Taxation · Exemptions from GST

GST Exemptions to Specified Persons and Special Cases for CA Inter

Updated 5 October 2026

These are GST exemptions under Section 11, given in Notification 12/2017-CT(Rate). Government and local authority services are exempt only under specific entries, each with its own exclusions. Residential rent for residence is exempt, but rent to a registered tenant is taxable under reverse charge (Notification 13/2017-CT(Rate)). Identify supplier, recipient and activity, then check the entry.

Understand Exemptions to Specified Persons and Special Cases

A supply is taxable unless the law takes it out. The Government can exempt services by notification under Section 11 of the CGST Act, 2017, either fully or on conditions. The exempt services are listed in Notification 12/2017-CT(Rate). Each entry looks at who supplies, who receives, or what the activity is.

Government and local authority. Some services are exempt because of who supplies them. The main entry is entry 3 of Notification 12/2017-CT(Rate). It covers services by the Central Government, a State Government, a Union territory or a local authority, but it excludes three things: 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 Government, a State Government or a Union territory; services relating to an aircraft or vessel, inside or outside the precincts of a port or airport; and transport of goods or passengers. These exclusions sit in entry 3. They take the service out of that entry, not out of every entry. Other entries have their own wording, conditions and exclusions. For example, the entry for services by Government or a local authority by way of any activity in relation to a function entrusted to a Panchayat or a Municipality under the Eleventh (Panchayat) and Twelfth (Municipality) Schedules of the Constitution (entry 9) is worded separately and does not carry this list of exclusions. Those Schedules cover functions such as water supply, sanitation and public amenities. So a vessel-related service by a municipal corporation in a port is excluded from entry 3. You then test whether the activity is a Twelfth Schedule function under the other entry. A vessel-related service in a port does not look like such a function, so it is likely taxable, but the final conclusion depends on the exact wording of the entry. Always read it.

International bodies and diplomatic missions. Services to the United Nations or a specified international organisation are covered by an exemption entry. Embassies and consulates of foreign countries work differently. They generally pay tax on their purchases and claim a refund under Section 55 of the CGST Act, on their UIN (Unique Identity Number). So do not write that every supply to an embassy is exempt.

Renting of residential dwelling. Renting a residential dwelling for use as a residence is exempt under Notification 12/2017-CT(Rate). The condition is about the tenant. From 18 July 2022, renting of a residential dwelling to a registered person is taxable, and the tax is payable by the registered tenant under reverse charge. The exemption notification does not create this liability. It arises under Section 9(3) of the CGST Act through Notification 13/2017-CT(Rate). Subject to the exception below, this applies whether or not the landlord is registered. Do not limit reverse charge to cases where the landlord is unregistered. Exception: where the tenant is a registered person who is a proprietor and takes the dwelling on rent in a personal capacity for his or her own residence, and not for the proprietorship business, reverse charge does not apply and the rent stays exempt. From 10 October 2024, the same treatment extends to a partner of a firm who takes the dwelling on rent for his or her own residence. This exception depends on the current text of the notification, so check the wording. Other registered tenants, such as companies, firms themselves, or a proprietor or partner renting for business, do not get this exception. Renting to an unregistered tenant for residence stays exempt.

Employee to employer. This is not an exemption. Services by an employee to the employer in the course of or in relation to employment are in Schedule III, so they are neither a supply of goods nor of services. Tax does not arise at all. Gifts to an employee above the stated limit are a different matter, covered under Schedule I.

Key rules to remember

Source of exemption power: Section 11 CGST Act, 2017 → Notification 12/2017-CT(Rate) for exemption of services. Reverse charge liability is separate: Section 9(3) → Notification 13/2017-CT(Rate); Exemption needs a notification in the public interest. It can be absolute or conditional, and can be given to a class of services. The exemption notification does not itself impose reverse charge.
Government or local authority services: Entry 3 of Notification 12/2017-CT(Rate): services by the Central Government, State Government, Union territory or local authority, excluding (a) Department of Posts speed post, express parcel post, life insurance and agency services provided to a person other than the Central Government, State Government or Union territory; (b) services relating to an aircraft or vessel, inside or outside the precincts of a port or airport; (c) transport of goods or passengers; These exclusions belong to entry 3. Other entries, such as the one for Panchayat or Municipality functions (entry 9), have their own wording and conditions. An exclusion removes the service from entry 3 only. Check the other entries and their exact wording before concluding. A vessel-related service in a port does not look like a Twelfth Schedule function, so it is likely taxable, subject to the exact wording.
Residential dwelling rent: Rent of residential dwelling for use as residence → exempt under Notification 12/2017-CT(Rate) for an unregistered tenant; to a registered person (from 18 July 2022) → registered tenant pays tax under reverse charge, Section 9(3) via Notification 13/2017-CT(Rate); Subject to the exception, reverse charge applies whether or not the landlord is registered. Exception: the tenant is a registered proprietor who takes the dwelling in personal capacity for his or her own residence, not for business. From 10 October 2024, a partner of a firm renting for own residence is treated the same way. Then the rent stays exempt. The exception depends on the current text of the notification. Other registered tenants do not qualify. Test the use as residence and the status of the tenant.
Diplomatic missions: Embassy or consulate pays tax on inward supplies → refund under Section 55 (UIN holders); Services to UN or a specified international organisation have their own exemption entry.
Employee to employer: Schedule III: employee services to employer in the course of employment = neither goods nor services; It is outside supply, not an exemption. The wording matters in a descriptive answer.

