Indirect Tax Laws · Exemptions from GST

Exemptions under IGST: Imports, SEZ and Special Cases

Updated 5 October 2026 · Fact-checked

IGST exemptions are supplies that the Government relieves from integrated tax by notification, including some imports and cross-border services. To solve a question, classify the supply (import, SEZ or other), check whether an IGST notification exempts it, and separate exempt from zero-rated. Then state the tax and ITC result.

Understand Exemptions under IGST: Imports, SEZ and Special Cases

IGST is charged on inter-State supplies, imports and exports. Imports of goods and services and supplies to or from an SEZ are all treated as inter-State. So IGST applies by default, unless a notification exempts the supply or the law zero-rates it.

The Government can exempt goods or services from IGST, wholly or partly, by notification in the public interest. The IGST (Rate) notifications work like the CGST ones. One lists exempt goods and another lists exempt services, and the IGST service list mirrors the CGST service list. In the exam, rely on the notification text you are given and match the description and conditions.

Imports of goods carry IGST collected at the border along with customs duty. A Customs exemption from basic duty does not automatically exempt IGST. Each levy has its own exemption, so check which one the question mentions. Import of services is taxed through reverse charge on the Indian recipient, unless an exemption covers the service or the import is not a supply.

Supplies to an SEZ unit or developer for authorised operations are zero-rated, not exempt. The supplier can supply under bond or Letter of Undertaking without paying IGST, or pay IGST and claim a refund. Supplies from an SEZ unit to the Domestic Tariff Area (DTA) are different. Goods cleared from an SEZ to the DTA are treated as imports and attract customs duty and IGST. Services from an SEZ to the DTA are inter-State supplies taxed under IGST. Imports by an SEZ unit or developer for authorised operations are exempt from IGST only where a notification issued under the IGST Act provides this, and only subject to the conditions in that notification.

Special cases include services by foreign diplomatic missions and services to the United Nations or specified international organisations, where the notification gives relief. Under Schedule I of the CGST Act, import of services from a related person, or from another establishment of the supplier outside India, without consideration, is deemed a supply only when it is made in the course or furtherance of business. Import of such a service for personal purposes without consideration, such as a gift received by an individual from a related person, is not a supply. Exempt means no tax and no ITC. Zero-rated means no tax, and the supplier gets a refund: either of the IGST paid on the supply, or of unutilised ITC when the supply is made under bond or LUT.

Key rules to remember

Default rule for cross-border supplies: Import of goods or services = inter-State supply = IGST; Supply to or by an SEZ unit or developer is also treated as inter-State. Only supply to an SEZ for authorised operations is zero-rated. Goods from an SEZ to the DTA are treated as imports and taxed with customs duty and IGST. Services from an SEZ to the DTA are inter-State supplies taxed under IGST.
Zero-rated vs exempt: Zero-rated: tax nil + refund of IGST paid or of unutilised ITC. Exempt: tax nil + no ITC; The question usually turns on this difference.
SEZ supply options: Supply under bond or LUT without IGST, OR pay IGST and claim refund; Applies to goods or services supplied to an SEZ unit or developer for authorised operations.
Import of services liability: IGST on imported service = value × rate, paid by recipient under reverse charge; Recipient can take ITC if used for taxable business supplies.
Customs vs IGST exemption: Exemption from basic customs duty ≠ exemption from IGST on import; Check whether the notification also covers integrated tax.
Exemption notification route: Exempt supply = covered by IGST (Rate) notification for goods or services, subject to conditions; Always check description and conditions in the notification.

How to solve Exemptions under IGST: Imports, SEZ and Special Cases questions

Use this order for any question on IGST exemptions of imports, SEZ and special cases.

1Identify the supply: goods or services, and whether it is an import, a supply to or from an SEZ, or a special supply.
2Confirm it is a supply and inter-State. Import of services from a related person or another establishment outside India, without consideration, is deemed a supply only if made in the course or furtherance of business. Import for personal purposes without consideration, such as a gift to an individual from a related person, is not a supply.
3Check if an IGST notification exempts it, matching the exact description, recipient and conditions.
4If it is a supply to an SEZ for authorised operations, treat it as zero-rated and choose bond/LUT or pay-and-refund. If it is a supply of goods from an SEZ to the DTA, treat it as an import and charge customs duty and IGST. If it is a supply of services from an SEZ to the DTA, treat it as an inter-State supply taxable under IGST.
5For imports of goods, treat IGST as separate from basic customs duty and check each exemption separately.
6Compute IGST where taxable: value × rate. Identify who pays, such as the recipient under reverse charge for imported services.
7State the ITC result: exempt means no ITC, zero-rated means a refund of IGST paid or of unutilised ITC, taxable means ITC if conditions are met.
8Write the conclusion in provision, facts, conclusion form.

Quickest way: Three-question filter

When to use it: Use it for MCQs and short case questions where you have under two minutes.

