Taxation · Exemptions from GST

Exemption Notifications for Services (Notification 12/2017)

Updated 5 October 2026

Notification 12/2017-Central Tax (Rate) lists services that are exempt from GST, such as services by government, charitable trusts, educational institutions and clinical establishments, interest on loans and deposits, and specified passenger and goods transport. To solve questions, match the service to its entry, check conditions and exclusions, then treat it as exempt or taxable.

Understand Exemption Notifications for Services (Notification 12/2017)

GST is charged on supply of services unless the law exempts it. Section 11 of the CGST Act, 2017 lets the Government exempt services by notification, fully or partly, when it is in the public interest. Notification 12/2017-Central Tax (Rate) is the main notification that does this for services. It is a long list of entries. Each entry names a service and often adds conditions.

An exempt service has no GST on it. The supplier does not charge tax. The supplier also cannot claim input tax credit on inputs used only for exempt supplies. If inputs are used for both taxable and exempt supplies, credit must be reversed in proportion under section 17(2) and the related rules.

The entries fall into groups you can remember by theme. Government and local authority services: entry 4 exempts services provided by the Central Government, State Government, Union territory or local authority, except the services the entry excludes. It does not exempt every service they supply, because the excluded services are not covered by this entry. The entry does not cover (a) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central or State Government, (b) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or airport, and (c) transport of goods or passengers. Do not treat one entry as covering all government-related services. Services supplied to the Government or a local authority, such as pure services, are dealt with in separate entries with their own conditions, and any exemption for transport depends on other specific entries. Check each of those separately. Read the entry fully before you call a government service exempt. Charity and religion: charitable activities by a trust registered under the Income-tax law, and certain renting of precincts of religious places, are exempt, with conditions.

Education and health care: services by an educational institution to its students, faculty and staff are exempt. Educational institution here means pre-school to higher secondary, institutions giving a qualification recognised by law, and approved vocational courses. Health care services by a clinical establishment, an authorised medical practitioner or para-medics are exempt. Cosmetic and plastic surgery is not exempt unless it restores anatomy or function after an accident, trauma or similar cause.

Transport and finance: passenger transport by modes such as metro, non-AC and ordinary public transport, and metered cabs or auto-rickshaws is exempt, as is transport of listed goods and small consignments by a goods transport agency (GTA). Taxable GTA services are under reverse charge when supplied to the specified recipients, unless the GTA opts to pay tax under forward charge. The listed-goods and small-consignment exemptions apply whether reverse charge or forward charge would otherwise apply. Interest or discount on deposits, loans and advances is exempt, except interest on credit card services. Other charges such as processing fees are separate services and stay taxable.

Key rules to remember

Power to exempt: Section 11, CGST Act, 2017 → exemption by notification, absolute or conditional, general or for a class of services; Notification 12/2017-Central Tax (Rate) is the main services notification. Exemption applies only if the service fits the entry and meets its conditions.
Government services: Entry 4 exempts services by the Central/State Govt, UT or local authority, except: (a) services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central or State Government; (b) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or airport; (c) transport of goods or passengers; Not every government service is exempt. The entry exempts services by Government or a local authority except the excluded services listed, so check the exclusions first. Services supplied to Government, such as pure services, are covered by separate entries, so no single entry covers all. Learn these exclusions. The life insurance exclusion refers to the Department of Posts. The 'other than Government' qualifier applies only to agency services. Any exemption for transport comes from other specific entries, not this one. They are the favourite exam trap.
Charitable activities: Charitable trust registered under Income-tax law + charitable activities = exempt; Charitable activities cover specified public health, religion and spiritual advancement, and educational or skill programmes for the weaker sections, and environment preservation. Other business income of the trust is not exempt.
Education: Services by educational institution to students, faculty and staff = exempt; Covers pre-school to higher secondary, recognised qualifications and approved vocational courses. Coaching centres are not educational institutions for this purpose.
Health care: Health care by clinical establishment, authorised medical practitioner or para-medics = exempt; Cosmetic or plastic surgery is excluded unless needed to restore anatomy or function after trauma, accident or similar.
GTA small consignment limits: Exempt if gross amount charged for transportation of goods on a consignment transported in a single carriage ≤ ₹1,500, or gross amount charged for transportation of all goods for a single consignee in that carriage ≤ ₹750; Also exempt: GTA transport of agricultural produce, milk, salt, food grains including flour, pulses and rice, organic manure, registered newspapers or magazines, and certain other listed goods. GTA services are taxable under reverse charge when supplied to the specified recipients, unless the GTA opts for forward charge. These exemptions apply either way.
Interest on deposits, loans and advances: Interest or discount on deposits, loans, advances = exempt (except interest on credit card services); Processing fees, documentation charges and similar fees are not interest. They are taxable.
Effect on input tax credit: Credit on inputs used for exempt supplies is not allowed; reversal under section 17(2) and rules 42 and 43; Exemption saves tax on output but removes the credit on related inputs.

