Exemptions from GST
Goods and Services Tax Paper 3, Sec B ~30 min revision Sections & RulesDefinitionsThresholds
AI-assisted · review in progress · last updated 25 July 2026 · jump to quick revision
In 30 seconds
- Exempt supply [Sec 2(47)] = nil-rated + wholly exempt supplies, and it INCLUDES non-taxable supply [Sec 2(78)] — liquor and the 5 petro products (crude, HSD, petrol, NG, ATF).
- Power to exempt sits in Sec 11 CGST / Sec 6 IGST: general notification (absolute or conditional), case-specific special order, and a 1-year window to insert a retrospective explanation.
- Notification 12/2017-CT(R) is the master list of service exemptions — learn it as 7 macro buckets: Charitable, Agriculture, Education, Health, Govt, Transport, Financial, plus residual entries.
- Almost every exemption carries a taxable sliver — ceilings like ₹5,000/day hospital rooms, ₹7,500/month RWA, ₹1,50,000 artists and ₹500 admissions decide most questions.
- Breach behaviour differs by entry: under Entries 77 and 78 crossing the ceiling makes the ENTIRE amount taxable, not just the excess.
Based on GST law as on 30.04.2025 (May 2026 exams onwards). Section numbers are CGST Act unless stated.
Exempt, non-taxable and the power to exempt
Everything in this chapter hangs off two definitions and one section. Get the containment relationship right first — it is the single most-tested trap.
Definition
Exempt supply [Sec 2(47)]
A supply that is nil-rated or wholly exempt — and it includes non-taxable supply. Trap: students wrongly exclude non-taxable supply; it is a subset of exempt supply, not a separate category.
Definition
Non-taxable supply [Sec 2(78)]
A supply not leviable to tax under CGST/IGST at all: alcoholic liquor plus the 5 petro products — crude, HSD, petrol, NG, ATF.
The machinery for granting exemptions — Sec 11 CGST / Sec 6 IGST (State laws mirror):
| Provision | Mode | Crux |
|---|---|---|
| 11(1) / 6(1) | Notification | General — public interest + Council recommendation; absolute (mandatory, no tax collection allowed) or conditional (optional to avail) |
| 11(2) / 6(2) | Special Order | Case-specific; exceptional circumstances must be stated |
| 11(3) | Explanation | Insertable within 1 year of the notification/order → effect retrospective from the entry’s inception, not from the explanation’s own date [Circular 120/39/2019] |
| Explanation to Sec 11 | Bar on excess collection | Where the exemption is absolute, the supplier cannot collect tax above the effective rate |
| 11A / 6A | Non-recovery | Power not to recover tax not/short levied due to a generally prevalent trade practice — retrospective regularisation, on Council recommendation, via Official Gazette notification |
Exemptions come in 4 patterns: (a) a specified activity/transaction — status of the parties immaterial; (b) a specified supplier only; (c) a specified recipient only; (d) specified supplier and recipient both.
The master list is Notification 12/2017-CT(R) dt 28.06.2017 (mirrored for IGST by 9/2017-IT(R), which adds IGST-only entries — Final level). Entry numbers are reference only, not examinable per se. RCM cases are governed separately by Notification 13/2017-CT(R) (Chapter 3 cross-reference).
The exemption map — 23 categories
Mnemonic for the 7 macro buckets: Charitable → Agriculture → Education → Health → Govt (by/to) → Transport (passengers + goods) → Financial (banking/insurance/pension/BF-BC) — plus residual entries (construction, leasing, legal, sponsorship, skill, artist, admission, RWA, other misc.).
