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CA Intermediate · Taxation

Exemptions from GST for CA Intermediate: Chapter Guide

A GST exemption means a supply is not taxed, either because the Government exempts it by notification under Section 11 of the CGST Act, 2017, or because it is outside the tax net. To solve questions, identify the supply, find the matching entry and its conditions, then state the conclusion and its effect on registration and input tax credit.

What this chapter covers

This chapter covers supplies on which no GST is payable. The Government can exempt goods or services, fully or partly, absolutely or on conditions, under Section 11 of the CGST Act, 2017. The detailed lists sit in two rate notifications: Notification 12/2017 for services and Notification 2/2017 for goods. You also study who need not register under Section 23, and how the small supplier registration threshold works.

The chapter is mostly about reading entries correctly. Each exemption has a scope and often a condition: who supplies, who receives, what the service is, or a value limit. A change in one fact can turn an exempt supply into a taxable one. Your written answers should show the entry, the facts that match it, and the conclusion.

This chapter links to almost every other GST chapter. Supply and its types decide whether you have a taxable, exempt or non-taxable supply. Registration depends on whether your supplies are taxable. Input tax credit is restricted when you make exempt supplies. Composite and mixed supplies depend on rates, and exemption can change the result. Learn this chapter alongside those, not in isolation.

Exemptions are a steady source of both MCQs and short written questions in the GST section, because the rules are factual and easy to test. A single entry can be turned into a 1 or 2 mark MCQ, or into a case-style question asking whether tax is payable, whether registration is needed and whether credit is allowed. Students who know the entries and their conditions can score quickly. Students who only memorise headings lose marks on the conditions. The effort is moderate, and the marks are reliable if you revise it regularly.

Exemptions from GST: topics in the order to study them

  1. 1Introduction to GST Exemptions (Section 11 & Section 23)Start with the legal basis: how exemption is granted, what absolute and conditional mean, and who need not register under Section 23.
  2. 2Exemption Notifications for Services (Notification 12/2017)Services form the larger and more testable list, so learn them next, grouped by theme such as government, health, education and charity.
  3. 3Exemptions for Goods (Notification 2/2017)The goods list is shorter and easier once you understand how entries and conditions work from the services topic.
  4. 4Exemptions to Specified Persons and Special CasesHere you apply the entries to particular suppliers, recipients and situations, which is how case questions are framed.
  5. 5Small Supplier Registration Threshold and Composite CasesFinish with the registration threshold and composite or mixed supplies, since they combine exemption with registration, aggregate turnover and rate rules.

How to prepare Exemptions from GST

Treat this chapter as a set of entries plus conditions. Your aim is to recognise the entry fast and check the condition before answering.

  1. Read the law first: Section 11 and Section 23 of the CGST Act, 2017. Be able to explain absolute versus conditional exemption and that a supplier of absolutely exempt goods or services cannot collect tax on them.
  2. Learn the definitions of exempt supply, nil-rated supply and non-taxable supply, and keep them apart by source. Under Section 2(47), exempt supply is the umbrella term: it covers nil-rated supply (0% rate), wholly exempt supply (under Section 11 of the CGST Act or Section 6 of the IGST Act) and non-taxable supply (not leviable to GST). The three differ in source, and you must still check how each affects registration and credit.
  3. Group the service entries by theme and write one line per theme with the key condition. Do the same for goods.
  4. For each entry, write down the trap: who must supply, who must receive, and any value or other limit. Check the current notification text in the study material.
  5. Revise the small supplier limit as a registration threshold, not a tax exemption. It comes from Section 22 and Section 23 and the notifications under them, so it decides who must register, not whether a supply is taxed. Aggregate turnover includes exempt supplies, is computed for all taxable persons having the same PAN, across India, and excludes taxes and inward supplies under reverse charge. Limits differ for goods and services, and special category states have lower limits. Verify the figures in the latest study material.
  6. Practise ICAI-style questions in two forms: MCQs for entry recognition, and written answers in the order provision, facts, conclusion.
  7. Link back to input tax credit: credit on inputs used for exempt supplies, including nil-rated and non-taxable supplies as covered by Section 2(47), is not available under Section 17(2). Where inputs are common to taxable and exempt supplies, the credit is apportioned under Rule 42 (inputs and input services) and Rule 43 (capital goods). Credit on inputs used for zero-rated supplies is not restricted.

Common mistakes in Exemptions from GST

  • Treating nil-rated, exempt and non-taxable supplies as the same thing

    Fix: Remember the source: nil-rated has a 0% rate, wholly exempt supply is exempted under Section 11 of the CGST Act (by notification or, in special circumstances, by special order) or Section 6 of the IGST Act, and non-taxable is not leviable to GST. Then apply the Section 2(47) definition, under which exempt supply is the umbrella covering all three, and check the credit consequences under Section 17.

