on such goods and/or services.

Section 11(2) provides that if the Central or a State Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendation of the Council, by special order in each case, exempt from payment of tax, under circumstances of an exceptional nature to be stated in such order, any goods and/or services on which tax is leviable.

Section 11(3) provides that the Central or a State Government may, if it considers necessary or expedient so to do for the purpose of clarifying the scope or application of any notification issued under Section 11(1) or order issued under Section 11(2), insert an explanation in such notification or order, as the case may be, by notification at any time within one year of issue of the notification under Section 11(1) or order under Section 11(2), and every such explanation shall have effect as if it had always been the part of the first such notification or order, as the case may be.

Section 11(4) provides that every notification issued under Section 11(1) or every order issued under Section 11(20 shall-

• Unless otherwise provided, come into force on the date of its issue by the Central Government or a State Government for publication in the Official Gazette or from any date subsequent to the date of its issue as may be specified therein; and
• be made available on the official website of the department of the Central or a State Government.

Exemption under IGST Act

Section 6 of the IGST Act gives power to grant exemption from tax.  Section 6(1) provides that any exemption granted by the Central Government on the recommendation of the Council, under Section 11 of CGST Act in respect of intra-State supply of goods and/or services of any specified description, shall apply mutatis mutandis to inter-State supply of goods  and/or services of the said description unless specifically provided otherwise.

Section 6(2) of the Act gives powers to the Central Government to grant exempt generally either absolutely or subject to such conditions as may be specified in the notification, inter-state supply of goods and/or services of any specified description from the whole or any part of the tax leviable thereon.  The Central Government is to satisfy that it is necessary in the public interest so to do and on the recommendations of the GST council.  Where an exemption in respect of any goods and/or services from the whole of the tax leviable thereon has been granted absolutely, the taxable person providing such goods and/or services shall not pay the tax on such goods and/or services.

Section 6(3) provides that where the Central Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendation of the GST Council, by special order in each case, exempt from payment of tax, under circumstances of an exceptional nature to be stated in such order, any goods and/or services on which tax is leviable.

Section 6(4) provides that the Central Government may, if it considers necessary or expedient so to do for the purpose of clarifying the scope or applicability of any notification issued under Section 6(1) or order issued under Section 6(2), insert an explanation in such notification or order, as the case may be, by notification at any time within one year of issue of the notification under Section 6(1) or order under Section 6(2) and every such explanation shall have effect as if it had always been the part of the first such notification or order, as the case may be.

Section 6(5) provides that every notification issued under Section 6(1) or Section 6(3) and every order issued under Section 6(2) shall come into force on the date of issue by the Central Government for publication in the Official Gazette or from any date subsequent to the date of its issue as may be specified therein and be made available on the official website of the department of the Central Government.

Requests are received from various industries to the Government seeking exemption either fully or partially for their products from GST which is expected to be implemented by 01.07.2017.   The Central Government or State Government will notify exemptions, considering the requests of the stakeholders and also on the recommendations of GST Council.