How to solve Exemptions to Specified Persons and Special Cases questions

Use the same sequence for any question asking whether a service to or by a specified person is taxable.

1Identify the supplier, the recipient and the exact service. Note whether the supplier is Government, a local authority, an employee, or a private person.
2Check whether the transaction is a supply at all. Employee services in the course of employment fall under Schedule III and are not a supply.
3Find the matching exemption entry in Notification 12/2017-CT(Rate): Government or local authority, UN or international organisation, residential renting, and so on.
4Read the exclusions and conditions of that entry: speed post, aircraft or vessel services, transport, registered tenant, and similar.
5If an exclusion applies, the exemption under that entry is lost. Check whether any other entry covers the service. If none does, say the service is taxable and name the liability, forward charge or reverse charge. For rent of a dwelling to a registered person, the liability is reverse charge on the tenant.
6For embassies or consulates, note the refund route under Section 55 rather than exemption.
7Write the conclusion in provision, facts and conclusion form and state the reason in one line.

Quickest way: Supplier, recipient, exclusion check

When to use it: Use it for MCQs and for the short conclusion in a descriptive answer.

MCQ: look at the supplier first. If it is Government or a local authority, scan the options for speed post, port or airport, aircraft or vessel services, or transport. These are the usual taxable traps.
MCQ: for rent, look at the tenant. A private unregistered person using it as a home is exempt. A registered tenant is the usual taxable case, with tax payable by the tenant under reverse charge.
MCQ: if it says employee and employer, think Schedule III, not exemption.
Written: use a fixed format: Provision (entry in Notification 12/2017), Facts (supplier, recipient, activity), Conclusion (exempt or taxable and why).
Written: if the question gives numbers, still decide exemption first, because exempt supplies carry no tax computation.

Common mistakes in Exemptions to Specified Persons and Special Cases

Treating all services by Government or local authority as exempt under one general entry.
Students remember the exemption but skip that the main entry (entry 3) has exclusions and that other entries have their own wording.
Fix: Find the entry that fits the service. In entry 3, learn the exclusions: Department of Posts speed post, express parcel post, life insurance and agency services to persons other than Government; aircraft or vessel services; transport of goods or passengers. Then read the exact wording of any other entry, such as the one for Panchayat or Municipality functions, before calling an excluded service taxable.
Saying all supplies to an embassy or diplomatic mission are exempt.
Students mix up the UN exemption with the refund route for missions.
Fix: Separate the two. Services to the UN or a specified international organisation have an exemption entry. Embassies and consulates claim refund under Section 55 on the basis of UIN.
Saying renting of a residential dwelling is always exempt, or taxable without naming who pays.
The headline of the entry is remembered but the registered-person condition and the reverse charge are not.
Fix: Check the tenant and the use. Residential use by an unregistered private person is exempt. Rent to a registered person is taxable under reverse charge, paid by the tenant under Section 9(3) through Notification 13/2017-CT(Rate), whether or not the landlord is registered. The exception is a registered proprietor who takes the dwelling on rent in personal capacity for his or her own residence, not for business. From 10 October 2024, a partner of a firm renting for own residence is treated the same way. That rent stays exempt. Check the current text of the notification. Other registered tenants do not qualify.
Calling employee services to the employer an exempt service.
Both exemption and Schedule III give a no-tax result, so students blur them.
Fix: Write that it is neither a supply of goods nor of services under Schedule III, so no question of exemption arises.
Quoting entry numbers from memory.
Notification entry numbers change with amendments.
Fix: Quote the notification name, 12/2017-CT(Rate), and describe the entry in words. Give a number only if you are certain.

Worked examples

Example 1

State with reasons whether GST is leviable on each: (a) a municipal corporation provides a service relating to a vessel inside a port; (b) the Department of Posts provides speed post services to a private company; (c) Mr. X, an employee, receives salary for services to his employer.

