GST Exemption Unveiled: Discovering the Goods that Lighten Your Tax Burden

Updated on : March 16, 2023 - noon 17 min read.

The Goods and Services Tax (GST) is a comprehensive tax system that has been implemented in India since July 2017. It is a consumption-based tax that is levied on the supply of goods and services across the country. However, there are certain goods and services that are not affected by gst. These exclusions are mainly due to historical reasons, as they were previously taxed under the old indirect tax regime. Goods not covered under gst are referred to as "Exempted Goods and Services" or "Non-GST Goods and Services".

The list of the items not affected by gst is specifically listed in Schedule III of the Central Goods and Services Tax (CGST) Act. These exclusions are separate from the goods and services that are exempt or non-GST supplies under GST.

What is Schedule III under GST?

The GST council in India has established GST rates for goods and services, including a list of exempted goods and services. However, there are certain activities or transactions that fall outside the purview of GST and are not considered a supply of goods or services. These activities or transactions are neither exempted nor subject to GST. Similar to the negative list under the previous Service Tax regime, these transactions are classified under Schedule III of the GST Act as "Neither goods nor services".

Section 7 of the CGST Act, which defines 'Supply' under GST, includes a sub-section (3) that refers to Schedule III. According to this sub-section, activities or transactions listed in Schedule III or activities or transactions conducted by the Central Government, a State Government, or any local authority as public authorities, as notified by the Government on GST Council's recommendations, will not be considered as supply of goods or services.

It is important to note that the items listed under Schedule III are distinct from the exempted goods and services. Exempted goods and services are considered as supply of goods or services, but are exempt from GST. The items listed under Schedule III, however, are not considered as supply of goods or services and are therefore not subject to GST.

Difference between exempt supplies, non-GST supplies, nil-rated supplies and Schedule III supplies

List of Entries in Schedule III of the CGST Act

Schedule III of the CGST Act lists the following entries that are considered as neither a supply of goods nor a supply of services and are therefore not liable to GST:

Employee Services under Employment Agreement

Employee services under employment agreement refer to the various services that an employee provides to their employer as per the terms and conditions mentioned in the employment agreement. These services can include a wide range of activities such as performing specific tasks or duties, working specific hours, adhering to company policies and procedures, maintaining confidentiality, meeting targets or goals, and more.

Under the GST regime, employee services are not considered as a supply of goods or services as they are covered under Schedule III of the CGST Act. Therefore, these services are not subject to GST. This means that any remuneration paid to an employee in exchange for their services is not considered as a consideration for supply and is not liable to GST.

However, certain activities related to employment, such as employee training services provided by an employer to their employees, are not covered under Schedule III and are considered as taxable services under GST. Therefore, it is important for employers to understand the GST implications of the services they provide to their employees and to comply with the relevant GST regulations accordingly.

Services by Court or Tribunal

Services provided by a court or tribunal are covered under Schedule III of the CGST Act, and hence, are not considered as a supply of goods or services under GST. This means that services provided by a court or tribunal, such as legal proceedings, judgment, or other related services, are not liable to GST.

This is because the services provided by the court or tribunal are considered as statutory services provided by the government, which are beyond the scope of GST. Therefore, there is no requirement to pay any GST on services provided by a court or tribunal.

if any services are provided by a person or an entity to a court or tribunal, such as legal representation or other support services, they are subject to GST. In such cases, the person or entity providing the services is required to charge and collect GST from the court or tribunal.

MP or Person in a constitutional post or government post

As per Schedule III of the CGST Act, services provided by a Member of Parliament (MP) or a person in a constitutional or government post are not considered as a supply of goods or services under GST. This means that any services provided by an MP or a person holding a constitutional or government post, such as their official duties or responsibilities, are not liable to GST.

This exemption is based on the fact that services provided by MPs and persons holding constitutional or government posts are considered as public services provided by the government, which are outside the scope of GST. Therefore, any remuneration or payment made to an MP or a person holding a constitutional or government post in exchange for their services is not considered as a consideration for supply and is not liable to GST.

Funeral and related services

Funeral and related services are not considered as a supply of goods or services under GST. This means that any services related to funeral or burial, such as providing transportation, arranging the funeral procession, providing caskets, or conducting last rites, are not liable to GST.

This exemption is based on the fact that funeral and related services are considered to be essential services provided by the community, and it would not be appropriate to levy GST on such services. Therefore, any payment made for funeral and related services is not considered as a consideration for supply and is not liable to GST.

Sale of land and/or completed building

As per Schedule III of the CGST Act, the sale of land and/or completed buildings is not considered as a supply of goods or services under GST. This means that any sale of land and/or completed building is not liable to GST.

The sale of land and/or completed buildings is excluded from the scope of GST as it is considered a transaction in immovable property. Such transactions are already subject to stamp duty and registration fees under the respective state laws. Therefore, the GST Council has decided not to levy GST on such transactions to avoid double taxation.

However, if the sale of land and/or completed building is made before obtaining the completion certificate, it would be considered as a supply of service and would be liable to GST at the rate applicable to the construction services.

Actionable claims apart from the lottery, etc

According to Schedule III of the CGST Act, actionable claims other than the lottery, betting, and gambling are not considered as supply of goods or services under GST. An actionable claim is a claim that gives the holder the right to receive payment from the debtor. Examples of actionable claims include a debt, security, or a cheque.

For example, if a person holds a cheque that is due for payment, the transfer of that cheque to another person does not attract GST as it is considered an actionable claim. Similarly, the transfer of a debt instrument, such as a promissory note or a bond, also does not attract GST.

Sale from and to Non-taxable territories

The sale of goods or services to and from non-taxable territories is not considered as a supply of goods or services under GST. Non-taxable territories are those territories that are outside the scope of GST, such as a foreign country or a territory that is not a part of India.

This means that the sale of goods or services to or from non-taxable territories is not liable to GST. For example, if a business in India sells goods to a company in the United States, it would not be required to pay GST on the transaction. Similarly, if a business in India purchases goods or services from a company in a non-taxable territory, it would not be able to claim input tax credit (ITC) on the transaction.

Transactions in Customs Port

According to Schedule III of the CGST Act, the following transactions related to supply of goods in a customs port are not considered as supply of goods or services under GST:

(a) Supply of warehoused goods to any person prior to clearance for home consumption.

This means that if goods are stored in a warehouse located in a customs port and are supplied to any person before being cleared for home consumption, such transactions would not be considered as a supply of goods or services under GST.

(b) Supply of goods by the consignee to any other person, by endorsing the documents of title to the goods, after the goods have been dispatched from the port of origin located outside India but before clearance for home consumption.

This means that if the consignee of goods, i.e., the person who is importing the goods, endorses the documents of title to the goods and supplies them to any other person after dispatching the goods from a port of origin located outside India, but before clearance for home consumption, such transactions would not be considered as a supply of goods or services under GST.

By Amit Pawar

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