Is it an import, an SEZ supply or a special case? Note which one.
Is there a named IGST exemption that matches the exact description and conditions? If yes, exempt.
If it is a supply to an SEZ for authorised operations, answer zero-rated. Otherwise, answer taxable IGST under reverse charge for imported services, or at the border for goods.

Common mistakes in Exemptions under IGST: Imports, SEZ and Special Cases

Treating SEZ supplies as exempt.
Both give nil tax, so they look alike.
Fix: Supplies to an SEZ for authorised operations are zero-rated. The supplier gets a refund of IGST paid, or of unutilised ITC if supplied under bond/LUT.
Treating supplies from an SEZ to the DTA as zero-rated.
Students apply the SEZ zero-rating rule in both directions.
Fix: Goods from an SEZ to the DTA are treated as imports, so customs duty and IGST are payable. Services from an SEZ to the DTA are inter-State supplies taxed under IGST.
Assuming a Customs exemption from basic duty also exempts IGST on import.
Both are collected together at import.
Fix: Check whether the exemption notification expressly covers integrated tax.
Forgetting reverse charge on import of services.
Students look for a foreign supplier charging tax.
Fix: The Indian recipient pays IGST under reverse charge unless an exemption applies.
Claiming ITC on exempt supplies.
Exempt and zero-rated are mixed up.
Fix: Exempt supplies get no ITC on related inputs. Only zero-rated supplies get a refund of IGST paid or of unutilised ITC.
Treating every import of services as taxable supply.
Import of services is generally inter-State.
Fix: Check if it is a supply at all. Under Schedule I, import of services from a related person or another establishment outside India, without consideration, is deemed a supply only when made in the course or furtherance of business. Import for personal purposes without consideration, such as a gift to an individual from a related person, is not a supply.
Citing section numbers or notification numbers from memory in the answer.
Students want to look precise.
Fix: State the rule in plain words and give the number only when certain.

Worked examples

Example 1

Alpha Ltd, a registered manufacturer in Pune, receives design services worth ₹10,00,000 from a foreign firm. No exemption notification covers the service. IGST rate is 18%. State the IGST position and ITC.

Show the solution

The service comes from outside India to a recipient in India, so it is an import of services and an inter-State supply.
No exemption applies, so the service is taxable.
IGST is payable by Alpha Ltd under reverse charge, as the recipient.
IGST = ₹10,00,000 × 18% = ₹1,80,000.
The service is used in a taxable business, so Alpha Ltd can take ITC of ₹1,80,000, subject to ITC conditions.

Answer: IGST of ₹1,80,000 is payable by Alpha Ltd under reverse charge, and ITC of ₹1,80,000 is available, subject to conditions.

Example 2

Beta Pvt Ltd in Nagpur supplies goods worth ₹5,00,000 to an SEZ unit for its authorised operations. The IGST rate is 18%. Explain the treatment and options for Beta.

Show the solution

A supply of goods to an SEZ unit for authorised operations is an inter-State supply and is zero-rated, not exempt.
Option 1: supply under bond or Letter of Undertaking without paying IGST.
Option 2: pay IGST and claim a refund.
IGST if paid = ₹5,00,000 × 18% = ₹90,000, refundable.
Under Option 1, Beta pays no IGST on the supply and can claim a refund of the unutilised ITC on its inputs.

Answer: The supply is zero-rated. Beta supplies under bond/LUT with nil IGST and can claim a refund of unutilised ITC, or pays ₹90,000 and claims a refund of that tax.

Exam tips

Always write whether the supply is exempt or zero-rated, as marks sit on this word.
In MCQs, check whether the exemption applies to IGST or only to customs duty.
For SEZ cases, look for the words authorised operations and unit or developer, and check the direction: to the SEZ is zero-rated. From the SEZ to the DTA, goods are taxed as imports (customs duty and IGST) and services are taxed as inter-State supplies under IGST.
Quote the rule in plain words and avoid uncertain notification numbers.

Practice questions from Exemptions from GST

Exemptions under IGST: Imports, SEZ and Special Cases in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Exemptions under IGST: Imports, SEZ and Special Cases: frequently asked questions

Is import of services exempt from IGST?

No, not by default. Import of services is an inter-State supply and the Indian recipient pays IGST under reverse charge. It is exempt only if a notification covers that service, or it is not a supply at all.

Are supplies to an SEZ exempt from GST?

No. Supplies to an SEZ unit or developer for authorised operations are zero-rated. The supplier can supply under bond/LUT without IGST, or pay IGST and claim a refund.

Which IGST notification lists exempt services?

IGST (Rate) notifications list exempt goods and exempt services separately, like the CGST ones. Do not quote a notification number from memory. In the exam, rely on the text supplied and match the description and conditions.

Does a customs duty exemption exempt IGST on imported goods?

Not automatically. IGST on import is a separate levy, so the exemption must also cover it. Read the notification carefully.