  • Ignoring the conditions attached to an exemption entry

    Fix: For every entry, note who supplies, who receives and any limit. Check each fact in the question against these.

  • Computing aggregate turnover wrongly for registration

    Fix: Include exempt supplies in aggregate turnover, compute it for all taxable persons having the same PAN, across India, and exclude taxes and inward supplies under reverse charge. Also remember that a person engaged exclusively in non-taxable or wholly exempt supplies is not liable to register under Section 23(1)(a) regardless of turnover, subject to Section 24 compulsory registration cases such as reverse charge liability. Say all this explicitly in the answer.

  • Forgetting that exempt supplies restrict input tax credit

    Fix: End case answers with the credit effect: credit on inputs used for exempt supplies, including nil-rated and non-taxable supplies under Section 2(47), is not available under Section 17(2), and common credit is apportioned under Rules 42 and 43. Remember that zero-rated supplies are not restricted.

  • Treating the small supplier limit as an exemption from tax

    Fix: Call it a registration threshold under Section 22 and Section 23 and the notifications under them. A Section 11 exemption removes tax on a supply; the threshold only removes the need to register.

  • Applying the wrong rule to composite and mixed supplies

    Fix: Composite: tax rate of the principal supply. Mixed: the supply attracting the highest rate. Identify the type first.

  • Writing only the conclusion in a descriptive answer

    Fix: Write the provision, then the facts, then the conclusion. Step marks come from each part.

Last-day revision: Exemptions from GST

  • Section 11 CGST Act, 2017 lets the Government exempt supplies by notification, absolutely or on conditions.
  • If a supply is absolutely exempt, the supplier cannot collect tax on it.
  • Notification 12/2017 covers services; Notification 2/2017 covers goods.
  • Exempt supply (Section 2(47)) means supply that attracts a nil rate of tax or is wholly exempt under Section 11 of the CGST Act or Section 6 of the IGST Act, and it includes non-taxable supply.
  • Non-taxable supply is not leviable to GST at all, such as alcohol for human consumption.
  • Section 23(1)(a): a person engaged exclusively in supplying goods or services that are not liable to tax or are wholly exempt is not liable to register, regardless of turnover, subject to Section 24 (compulsory registration cases).
  • A person liable to pay tax under reverse charge must still register under Section 24, even if the other supplies are exempt.
  • Section 23: an agriculturist supplying produce from cultivation of land is not liable to register.
  • Aggregate turnover for the registration limit includes exempt supplies. It is computed for all taxable persons having the same PAN, across India, and excludes central tax, State tax, UT tax, integrated tax, cess and inward supplies under reverse charge.
  • The small supplier limit is a registration threshold under Section 22 and Section 23, not a Section 11 exemption.
  • Credit on inputs used for exempt supplies (including nil-rated and non-taxable) is not available under Section 17(2). Common credit is apportioned under Rule 42 (inputs and input services) and Rule 43 (capital goods). Zero-rated supplies are not restricted.
  • In a composite supply, tax follows the principal supply; in a mixed supply, the highest rate applies.
  • Always check conditions in the entry before declaring a supply exempt.

Exemptions from GST practice questions

Exemptions from GST in other exams

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

Exemptions from GST: frequently asked questions

Is the exemption notification list given in the exam?

Do not assume it will be provided. Learn the main entries and their conditions from the study material. Questions are usually framed so that you recognise the entry from the facts.

What is the difference between exempt and nil-rated supply?

A nil-rated supply is one where the rate of tax is 0%. Under Section 2(47), exempt supply is the wider term: it covers nil-rated supply, wholly exempt supply (exempted under Section 11 of the CGST Act or Section 6 of the IGST Act) and non-taxable supply. So nil-rated and non-taxable supplies are also exempt supplies for the purposes of the Act, and you tell the three apart by their source.

Do exempt supplies count towards the registration threshold?

Yes. Aggregate turnover includes exempt supplies and is computed for all taxable persons having the same PAN, across India. It excludes taxes and inward supplies under reverse charge. A person engaged exclusively in non-taxable or wholly exempt supplies is not liable to register under Section 23(1)(a) regardless of turnover, subject to Section 24 compulsory registration cases. Limits for goods and services and for special category states differ, so confirm the figures in the latest material.

Can I claim input tax credit if I only make exempt supplies?

No. Treat registration and credit as two separate points. A person engaged exclusively in non-taxable or wholly exempt supplies is not liable to register under Section 23(1)(a), but registration may still be compulsory under Section 24 (for example, where reverse charge applies). Even if you are registered, credit on inputs used for exempt supplies remains blocked under Section 17(2). This covers nil-rated, wholly exempt and non-taxable supplies as per Section 2(47). If you make both taxable and exempt supplies, common credit is apportioned under Rule 42 (inputs and input services) and Rule 43 (capital goods). Credit on inputs used for zero-rated supplies is not restricted.