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CMA Intermediate · Direct and Indirect Taxation · Exemption from Tax

Under the Explanation to Section 11 of the CGST Act, 2017, where a supply of services has been exempted absolutely by notification, what is the position of the registered supplier?

A registered supplier making an absolutely exempt supply must not collect tax in excess of the effective rate. Since the effective rate on a fully exempt supply is nil, no GST can be charged to the recipient on it.

  1. AThe supplier may collect tax at the normal rate and later refund it to the recipient
  2. BThe supplier must not collect tax in excess of the effective rate on that supplyCorrect
  3. CThe supplier may collect tax only if the recipient agrees in writing
  4. DThe supplier may collect tax at half the normal rate

Explanation

The Explanation provides that where an exemption has been granted absolutely, the registered person shall not collect tax in excess of the effective rate. For a fully exempt supply the effective rate is nil, so no tax may be collected. Collecting at the normal rate is therefore not permitted.

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