| # | Category | Key entries | One-line crux |
|---|---|---|---|
| 1 | Charitable & religious | 1, 13, 60, 80 | 12AA/12AB trust charitable activities; precinct renting — 3 thresholds; KMVN/Haj pilgrimage; arts (individual) / sports (charity) coaching |
| 2 | Agriculture | 24, 24A, 24B, 54, 55, 55A | Rice/produce storage-warehousing; cultivation-linked operations up to PRIMARY market only; AI of livestock (not horses) |
| 3 | Education | 66, 66A | EI-to-student and listed inputs to pre-school–HSC EI; Board affiliation to Govt schools only |
| 4 | Health care | 46, 74 | Vet clinics; clinical establishment / practitioner / paramedic care; room over ₹5,000/day (non-ICU) taxable |
| 5 | Govt services (BY) | 4–9, 9C–9F, 24C, 34A, 47, 61–65, 65B, 74A | Art. 243W/243G functions; ₹5,000 threshold; 4 exclusions (Posts/Railways, aircraft/vessel, transport, business entities) |
| 6 | Construction | 10, 10A, 11 | Pure labour PMAY / single residential unit contracts |
| 7 | Passenger transport | 15, 16, 17 | Economy NE/Bagdogra; non-AC contract/stage carriage (not tourism); RCS VGF (3 yrs); rail/metro/metered cab |
| 8 | Goods transport | 18, 20, 21, 21A, 21B | Road (not GTA/courier); rail/vessel/GTA listed goods; GTA-to-unregistered (6 exclusions); GTA-to-Govt (TDS-only) |
| 9 | Banking/financial | 27, 27A, 34, 39A | Interest/discount (not credit-card interest); PMJDY BSBD account; card settlement ≤₹2,000; IFSC intermediary |
| 10 | Life insurance | 28, 29, 29A, 29B, 36 | NPS annuity; armed forces group insurance; 7 named schemes incl. micro-insurance ≤₹2,00,000 cover |
| 11 | Specified bodies | 30, 31, 31A, 31B | ESIC, EPFO, Coal Mines PF, NPS Trust admin fee |
| 12 | General insurance | 35, 36A, 36B | 18 named schemes; reinsurance/retrocession; MV Accident Fund |
| 13 | Pension schemes | 37, 38 | Atal Pension Yojana + State pension scheme collection |
| 14 | BF/BC | 39 | To bank/insurer — RURAL AREA branch only |
| 15 | Services TO Govt | 3, 3A, 3B, 11A, 40, 72 | Pure services / ≤25% goods composite re Art. 243G/243W; FPS commission; Govt-paid insurance; 75%+ funded training |
| 16 | Leasing | 41 | Long-term (≥30 yr) industrial/financial plot lease upfront premium, 20%+ Govt-owned lessor |
| 17 | Legal services | 45 | Arbitral tribunal / advocate / senior advocate → non-business-entity / business entity ≤ threshold / Govt; RCM if business entity above threshold |
| 18 | Sponsorship (sports) | 53 | Sponsorship of recognised-body organised sporting events |
| 19 | Skill development | 69, 70, 71 | NSDC/NCVET/DGT/DDUGKY training & assessment bodies |
| 20 | Artist performance | 78 | Folk/classical music/dance/theatre ≤₹1,50,000; NOT brand ambassador |
| 21 | Right to admission | 79, 79A, 81 | Museum/park/zoo/monument = NO ceiling; circus/concert/sport/planetarium ≤₹500/person |
| 22 | Unincorporated body / RWA | 77, 77A | Member reimbursement / trade union / exempt-activity; RWA ≤₹7,500/month/member; association membership fee ≤₹1,000/yr |
| 23 | Other residual | 2, 12, 12A, 19C, 22, 23, 25, 25A, 44, 44A, 48, 49, 50, 52, 57, 58, 59, 61A, 65A, 68, 76 | Going concern; residential dwelling (not to registered person); accommodation ≤₹20,000/mo & ≥90 days; toll; electricity T&D; incubatee ≤₹50L; R&D grants; RTI; player/coach services |
Definitions that decide answers
Four definitions carry the most marks — learn them with their carve-outs.
Definition
Charitable activities
A closed list: public health (care of terminally ill / HIV / de-addiction; awareness); advancement of religion/spirituality/yoga; education/skill development for orphans, abused persons, prisoners, and rural-area elderly (65+); preservation of the environment. The rural-area qualifier applies ONLY to the 65+ limb. Hostel accommodation and pilgrimage are NOT charitable.
Definition
Educational institution (EI)
Three limbs: pre-school up to higher secondary (HSC); education as part of a curriculum for a qualification recognised by law; or an approved vocational education course (ITI/ITC designated trades under NCVET/SCVT, or an NCVET-approved Modular Employable Skill course). Private coaching (IBPS/UPSC) is NOT an EI; foreign-law qualifications are not covered; a private ITI is an EI only for designated trades.
