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CA Intermediate · Taxation · Exemptions from GST

Under the CGST Act, 2017, a registered person makes both taxable supplies and exempt supplies, and the question arises whether exempt supplies include non-taxable supplies. Gaurav Traders, Indore, has the following turnover: taxable goods Rs 80 lakh, exempt goods Rs 15 lakh, petrol sold (outside GST) Rs 5 lakh. Also, Gaurav supplies some goods under an absolute exemption notification. Which statement about the definition of 'exempt supply' is correct?

Exempt supply includes nil-rated supplies, supplies wholly exempt by notification, and non-taxable supplies such as petrol outside GST. It does not include zero-rated supplies like exports. The statement that includes all three but excludes zero-rated supplies is therefore correct.

  1. AExempt supply includes supplies wholly exempt by notification, nil-rated supplies and non-taxable supplies, but excludes zero-rated suppliesCorrect
  2. BExempt supply covers only supplies that are exempt by notification, not nil-rated or non-taxable supplies
  3. CExempt supply includes zero-rated supplies of goods exported
  4. DExempt supply excludes non-taxable supplies but includes nil-rated supplies

Explanation

Under the CGST Act, exempt supply means supply of any goods or services which attracts nil rate of tax or which may be wholly exempt from tax under section 11 or section 6 of the IGST Act, and includes non-taxable supply. Zero-rated supplies (exports, SEZ) are separately dealt with under the IGST Act and are not exempt supplies. So petrol outside GST, nil-rated and notification-exempt goods all count as exempt supplies, which matters for reversal of input tax credit.

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