EXEMPTION UNDER GST – GST EXEMPTION – SECTION 11 of CGST ACT

EXEMPTION UNDER GST – GST EXEMPTION – SECTION 11 of CGST ACT

The purview of the article is primarily dealing with the Power to grant exemption from Goods and Services Tax (GST) by the Government under Section 11 of CGST Act, 2017. However the essence of the provision is pretty direct and simple that it deals with what are the grounds of exemption the government realized the need for.

Before going into the Section 11 provisions of CGST ACT, let us understand the concept of Exemption and how section 11 takes its place in GST Exemption.

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GST EXEMPTION – EXEMPT SUPPLY

Under GST, Exempt Supply simply means supplies of goods and services which not attract tax. As we all know GST is based on supply, despite of the trigger the Exempt Supply do not attract GST. Apparently the input tax credit paid in relation to these supplies will not be available for utilization or set off the GST liability as well.

To put into simple words, the following are three types of supply which are considered as exempt supply:-

• Supplies which are chargeable to nil rate tax
• Supplies which are partially and wholly exempt from the charge of GST – Section 11 of CGST and Section 6 of IGST.
• Supplies which comes under the Section 2(78) of the CGST Act, which deals with “non-taxable supply”. Ex. alcoholic liquor for human consumption.

POWER TO GRANT EXEMPTION FROM TAX

The provision of Section 11 of the CGST ACT basically deals with the power of the Government to grant exemption from tax, i.e., GST for supply for goods and services. But to understand the rationale of this exemption as provided shall necessitate us to look into the underlying conditions that the government considers in order to grant an exemption under this section.

At the outset, the Governments are empowered to grant exemptions, where the following conditions are satisfied that such exemption –

• Should be in the public interest
• Made by way of issue of notification
• Must be recommended by the GST Council
• Absolute exemption or conditional exemption
• Exemption by way of a special order (not notification) may be granted exceptional circumstances.

Note: Further it also explains that for the purpose of this section, the Registered person supplying the services and or services is not entitled to collect tax higher than the effective rate, where the supply enjoys an absolute exemption.

SECTION 11 of CGST ACT 2017

To understand the provisions better, the verbatim text form the section is reproduced below and granulated analysis of the every subsection has been dealt with. This will help to understand the distinctive exemption under every subsection.

Section 11 Subsection (1)

The text from the act states that

(1) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by notification, exempt generally, either absolutely or subject to such conditions as may be specified therein, goods or services or both of any specified description from the whole or any part of the tax leviable thereon with effect from such date as may be specified in such notification.

Analysis
Subsection (1) provides that, the Government if satisfied –

• Based on the recommendation from the GST Council
• Is satisfied that it is in necessary, in the public interest
• By way of Notification – Exempt generally
• Either Absolute or subject to conditions
• The whole tax or part tax
• On taxable goods and/or services of any specified description

Section 11 Subsection (2)

(2) Where the Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by special order in each case, under circumstances of an exceptional nature to be stated in such order, exempt from payment of tax any goods or services or both on which tax is leviable.

Analysis
Subsection (2) provides that, the Government if satisfied –

• Based on the recommendation from the GST Council
• Is satisfied that it is in necessary, in the public interest
• By way of Special Order -Exempt generally
• Under exceptional circumstances, explicitly specified in such order
• The whole tax
• On taxable goods and/or services of any specified description

Section 11 Subsection (3)

(3) The Government may, if it considers necessary or expedient so to do for the purpose of clarifying the scope or applicability of any notification issued under sub-section (1) or order issued under sub-section (2), insert an explanation in such notification or order, as the case may be, by notification at any time within one year of issue of the notification under sub-section (1) or order under sub-section (2), and every such explanation shall have effect as if it had always been the part of the first such notification or order, as the case may be.

Analysis
Subsection (3) provides that, the Government if –

• Considers it necessary
• For the purpose of clarifying the scope and applicability
• Of Notification under Section 11(1) and/or Special Order underSection 11(2)
• Insert an Explanation in Notification or Special Order
• Within 1 year
• And such explanation/ clarification that shall have retrospective effect.

Section Explanation.––For the purposes of this section, where an exemption in respect of any goods or services or both from the whole or part of the tax leviable thereon has been granted absolutely, the registered person supplying such goods or services or both shall not collect the tax, in excess of the effective rate, on such supply of goods or services or both.

Analysis

The explanation to the section states that-

• Where an exemption under Section 11 has been granted, absolutely
• The Registered person supplying the services and / or services
• Is not entitled to collect tax higher than the effective rate,
• Where the supply enjoys an absolute exemption.

Important Notifications in relation to Section 11

Notification No. 02/2017 – Central Tax (Rate)dated 28.06.2017

• This notification Exempted supplies of around 149 items of services in terms of Section11(1). Ex. Electricity, Salt, fresh fruits, etc. This is vast list of tariff items with description.
• Subsequently amended vide Notification No.28/2017, 35/2017,42/2017, 7/2018, 19/2018

Notification No. 12/2017 – Central Tax (Rate) dated 28.06.2017

• This notification listed out the Exemption to supply specified services.
• Subsequently amended vide Notification No.21/2017, 25/2017, 32/2017 and 47/2017, 2/2018

This is all about the Exemption Under GST. We will be back with the complete List of Goods and Services that are Exempted under Goods and Services Tax (GST). Stay tuned!

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Important Tags : Exemption Under GST / Exemption Under GST / Section 11 / CGST Act / Exemption / Goods and Services Tax / Exempt Supply