The Government first introduced GST exemption on 1st July 2017 considering the fact that individuals need not pay GST on daily-use items. This increased their affordability and encouraged people to use them as per their requirements. At the same time, people could save more on basic amenities.
There were several types of GST exemptions introduced that eventually served the same purpose but had minor differences. It is imperative to know these differences so that you can determine for which goods or services exemption is available. Nonetheless, before moving forward, it is crucial to have a clear idea regarding Input Tax Credit and Output Tax Credit.
What is Input Tax Credit (ITC)?
This is the tax that a buyer pays to the Government when they purchase a good on which the Government charges GST. The GST rates vary considerably with the types of goods.
What is Output Tax Credit (OTC)?
This is usually the GST that sellers pay the Government when they sell goods or services to their customers.
Now that you have a clear idea about ITC and OTC let’s move on to site the differences between Exempt, Non-GST, Nil and Zero-Rated Supplies Under GST.
What are Exempt Supplies?
These are the goods for which Government do not charge any GST. These mainly include essentials that people use in their daily lives, like fresh fruits, curd, fresh milk, bread etc. Therefore, buyers do not have to pay any ITC for these goods. So if any seller is selling these goods, instead of a tax invoice, they will have to issue a ‘bill of supply.’
What are Non-GST Supplies?
These goods or services do not attract any ITC. However, the Government levies different taxes on these types of goods when buying or availing them. These include alcohol, electricity, diesel, and petrol.
What are Nil-GST Supplies?
These include goods or services for which Government charges 0% GST. They are mainly the everyday items that people use. For example, jaggery, grains salt etc. These items are listed in Schedule 1 under GST.
What are Zero-rated Supplies?
These mainly involve goods that are transported overseas. It includes goods supplied to foreign countries located in Special Economic Zones (SEZ). Exporters will have to pay 0% GST on these goods while exporting them. Additionally, taxpayers can avail an Income Tax Credit on these goods.
You must be aware of several types of GST exemptions available in India.
Types of GST Exemptions Granted in India
The different types of GST exemptions granted in India are as follows:
- Partial exemption
If a person who has not yet registered for GST transfers goods across states, then they are eligible for a GST exemption. However, the primary condition here is that they will have to pay a GST if the value of goods that they are transferring per day is more than Rs. 5000.
- Absolute exemption
No specific condition is set by the Government for GST exemptions that fall under this category. They include services provided by RBI and electricity transmitted by electricity transmission unit.
- Conditional exemption
These exemptions are generally associated with several conditions. If these conditions are not met, you cannot claim an exemption. This includes taxes paid by clubs and hotels that charge less than Rs. 1000 per day.
You can calculate the amount of GST you are paying the Government while purchasing goods or hiring services. However, it would be best to use an online calculator for the same to get quick and accurate results.
Steps to Use Online GST Calculator for Estimating GST
Below are the steps that you can follow to use an online GST calculator:
Step 1: Navigate to the official website of a financial institution.
Step 2: Move to the GST calculator section.
Step 3: Select if you are a buyer, manufacturer or retailer.
Step 4: Adjust the pointers to select the input values.
If you are a buyer, you will only need to enter the price and GST rate of that good. However, manufacturers will need to input the cost of production, profit ratio and GST rate. Otherwise, if you are a retailer or wholesaler, you will need to enter the cost of goods, profit ratio and GST rate. Once done, the results will appear almost instantly.
There are different slabs of GST such as 0.25%, 3%, 5%, 12%, 18% and 28%. Under each GST slab, there are several goods. You can quickly navigate to the official website of Bajaj MARKETS to know the goods and services listed under each. This will give you a holistic idea of GST rates that Government charges on goods and services.
Now that you have known thoroughly about GST exemption, you can easily opt for items that fall under these categories. In addition, you can also calculate the amount of GST charged for different items using the online GST calculator.