List of Exempted Goods and Services under GST

 List of Exempted Goods and Services under GST

The GST introduced on July 1, 2017, in India was one of the pivotal tax reforms in the history of the country. The GST has replaced a very complex network of central and state taxes with a unified system. The GST was to bring most goods and services, but not all goods and services are under this system. It has to be understood that certain categories “List of Exempted Goods and Services under GST” have deliberately not included move under GST to save and protect, from one end, vulnerable groups of society and promote sectors, such as healthcare and education, from another end, and finally ensure attuning affordability of basic necessities.

In simple terms, exempted goods and services are those on which no GST is charged. Whether you're a small trader, service provider, law student, or finance professional, knowing these exemptions can save you from unnecessary compliance, reduce costs, and help you remain legally sound in your tax filings. Let’s explore these exemptions in depth, including legal references, real-life examples, official notifications, and the latest updates—all in easy language.

🧾 What is GST Exemption?

GST exemptions stand for non-taxability of specified goods or services on account of their characteristics, purpose, or socio-economic significance. The exemptions can, however, also be total (no tax on any conditions) or partial (taxability conditional upon certain criteria) or be temporary, depending on government policy.

 There are three main types of exempt supplies under GST:

1. Absolutely Exempt Supplies – Directly exempt through notifications (e.g., education services).
2. Conditional Exempt Supplies – Exemption from tax is only possible if some conditions are satisfied (e.g., renting of religious premises under ₹1,000/day).
3. Non-GST Supplies – GST reach are excluded from the ambit (petroleum, alcohol for human consumption).

Understanding these categories is crucial because once a good or service is classified as exempt, Input Tax Credit (ITC) is typically not allowed on purchases related to them, which directly impacts business costs and compliance.

 📚 Legal Basis: Relevant Sections and Rules

The GST exemption framework is not arbitrary. It’s legally structured and backed by specific provisions of the GST laws.

Provision	Details
Section 2(47) of CGST Act	Defines 'exempt supply' to include nil-rated, non-taxable, and notified exempt goods/services
Section 11 of CGST Act	Empowers the government to grant exemptions on goods and services through notification
Section 6 of IGST Act	Similar provision for inter-state transactions
Schedule III of CGST Act	Lists activities that are neither goods nor services and hence, not taxable
Rule 42 & 43 of CGST Rules	Explain the calculation and reversal of ITC when both exempt and taxable supplies are made

These sections ensure there’s a transparent legal foundation for exemptions, and also help taxpayers assess whether they’re eligible or not.

🤔 Why Are Some Goods and Services Exempted?

Exemptions in GST aren't random—they serve well-defined economic and social objectives. Here's why some goods and services are exempt:

To Support Public Welfare: Services like education and healthcare are considered basic rights and are essential to nation-building. Taxing them would make them more expensive and restrict access for the underprivileged.

Encourage Agricultural and Rural Economy: Most agriculture-related products and services are exempt to safeguard farmer income, stabilize rural economies, and prevent cascading taxation in the food supply chain.

Reduce Tax Compliance for Small and Informal Sectors: Many small service providers or local businesses operate in the informal sector. Exempting them reduces their compliance burden and supports ease of doing business.

Control Inflation and Promote Affordability: Basic daily needs like food grains, fresh milk, unbranded cereals, etc., are exempt to prevent price hikes and ensure affordability for the masses.

🍚 List of Exempted Goods under GST (as per Notification No. 2/2017-CT (Rate))

This notification provides the detailed list of goods exempted from GST. Here's a table of commonly consumed or traded exempt goods:

Sl. No.	Exempted Goods	HSN Code	Conditions/Notes
1	Fresh fruits, vegetables	Chapter 7	Must be unprocessed and unbranded
2	Unbranded rice, wheat, and pulses	1006, 1001	If sold in loose or non-branded packs
3	Milk, curd, buttermilk	0401, 0403	Fresh, not processed in retail packs
4	Common salt	2501	Edible, daily use
5	Water (excluding mineral/aerated water)	2201	Drinking water from public source
6	Educational books, maps	4901, 4905	All types of printed educational material
7	Handmade Khadi by Khadi institutions	-	Certified institutions only
8	Live animals (cow, buffalo, sheep, goat)	0102, 0104	For farming or dairy use
9	Compost, organic manure	3101	For agricultural use
10	Plain glass bangles	7018	Unbranded, non-precious

💡 Tip: If the same goods are sold under a brand name or packaged, they may become taxable.

