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CMA Intermediate · Direct and Indirect Taxation · Exemption from Tax

A registered supplier provides a service that is wholly exempt absolutely by notification. The supplier invoices Rs 50,000 and also charges Rs 9,000 as GST to the recipient. Under the Explanation to section 11 of the CGST Act, 2017, what is the position?

The supplier cannot collect the Rs 9,000. Where an exemption is granted absolutely, the Explanation to section 11 bars a registered person from collecting tax above the effective rate, and for a full exemption that rate is nil.

  1. ARs 9,000 is allowed because the recipient agreed to it
  2. BRs 9,000 is allowed if the supplier is registered
  3. CTax of Rs 4,500 is allowed, being half the amount
  4. DThe supplier shall not collect tax in excess of the effective rate, which here is nilCorrect

Explanation

Where exemption has been granted absolutely, the registered supplier shall not collect tax in excess of the effective rate. For a full exemption the effective rate is nil, so no tax can be collected. Agreement or registration status does not change this.

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