CMA Intermediate · Direct and Indirect Taxation
Exemption from Tax under GST: CMA Inter Guide
Exemption from tax is the power of the Government to relieve goods or services from GST, wholly or partly. Under Section 11 CGST Act and Section 6 IGST Act, it acts on Council recommendation and in public interest, by general notification or special order. To answer, name the section, the route, the conditions and the effect.
What this chapter covers
This chapter covers one idea, stated twice. Section 11 of the CGST Act and Section 6 of the IGST Act give the Government the power to exempt goods or services from the whole or part of the tax. The wording of the two sections is almost identical. One covers central tax. The other covers integrated tax.
Both sections have three sub-sections and an Explanation. Sub-section (1) is the general exemption by notification. Sub-section (2) is the special order for exceptional circumstances. Sub-section (3) lets the Government insert an explanation to clarify a notification or order. The Explanation says that where exemption is absolute, the supplier must not collect tax in excess of the effective rate.
This chapter links to the rest of the paper in three ways. It sits beside levy and supply, because exemption decides whether a taxable supply bears tax. It links to input tax credit, because Section 18 CGST deals with credit when an exempt supply becomes taxable and with payment when supplies become wholly exempt. It also links to the legislative process, because notifications are laid before Parliament under Section 166 CGST.
The chapter is short and the text is precise, so it suits direct questions. An MCQ can test the exact words of a sub-section, such as the one-year limit for an explanation or the need for Council recommendation. A written answer can ask you to compare general exemption with a special order, or to explain the effect of absolute exemption. Students who learn the wording properly get these marks with little effort. It also supports your ITC answers on exempt supplies, which appear in several other chapters.
Exemption from Tax: topics in the order to study them
- 1Power to Grant Exemption under Section 11 CGST ActStart here because it is the base text. Learn the three sub-sections and the Explanation once, and the IGST section becomes easy.
- 2Power to Grant Exemption under Section 6 IGST ActThe wording mirrors Section 11. Read it second and note only that it applies to integrated tax.
- 3Conditions, Forms and Effect of Exemption NotificationsNext, build on the two sections. Learn absolute versus conditional exemption, whole versus part, general versus special order, the clarifying explanation and the effect on tax collection.
- 4Exempt Supplies and Treatment under GSTFinish with the consequences. Link exemption to credit through Section 18 CGST, including when an exempt supply becomes taxable and when supplies become wholly exempt.
How to prepare Exemption from Tax
The text is short, so learn it by structure and then test yourself on exact conditions.
- Read Section 11 CGST once in full. Then write its skeleton from memory: sub-section (1) general notification, (2) special order, (3) explanation, plus the Explanation on absolute exemption.
- Learn the four conditions common to both powers: public interest, Council recommendation, notification or special order, and effect from a specified date for general exemption.
- Read Section 6 IGST next and list only the differences from Section 11 CGST. The main one is the tax covered.
- Make a two-column comparison of sub-section (1) and sub-section (2): form, scope, and need for exceptional circumstances stated in the order.
- Read Section 18 CGST and learn the four cases in sub-section (1), then sub-section (4) on payment when supplies become wholly exempt, with the lapse of the balance credit.
- Note the other provisions here: Section 11A on general practice, Section 6 CGST on State and Union territory officers, and Section 166 on laying notifications before Parliament.
- Practise MCQs on exact wording, then write one short answer in a clear format: provision, condition, effect.
Common mistakes in Exemption from Tax
Writing that exemption can be granted without Council recommendation.
Fix: Always write both: public interest and on the recommendations of the Council.
Mixing up general exemption and special order.
Fix: Link sub-section (1) to notification and generally specified goods or services, and sub-section (2) to a special order for exceptional circumstances in each case.
Saying a clarifying explanation can be inserted at any time.
Fix: Remember it must be inserted within one year of issue, and it has effect as if it had always been part of the original.
Thinking a supplier of absolutely exempt goods may still collect tax.
Fix: State that the registered person shall not collect tax in excess of the effective rate.
Treating the CGST and IGST sections as different rules.
Fix: Learn them as one rule applied to two taxes.
Giving an exempt-supply credit answer without the Section 18 conditions.
Fix: Name the stock covered, the capital goods condition, the reduction by prescribed percentage points, and the lapse of balance credit in sub-section (4).
Last-day revision: Exemption from Tax
- Section 11 CGST and Section 6 IGST have near-identical wording; one deals with central tax, the other with integrated tax.
- The Government acts only when satisfied that it is necessary in the public interest.
- Exemption is granted on the recommendations of the Council.
- Sub-section (1): general exemption by notification, absolute or conditional, whole or part of the tax.
- General exemption takes effect from the date specified in the notification.
- Sub-section (2): special order in each case, for circumstances of an exceptional nature stated in the order.
- Sub-section (3): an explanation can be inserted within one year of the notification or order and applies as if always part of it.
- Where exemption is absolute, the supplier must not collect tax in excess of the effective rate.
- Section 18(1)(d) CGST allows credit on stock and exclusive capital goods when an exempt supply becomes taxable.
- Section 18(4) CGST requires payment of credit when supplies become wholly exempt; the balance credit lapses.
- Section 11A CGST lets the Government direct non-recovery of tax not levied or short-levied due to a general practice.
Exemption from Tax practice questions
- Which of the following is a correct statement about an exemption granted by special order under Section 6(2) of the IGST Act, 2017?
- Under Section 6(1) of the IGST Act, 2017, the Government may exempt goods or services from integrated tax by general notification. Which con…
- A special order under Section 11(2) of the CGST Act, 2017 differs from a general notification under Section 11(1) because it:
- Under Section 11 of the CGST Act, 2017, the Government may exempt goods or services generally by notification. Which of the following is a r…
- A registered supplier provides a service that is wholly exempt absolutely by notification. The supplier invoices Rs 50,000 and also charges …
- Section 11A of the CGST Act, 2017 (inserted w.e.f. 1 November 2024) empowers the Government, on the Council's recommendation, to direct that…
- Under Section 6 of the IGST Act, 2017, which statement correctly describes the Government's power to grant exemption from integrated tax?
- The Government issued an exemption notification under Section 11(1) of the CGST Act in March. In which case can an Explanation clarifying it…
Exemption from Tax in other exams
The same ground in other exams, if you are preparing for more than one or want another angle on it.
Exemption from Tax: frequently asked questions
What is the difference between Section 11 CGST and Section 6 IGST?
The power and conditions are almost word for word the same. Section 11 deals with central tax, while Section 6 of the IGST Act deals with integrated tax. Learn one and note the tax covered in the other.
Can the Government exempt goods or services only partly?
Yes. Sub-section (1) allows exemption from the whole or any part of the tax leviable. It may be absolute or subject to conditions specified in the notification.
What is a special order under sub-section (2)?
It is an exemption granted in each case, on the recommendations of the Council, in the public interest. The exceptional circumstances must be stated in the order.
Is there negative marking in the MCQs of this chapter?
No. Neither the question papers nor the ICMAI prospectus provide for negative marking, so attempt every MCQ.