How to solve Exemption Notifications for Services (Notification 12/2017) questions

Use this method for any question that asks whether a service is exempt or what GST is payable.

1Identify the exact service and who supplies it to whom. Write down the supplier and the recipient.
2Match the service to the group in the notification: government, charity, education, health care, transport, financial or other.
3Read the conditions of that entry: type of supplier, type of recipient, value limits, mode of transport and goods carried.
4Check the exclusions inside the entry, such as postal services or cosmetic surgery.
5Split the transaction into separate components if there are several, for example interest and processing fee, or room rent and treatment.
6Mark each component exempt or taxable. Compute GST only on the taxable components at the rate given in the question.
7State the conclusion in plain words: provision, facts, conclusion. Add the input tax credit effect if the question hints at it.

Quickest way: Entry, condition, exclusion in three checks

When to use it: Use this for MCQs and for the first line of a written answer when time is short.

For an MCQ, find the option that matches the entry exactly. Wrong options usually break a condition: wrong recipient, limit crossed or an excluded service.
Check numbers first. For a GTA, the small-consignment exemption applies if the gross amount charged for a consignment transported in a single carriage is ₹1,500 or less, or if the gross amount charged for all goods for a single consignee in that carriage is ₹750 or less. If a consignment charge is ₹1,501, it fails the first limit. The second limit needs the amount charged for all goods for a single consignee in that carriage, so test it only if the question gives that figure. If it is not given, treat the service as failing the limits. Remember that GTA services are taxable under reverse charge when supplied to the specified recipients, unless the GTA opts for forward charge. The exemption test is the same either way.
Treat fees apart from interest: processing fee is taxable, interest on loan is exempt.
In written answers, use this format: Provision (entry of Notification 12/2017) → Facts (apply the condition) → Conclusion (exempt or taxable, with the amount). This earns step marks even if the final number is off.
Do not quote entry numbers unless you are sure. Name the service and the notification instead.

Common mistakes in Exemption Notifications for Services (Notification 12/2017)

Treating all government services as exempt.
Students remember that government services are exempt in some cases and forget that the entry has exclusions.
Fix: Match the service to the entry first. The entry on services by the Central or State Government, Union territory or local authority exempts them except the excluded services, so check the exclusions. The entry does not cover services by the Department of Posts by way of speed post, express parcel post, life insurance, and agency services provided to a person other than the Central or State Government; services in relation to an aircraft or a vessel, inside or outside the precincts of a port or airport; and transport of goods or passengers. Any exemption for such transport depends on other specific entries. Read the entry fully before you conclude.
Exempting the whole loan transaction because interest is exempt.
Students see 'loans' and stop reading.
Fix: Only interest or discount is exempt. Processing fees and similar charges are separate taxable services.
Treating every educational service as exempt, including coaching.
The word 'education' feels broad.
Fix: The exemption is for educational institutions as defined, supplying to their students, faculty and staff. A private coaching centre is not such an institution.
Applying the GTA exemption to every goods transport.
Students mix the exempt listed goods with the small consignment limits.
Fix: Check the goods carried first, then the limits: the gross amount charged for a consignment transported in a single carriage is ₹1,500 or less, or the gross amount charged for all goods for a single consignee in that carriage is ₹750 or less. If neither applies, the service is taxable. GTA services are taxable under reverse charge when supplied to the specified recipients, unless the GTA opts for forward charge.
Exempting cosmetic surgery as health care.
Students link any hospital service with health care.
Fix: Cosmetic or plastic surgery is exempt only when it restores anatomy or function lost through trauma, accident or similar causes.
Forgetting the input tax credit effect of exemption.
Students stop once they decide the output is exempt.
Fix: State that credit on inputs used for exempt supplies is not available. Where inputs serve both taxable and exempt supplies, a proportionate reversal applies.