🧾 List of Exempted Services under GST (Notification No. 12/2017-CT (Rate))

This notification details which services are GST-free. Here’s a table for easy reference:

Sl. No.	Exempted Service	Conditions/Scope
1	Services by educational institutions	Must be up to higher secondary and as per syllabus
2	Healthcare services	Must be by registered clinics/hospitals/doctors
3	Public transport (non-AC)	Buses, autos, metros excluding luxury services
4	Renting of religious places	Rent below ₹1,000/day
5	Agricultural labor, harvesting, warehousing	Only for primary produce
6	Legal services by individual advocates	To individuals and certain entities
7	Services by RBI, SEBI, IRDA	Statutory body services
8	Services by Gram Panchayats or municipalities	Civic services
9	Funeral, cremation services	Entirely exempt
10	Hotel accommodation below ₹1,000/day	Not applicable to higher tariffs

These services form the backbone of essential and social infrastructure and are thus kept outside GST.

💡 Real-Life Examples of Exemptions

Let’s see how GST exemptions apply in daily life:

✅ Example 1: A farmer sells unbranded wheat to a local buyer.

🔸 Exempt, since it’s an unbranded agricultural product sold by a cultivator.

✅ Example 2: A private school offers CBSE curriculum education.

🔸 Exempt, because it fulfills the “education as per curriculum” condition.

✅ Example 3: A government hospital provides free or subsidized OPD treatment.

🔸 Completely GST-free, under healthcare exemptions.

✅ Example 4: A self-employed lawyer gives consultancy to an individual.

🔸 Exempt, provided the recipient is a non-business entity.

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🔄 Reverse Charge and Exemptions

A common confusion is whether Reverse Charge Mechanism (RCM) applies to exempt supplies. The answer is no. RCM applies only to taxable supplies.

👉 Example: If a business buys agricultural produce directly from a farmer, no GST under RCM is payable because the product is exempt.

However, if the farmer is registered and sells a taxable supply, RCM rules may apply depending on the transaction.

🔍 Nil Rated vs Exempt vs Non-GST Supply

Category	Meaning	ITC Allowed?
Nil Rated	GST rate is 0% (e.g., salt, jaggery)	❌ No
Exempted	Not taxable by notification (e.g., education)	❌ No
Non-GST Supply	Outside GST Act (e.g., petrol, liquor for human use)	❌ No

Understanding these differences is important for filing GSTR-1, 3B, and annual returns (GSTR-9) accurately.

🗂️ Latest Notifications and Circulars (as of April 2025)

Reference	Date	Purpose
Notification 2/2017-CT (Rate)	28.06.2017	Original goods exemption list
Notification 12/2017-CT (Rate)	28.06.2017	Original services exemption list
Notification 3/2022-CT (Rate)	13.07.2022	Threshold for hotel accommodation updated
Circular 177/09/2022-GST	03.08.2022	Renting of religious places clarified
Notification 7/2023-CT (Rate)	28.06.2023	Updates on food items and labeling

👉 Always refer to cbic-gst.gov.in for up-to-date notifications.

📌 Final Summary

• Exemptions under GST reduce the burden on poor and middle-class consumers.
• All exemptions are declared via notifications under Section 11 of CGST Act.
• Input Tax Credit is not allowed on goods or services used for exempt supplies.
• Always distinguish between exempt, nil-rated, and non-GST goods/services.
• Regularly check for updates in notifications and circulars to avoid compliance errors.

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📝 Conclusion

Being familiar with the “goods and services exempt from GST” will help you comply better, preventing any unintended tax liabilities and allowing for well-thought-out pricing decisions for your business. These exemptions are not merely technicalities; they are established mechanisms to help you overcome taxation challenges.

Whether you're filing returns, running a business, or advising clients, keeping this list handy ensures you're always one step ahead.

🙋‍♂️ FAQs on GST Exemptions

Q1: Is electricity exempt under GST?

✅ Yes. Electricity transmission and distribution are non-GST supplies.

Q2: Is GST applicable on second-hand vehicles?

⚠️ GST applies based on the margin scheme if sold by a dealer. No GST if sold by a private individual.

Q3: Can a supplier voluntarily pay GST on exempt goods?

❌ No. If a supply is exempt, you cannot charge GST or issue a tax invoice.

Q4: What about mixed supplies involving exempt items?

Mixed supplies are taxed at the rate of the highest taxable item involved, as per Section 8.

More Read: ITC Reversal Rule 42 & 43 under GST | Input Tax Credit Calculation, Conditions & Examples