Definition
Health care services
Diagnosis/treatment/care in a recognised system of medicine (allopathy, yoga, naturopathy, ayurveda, homeopathy, siddha, unani + CG-notified) plus patient transport. Excludes cosmetic/hair-transplant surgery except reconstructive (congenital/trauma). IVF/ART is exempt; Reiki is not a recognised system; cord blood banking is not exempt.
Definition
Goods Transport Agency (GTA)
A person transporting goods by road AND issuing a consignment note — the consignment note is the sine qua non; no note = not a GTA, and general Entry 18 applies. A consignment note is a serially numbered document showing consignor/consignee, vehicle registration, goods, origin-destination, weight, and GSTIN of the person liable.
The rest of the definitions sheet, compressed to meaning + trap:
| Term | Meaning | Trap / keyword |
|---|---|---|
| Rural area | Village per land revenue records, excluding municipal/cantonment/notified urban areas | Same test for charitable-elderly and BF/BC entries |
| Agricultural produce | Cultivation/rearing produce (not horses); no/minimal processing; marketable for PRIMARY market | Tea, coffee, jaggery, dehusked dal NOT agri produce; whole gram/rajma ARE |
| Specified organisation (Entry 60) | KMVN (Kailash Mansarovar) or Haj Committee of India/State Haj Committee | Only bilateral GoI-facilitated pilgrimage exempt; other trust yatras taxable |
| Government [2(53)] | Central Government (State Acts define State Govt separately) | CCI, Press Council, DGCA, FMC, CPCB, SEBI are NOT “Government” |
| Local authority [2(69)] | CLOSED list: Panchayat, Municipality, Municipal Committee/Zilla Parishad/District Board, Cantonment Board, Sixth Schedule Council, Art. 371/371A/371J Boards | DDA, AUDA, BDA are NOT local authorities |
| Governmental authority | Set up by Parliament/State Act OR ≥90% Govt equity/control, for Art. 243W/243G functions | Function MUST be 243W/243G-specific |
| Government Entity | Body (incl. society/trust/corp) by Act OR ≥90% Govt control, for ANY function entrusted by Govt | Broader than governmental authority |
| Contract carriage | Vehicle hired as a whole, fixed rate, time/point basis, no en-route pickup outside contract; incl. maxicab/motor cab | Radio taxi (two-way radio + GPS) is excluded from Entry 15(b) |
| Stage carriage | Vehicle for more than 6 passengers, separate fares, whole/stage journey | Entry 15(c) — only NON-AC exempt |
| Metered cab | Contract carriage with approved fare-meter device | Does NOT include radio taxi |
| Courier agency | Door-to-door time-sensitive document/goods transport | “Express Cargo Service” = courier agency, NOT exempt |
| Interest (Entry 27) | Consideration for money borrowed / debt incurred | EXCLUDES credit-card interest (always taxable) and service/processing fees |
| Life micro-insurance product | IRDA Reg. 2(e) products — term/endowment/health, with/without rider | Cap: maximum cover ₹2,00,000 for exemption |
| Retrocession | Reinsurer further cedes assumed risk to another insurer/CBR | Included within “reinsurance” [Circular 228/22/2024] |
| Senior advocate | SC/HC-designated advocate (ability/standing/special knowledge) | Entry 45(c) has NO “to another advocate” limb (unlike 45(b)) |
| Recognised sports body | IOA, SAI, national federations + affiliates, national sports promotion orgs, IOC/international federations | Local sports club NOT recognised |
| Brand ambassador | Person engaged to promote a brand/name/logo | Entry 78 exemption DENIED even below ₹1,50,000 |
| Incubatee | Entrepreneur in TBI/STEP (NSTEDB) premises, agreement-based | Entry 44: ₹50 lakh turnover ceiling, 3-year window |
Taxable slivers inside the exemptions
Every category has carve-outs that stay taxable — these decide the “state with reasons” questions.