Show the solution

(a) Entry 3 of Notification 12/2017-CT(Rate), which covers services by Government and local authorities, excludes services relating to an aircraft or vessel, inside or outside the precincts of a port or airport. So entry 3 does not exempt this service.
Next, check other entries. The entry for activities in relation to functions entrusted to a Municipality under the Twelfth Schedule has its own wording. A service relating to a vessel inside a port does not look like a Twelfth Schedule function such as water supply, sanitation or public amenities. So, on the facts given, no other entry saves it, and the service is taxable, subject to the exact wording of that entry.
(b) Speed post by the Department of Posts to a person other than Government is a named exclusion in entry 3. The service is to a private company, not Government. It is not exempt under that entry, and no other entry is indicated on the facts.
(c) Services by an employee to the employer in the course of employment are covered by Schedule III. They are neither a supply of goods nor of services.
So (a) is taxable on the facts given and (b) is taxable. In (c) no GST arises, because there is no supply.

Answer: (a) Taxable on the facts given. Vessel-related services are excluded from entry 3, and a service relating to a vessel inside a port does not look like a Twelfth Schedule municipal function, so no other entry appears to exempt it. This depends on the exact wording of the other entry. (b) Not exempt under entry 3, because speed post to a non-Government person is an excluded service. It is taxable on the facts given, as no other entry is indicated. (c) No GST, because it falls under Schedule III and is not a supply.

Example 2

Ms. Rao, an unregistered person, rents her flat to Mr. Shah, an individual who is not registered, for his family's residence. She also rents another flat to Zeta Ltd., a registered company, for its employee's stay. Discuss the GST position of both.

Show the solution

Notification 12/2017-CT(Rate) exempts renting of a residential dwelling for use as residence, but not where the dwelling is rented to a registered person.
Flat 1: the tenant is an unregistered individual who uses it as his home. The condition is met, so the rent is exempt.
Flat 2: the tenant is a registered person. From 18 July 2022, renting of a residential dwelling to a registered person is taxable, and the registered tenant, Zeta Ltd., is liable to pay the tax under reverse charge. This liability arises under Section 9(3) through Notification 13/2017-CT(Rate). It applies irrespective of the landlord's registration status, so Ms. Rao's unregistered status does not change the result.
The exception is where the tenant is a registered proprietor (or, from 10 October 2024, a partner of a firm) who takes the dwelling in personal capacity for his or her own residence, not for business. It does not help here, as the tenant is a company.
Note that exemption depends on the tenant and the use, not on the flat being a residential building.

Answer: Rent from Mr. Shah is exempt. Rent from Zeta Ltd. is taxable under reverse charge, with Zeta Ltd. as the person liable to pay the tax, because the tenant is a registered person. Ms. Rao's registration status does not affect this.

Exam tips

Questions are mostly one-line conclusions. Practise writing the entry, the facts and the conclusion in three short lines.
MCQs on this topic usually turn on one exclusion or condition. Underline words like registered, residence, vessel, speed post and transport.
RTP and MTP style questions often combine several small supplies. Treat each separately and do not apply one conclusion to all of them.
Do not write a rate unless the question gives it. The exam marks the exemption decision.
Keep the difference between exemption, non-supply under Schedule III, and refund under Section 55 in your answer.
For rent to a registered tenant, always name reverse charge and say the tenant pays the tax.

Practice questions from Exemptions from GST

Exemptions to Specified Persons and Special Cases: frequently asked questions

Are all services by Government or a local authority exempt under GST?

No. The main entry is entry 3 of Notification 12/2017-CT(Rate), and it carries exclusions: speed post, express parcel post, life insurance and agency services by the Department of Posts to persons other than Government, services relating to aircraft or vessels, and transport of goods or passengers. Other entries, such as the one for Panchayat or Municipality functions, have their own wording and conditions. An exclusion removes the service from entry 3 only, so check other entries and read the exact wording before concluding.

Is renting of a residential dwelling exempt from GST?

Yes, under Notification 12/2017-CT(Rate), when it is rented for use as a residence to an unregistered person. If the tenant is a registered person, the rent is taxable from 18 July 2022. The registered tenant pays the tax under reverse charge, which arises under Section 9(3) through Notification 13/2017-CT(Rate), whether or not the landlord is registered. The exception is a registered proprietor who takes the dwelling on rent in personal capacity for his or her own residence, not for business. From 10 October 2024, a partner of a firm renting for own residence is treated the same way. That rent stays exempt. Check the current text of the notification.

Are services to diplomatic missions exempt from GST?

Not as a general rule. Services to the United Nations or a specified international organisation have an exemption entry. Embassies and consulates pay tax on purchases and claim a refund under Section 55, using their UIN.

Is the service by an employee to the employer exempt from GST?

It is not an exemption. Under Schedule III, services by an employee to the employer in the course of or in relation to employment are neither a supply of goods nor of services. So GST does not apply.