Non applicability and exemptions under gst law

OBJECTIVE

Goods and Services Tax (GST) is the Indirect Tax levied in India introduced in July 2017 which was one of the most important reforms in the Indian Economy. There are various provisions for non-applicability of GST and exemptions from GST. In this webinar, we shall analyse and understand such provisions.

1. Non-Applicability & Exemptions under GST – Part I CA Divakar Vijayasarathy

2. 2 Credits and Acknowledgements Harish Kumar R Thirumal V CA Jugal Narendra Gala

3. Legends Used 3 CG Central Government CGST Central Goods and Service Tax EI Educational Institution FY Financial Year GST Goods and Services Tax ITA Income Tax Act, 1961 SG State Government SGST State Goods and Service Tax UT Union Territory VAT Value Added Tax

4. Presentation Schema 4

5. Introduction 5

6. Non-Applicability of GST 6 Supply of Goods and Services which do not meet the conditions of supply definition shall also not be liable to GST. Only complete exclusion from the definition are discussed in this webinar

7. Exclusions from the Definition of Supply 7

8. Non-applicability of Charging Section 8 Supply of alcoholic liquor for human consumption GST shall not be chargeable on: GST currently not leviable on (leviable if notified): Supply of P etroleum crude, H igh speed diesel, M otor spirit (commonly known as petrol), N atural gas and A viation turbine fuel However, Taxes are charged by respective states Currently, Central excise, cess and state VATs are being levied

9. Person Other than Taxable Person 9 As per the Charging Section, GST is to be levied and paid only by a Taxable Person Persons Liable for Registration – Sec 22 Threshold limit of registration Every supplier of goods or services or both is required to obtain registration in the State or UT from where he makes the taxable supply if his aggregate turnover exceeds - Rs. 20 lakhs or - Rs. 10 lakhs, if the person is carrying out business in Special Category States of Mizoram, Tripura, Manipur and Nagaland However, as per Notification No. 10/2019 CT dated 07.03.2019 exempts any person who is engaged in exclusive supply of goods and whose aggregate turnover from the FY 19-20 does not exceed Rs. 40 lakh , from registration requirement

10. 10 The category of persons requiring compulsory registration under GST are: Persons making any inter-State taxable supply Threshold limit of Rs. 20 lakh (Rs. 10 lakh in case of Special Category States of Mizoram, Tripura, Manipur and Nagaland) is available in case of inter-state supply of taxable services and of notified handicraft goods ( 33 items including leather, bamboo, handmade toys etc.) Casual taxable persons* (CTP) making taxable supply Threshold limit of Rs. 20 lakh (Rs. 10 lakh in case of Special Category States of Mizoram, Tripura, Manipur and Nagaland) is available in case of inter-state supply of notified handicraft goods Compulsory Registration in Certain Cases - Sec 24 Non-resident taxable persons making taxable supply Every Electronic Commerce Operator (ECO) who is required to collect tax at source Persons who make taxable supply of goods or services or both on behalf of other taxable persons whether as an agent or otherwise Every person supplying online information and data base access or retrieval (OIDAR) services Persons who are required to pay tax under reverse charge (tax to be paid by recipient of service) * CTP means a person who occasionally undertakes transactions involving supply of goods or services or both in the course or furtherance of business, whether as principal, agent or in any other capacity, in a State or a Union territory where he has no fixed place of business

11. Exempt Supply 11 Exempt supply (Sec 2(47) of CGST Act)

12. Power to Grant Exemption 12 Power to grant exemption from GST has been granted vide Sec 11 of the CGST Act and vide Sec 6 of the IGST Act (identical provisions) State GST laws also contain identical provisions granting power to exempt SGST Sub-section (1)

13. Power to Grant Exemption 13 The Government if it considers necessary or expedient so to do for the purpose of clarifying the scope or applicability of any notification or order, insert an explanation at any time within one year of issue and every such explanation shall have effect as if it had always been the part of the first such notification or order Sub-section (2)

14. Goods Exempt from GST 14 Notification No. 2/2017 Central Tax (Rate) dated 28.06.2017 & Notification No. 2/2017 Integrated Tax (Rate) dated 28.06.2017

15. Goods Exempt from GST 15 Under GST, everyday items used by the common man have been included in the list of exempted items Some of the common items out of total 149 items of the list are mentioned below:

16. Goods Exempt from GST

17. Services Exempt from GST 17 Notification No. 12/2017 Central Tax (Rate) dated 28.06.2017 & Notification No. 12/2017 Integrated Tax (Rate) dated 28.06.2017 Entry Numbers mentioned in this presentation refer to entry numbers in the first-mentioned notification