| Area | Taxable despite the exemption |
|---|---|
| Charitable / religious | Advertising rights on premises/publications; ticketed event admission; hostel accommodation; yatras other than KMVN/Haj; precinct renting at/above thresholds — rooms ≥₹1,000/day, halls/kalyanmandapam/open area ≥₹10,000/day, shops ≥₹10,000/month (3 separate thresholds); arts/culture coaching by non-individuals and sports coaching by non-charities; services provided TO trusts are not automatically exempt |
| Agriculture | Processing altering essential character (chips, ketchup); processing for RETAIL market (grinding, sterilizing, retail-pack); APMC renting shops/property for commerce; milling of paddy into rice (not Entry 55) |
| Education | Private coaching/unrecognised institutes; transport/catering/security-cleaning inputs for degree/vocational EIs (exempt only for pre-school–HSC); journals only for law-recognised-qualification EIs; IIM short “participant” programmes; university–college and Board–private-school affiliation; campus-recruitment fees from prospective employers; annual day/events OUTSIDE school premises |
| Health care | Room charges over ₹5,000/day (excl. ICU/CCU/ICCU/NICU); plain cosmetic/plastic surgery (non-reconstructive); cord blood banking; Reiki; food to non-admitted persons/visitors; renting shops/auditorium/ad space in hospital |
| Govt services (Entry 6) | Four exclusions: (a) Dept of Posts & Railways; (b) aircraft/vessel services in/out of port-airport; (c) transport of goods/passengers; (d) services to business entities (above Entry 7 threshold). Also: postal AGENCY services (mutual fund/bond distribution, bill collection — no RCM); police/security to PSUs/private entities/private sports events (RCM applies); ERCC (Entry 65B) shortfall payable if lease holders’ GST is below the exempted amount |
| Construction | Only PURE LABOUR contracts exempt — any goods-inclusive works contract falls outside Entries 10/10A/11 |
| Passenger transport | Entries 15(b)/(c) & 17(e) via e-commerce operator (Sec 9(5)) — ECO pays; non-AC contract carriage for tourism/conducted tour/charter/hire (only pre-determined route/schedule exempt); AC stage carriage; Entry 16 VGF after 3 years from RCS airport commencement; vessels predominantly for tourism (cruise/shikara with sightseeing/food/music) |
| Goods transport | Road transport by GTA/courier (outside Entry 18); GTA to 6 recipient types even if unregistered — factory, society, co-op society, body corporate, partnership/AOP, registered casual taxable person; GTA to registered persons (RCM/FCM); ancillary loading/warehousing invoiced SEPARATELY; vehicle-with-operator hire where recipient controls route/schedule (not “transport of goods”) |
| Banking / financial | Service fee/documentation/broking/admin/entry charges over interest; credit-card outstanding interest — ALWAYS taxable; penal interest embedded in goods price (billed by seller); forex sale to general public; bank services to RBI |
| BF/BC | Services at an URBAN branch — the rural-area condition is mandatory |
| Services to Govt | Pure services / ≤25%-goods composite NOT linked to Art. 243G/243W functions (e.g. MCD HQ housekeeping/horticulture); services to Indian Army/Ministries not performing 11th/12th Schedule functions |
| Legal services | To a business entity with turnover ABOVE threshold — taxable, RCM on recipient; senior advocate to another advocate/firm NOT covered |
| Artist (Entry 78) | Consideration over ₹1,50,000 → ENTIRE amount taxable (not just excess); brand ambassador always taxable regardless of amount; non-folk/classical forms (western music/dance, film/TV, painting/sculpture) always taxable |
| Admission (Entry 81) | Consideration over ₹500/person taxable; non-recognised sporting events still covered under (b) subject to the ₹500 cap |
| RWA / unincorporated body | Contribution over ₹7,500/month/member → ENTIRE amount taxable; threshold applies PER APARTMENT; membership fee (Entry 77A) over ₹1,000/member/year taxable |
| Other residual | Entry 12: dwelling rented to a REGISTERED person (other than proprietor’s personal-capacity use) or for commercial use — taxable, RCM on registered recipient; Entry 12A: BOTH conditions mandatory — value ≤₹20,000/person/month AND minimum continuous 90 days; Entry 52: business exhibition WITHIN India; Entry 68: selectors/commentators/curators/technical experts (only player/referee/umpire/coach/team manager exempt), and services to a non-recognised-sports-body franchisee; guest anchor honorarium unless aggregate turnover ≤₹20 lakh (₹10 lakh special category states) |