Worked examples

Example 1

A bank grants a business loan. During the month it receives interest of ₹6,00,000 and a processing fee of ₹20,000. The processing fee is taxable at 18% GST. Compute the GST payable on these two receipts.

Show the solution

Interest on loans is exempt under Notification 12/2017, so GST on ₹6,00,000 is nil.
The processing fee is a separate service and is not interest. It is taxable.
GST on the fee = ₹20,000 × 18% = ₹3,600.

Answer: GST payable is ₹3,600, only on the processing fee. The interest of ₹6,00,000 is exempt.

Example 2

A goods transport agency does three jobs. (i) It carries furniture for a single consignee in a single carriage and charges ₹60,000. (ii) It carries agricultural produce and charges ₹40,000. (iii) It carries a consignment of mixed goods in a single carriage and charges ₹1,400. Identify the value of exempt services and of taxable services.

Show the solution

Job (i): furniture is not a listed exempt good. The gross amount charged for the consignment in the single carriage is ₹60,000, which is above ₹1,500. The gross amount charged for all goods for the single consignee is ₹60,000, which is above ₹750. Neither limit is met, so it is taxable.
Job (ii): transport of agricultural produce by a GTA is exempt, whatever the freight.
Job (iii): the gross amount charged for the consignment transported in the single carriage is ₹1,400, which does not exceed ₹1,500. It is exempt.
Exempt value = ₹40,000 + ₹1,400 = ₹41,400.
Taxable value = ₹60,000.

Answer: Exempt services: ₹41,400 (jobs ii and iii). Taxable services: ₹60,000 (job i).

Exam tips

Learn the exclusions along with each entry. Examiners build MCQs on the exception, not the rule.
Read numbers and limits slowly. The GTA limits are tested directly: gross amount charged of ₹1,500 or less for a consignment transported in a single carriage, or gross amount charged of ₹750 or less for all goods for a single consignee in that carriage.
In multi-part questions, split the receipts into components and decide each one separately.
Use the provision-facts-conclusion format in written answers, and add the input tax credit effect in one line.
Do not confuse this notification with the one for reverse charge on services. This one only decides what is exempt.

Practice questions from Exemptions from GST

Exemption Notifications for Services (Notification 12/2017): frequently asked questions

What is Notification 12/2017-Central Tax (Rate)?

It is the notification under section 11 of the CGST Act, 2017 that lists services exempt from GST. Each entry names a service and may add conditions or exclusions. You must check both before calling a service exempt.

Is interest on loans and deposits exempt from GST?

Yes. Interest or discount on deposits, loans and advances is exempt, except interest on credit card services. Processing fees and other charges are not interest and remain taxable.

Are all educational and health care services exempt?

No. Education services are exempt when an educational institution as defined supplies them to its students, faculty and staff. Health care is exempt when supplied by a clinical establishment, authorised medical practitioner or para-medics, but cosmetic and plastic surgery is excluded unless it restores anatomy or function after trauma or similar.

Can I claim input tax credit if my output service is exempt?

No credit is available on inputs used for exempt supplies. If you make both taxable and exempt supplies, you must reverse credit in proportion under section 17(2) and the rules.