18. Services Exempt under IGST Apart from the Exemptions common with CGST, there are few additional services which have been exempted only under IGST law Services received from a provider of service located in a non- taxable territory by – CG / SG / UT / Local Authority / Govt. Agency / A n individual in relation to any purpose other than commerce, industry or any other business or profession an entity registered under section 12AA of the Income- tax Act , 1961 for the purposes of providing charitable activities way of supply of online educational journals or periodicals to an educational institution other than an institution providing services by way of- pre-school education and education up to higher secondary school or equivalent; or education as a part of an approved vocational education course A person located in non-taxable territory the exemption shall not apply to – Online information and database access or retrieval (OIDAR) services received by above mentioned CG/SG/UT Individual etc. or trust or Services by way of transportation of goods by a vessel from a place outside India up to the customs station of clearance in India received by persons specified in the entry. * Non taxable territory means a territory outside the taxable territory Taxable territory – territory to which the provisions of the act apply

19. Services Exempt under IGST – Contd. A ltd India providing services to A ltd USA (subsidiary) Treated as distinct persons under GST – chargeable to tax However, exempt if place of supply is outside India

20. Services Exempt from GST Lets discuss a portion of the exempted services from the notification Various entries are clubbed together based on their nature

21. Services Related to Charitable and Religious Activities 21

22. 22 Entry 1 of the Notification exempts services provided by an entity registered under Sec 12AA of the ITA by way of charitable activities Exempts the following services by a person by way of Conduct of any religious ceremony Renting of precincts of a religious place meant for general public, owned/managed by institutions/entities/trusts, registered under Sec 12AA/10(23C)(v) of the ITA or body/authority covered under section 10(23BBA) of ITA, except where Services by a specified organisation [KMVN/Haj Committee] in respect of a religious pilgrimage [Haj and Kailash Mansarovar Yatra] Training/coaching in recreational activities relating to (a) arts/culture, or (b) Sports by charitable entities registered under Sec 12AA of the ITA Entry 13 Entry 60 Entry 80

23. 23 Meaning of Charitable Activities The term ‘charitable activities’ mean activities relating to Public Health A. Care or counseling of - Terminally ill persons or persons with severe physical or mental disability - Persons afflicted with HIV or AIDS - Persons addicted to a dependence-forming substance such as narcotics drugs or alcohol B. Public awareness of preventive health, family planning or prevention of HIV infection Advancement of Religion, spirituality or yoga Advancement of Educational programmes/ skill development relating to Preservation of Environment including watershed, forests & wildlife

24. 24 Agriculture Related Services

25. 25 Entry 24 Services by way of loading, unloading, packing, storage or warehousing of rice Services by way of warehousing of minor forest produce Entry 24A Services by way of fumigation in a warehouse of agricultural produce Entry 53A Entry 55 Carrying out an intermediate production process as job work in relation to cultivation of plants and rearing of all life forms of animals, except the rearing of horses for food, fibre, fuel, raw material or other similar products or agricultural produce Entry 54 Services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce by way of: Agricultural operations directly related to production of any agricultural produce including cultivation, harvesting, threshing, plant protection or testing; Supply of farm labour; Processes carried out at an agricultural farm including tending, pruning, etc. and such like operations which do not alter the essential characteristics of agricultural produce but make it only marketable for the primary market Renting or leasing of agro machinery or vacant land with/without a structure incidental to its use; Loading, unloading, packing, storage or warehousing of agricultural produce; Agricultural extension services; Services by any Agricultural Produce Marketing Committee or Board or services provided by a commission agent for sale/purchase of agricultural produce. Services by way of fumigation in a warehouse of agricultural produce Services by way of loading, unloading, packing, storage or warehousing of rice Fumigation is a technique that employs various chemicals (fumigants) to eliminate pests and insects Minor forest produce means all non-timber forest produce of plant origin and will include bamboo, canes, fodder, leaves, gums, waxes, dyes, resins and many forms of food including nuts, wild fruits, Honey, Lac, Tusser etc

26. 26 Educational Services Entry 66 exempts the following services provided by an Educational Institution (EI) Services provided to an EI, by way of These exemptions are only applicable to an institution providing services by way of pre- school education & education up to higher secondary school or equivalent Educational Institution means an institution providing services by way of,- Pre-school education and education up to higher secondary school or equivalent; Education as a part of a curriculum for obtaining a qualification recognised by any law for the time being in force; Education as a part of an approved vocational education course

27. 27 Health Care Services Entry No. 46 Services by a veterinary clinic in relation to health care of animals or birds Entry No. 74 Services by way of- -Health care services by a clinical establishment, an authorised medical practitioner or para-medics ; - Transportation of a patient in an ambulance by any person other than specified above Entry No. 73 Services provided by the cord blood banks by way of preservation of stem cells or any other service in relation to such preservation Pension Schemes Services by way of collection of contribution under: •Atal Pension Yojana •Any pension scheme of SG Entry 37 and 38

28. 28 Business Facilitator/Correspondent Entry No. 39 Services by the following persons in respective capacities Business Correspondents and Business facilitators are representatives of a bank, responsible for building awareness, sourcing prospective customers. In addition, business correspondents are also responsible for carrying out banking transactions for existing customers

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