Circulars that settle the grey areas
| Circular | Takeaway |
|---|---|
| 120/39/2019 | Sec 11(3) explanation is retrospective from the entry’s inception — Entry 3(vi) effective 21.09.2017, not 27.07.2018 |
| 66/40/2018 | Religious/yoga camps exempt if predominant purpose is religion/yoga; fitness/dance camps taxable |
| 16/16/2017 | Tea/coffee/jaggery/dal are NOT agri produce — essential character altered |
| 19/19/2017 | Paddy milling is NOT the Entry 55 job-work exemption — post-harvest, millers are not cultivators |
| 55/29/2018 | Private ITI: designated trades only; Govt ITI exempt via Entry 6 |
| 82/01/2019 | IIM programmes ≥1 yr (degree/diploma) exempt; short “participant” courses taxable |
| 151/07/2021 | Education Boards (NBE): exam conduct exempt, accreditation taxable — limited-purpose EI status |
| 149/05/2021 | Anganwadi/school catering exempt irrespective of funding source (anganwadi = pre-school) |
| 177/09/2022 | Omnibus clarifications: migration certificates, contract carriage hire, IVF, toll/FASTag etc. |
| 27/01/2018 | Room rent ₹5,000/day ceiling; ICU/CCU/ICCU/NICU excluded from the cap (read with Entry 74 proviso) |
| 32/06/2018 | Entire hospital charge exempt (incl. consultants); in-patient food exempt; outsourced food taxable at caterer’s end |
| 190/02/2023 | Armed forces mess exempt if it qualifies as an Entry 6 Govt supply |
| 178/08/2022 | Liquidated damages taxable only if an obligation to tolerate exists — mere compensation is not a supply |
| 101/20/2019 | Entry 41 upfront amount exempt regardless of number of instalments, if fixed upfront |
| 102/21/2019 | Penal interest: separate loan transaction = exempt; embedded in goods price = taxable [Sec 15(2)(d)] |
| 109/28/2019 | RWA: ₹7,500/month/member, per apartment, statutory dues excluded (Entry 77(c)) |
| 234/28/2024 | Affiliation: Board–Govt school exempt (Entry 66A); Board–private school and university–college taxable |
| 245/02/2025 | MCD facility management (housekeeping/horticulture) not 243W-linked — taxable |
| 164/20/2021 | Scholarship coaching (75% expenditure test), STU hire, toll overload — Entries 72/22/23 |
| 154/10/2021 | Govt guarantee to PSU loans specifically exempt (Entry 34A) |
| 117/36/2019 | Maritime Training Institutes are recognised EIs (DG Shipping approval) |
| 86/05/2019 | BF/BC model: bank liable on entire charge; RCM on BF/BC commission |
| 228/22/2024 | Retrocession included in “reinsurance” (Entry 36A) |
| 34/8/2018 | DISCOM ancillary charges (application/testing/duplicate bill fee) taxable then — later exempted via Entry 25A |
Timelines, recovery hooks and classic traps
| Period | Event | Ref |
|---|---|---|
| 1 year from notification/order | Explanation may be inserted; effect retrospective from entry’s inception | Sec 11(3); Circular 120/39/2019 |
| 3 years from RCS airport commencement | Entry 16 VGF exemption (air transport to Govt) lapses | Entry 16 proviso |
| 3 years from incubatee agreement | Entry 44 condition (+ ₹50 lakh turnover ceiling, current & preceding FY) | Entry 44 |
| Per FY | ₹5,000 threshold for CONTINUOUS supply applies per financial year | Entry 9 |
| Minimum continuous 90 days | Entry 12A accommodation condition (with value ≤₹20,000/month) | Entry 12A |
| 60 years+ | Old age home resident age; consideration cap ₹25,000/month/member | Entry 9D |
| 65 years+, rural area | Charitable-activity skill/education qualifier for the elderly | Charitable activities definition |
No standalone penalty section exists in this chapter — ordinary Chapter 19–21 penalty/interest provisions apply. But two recovery (quasi-penal) mechanisms sit inside exemption entries:
Key points
- Entry 41 (leasing): on breach of the land-use/end-use condition, the original lessor, original lessee AND all subsequent lessees/buyers/owners are jointly & severally liable for the tax that would have been payable + interest + penalty.
- Entry 65B (ERCC): if GST actually paid by mining lease holders on royalty is less than the GST exempted to the ERCC, the exemption is restricted to that lower amount — the ERCC pays the difference.
Common mistakes
- Treating non-taxable supply as outside exempt supply — Sec 2(47) includes it; liquor and the 5 petro products are exempt supplies too.
- Mixing up the three categories: nil-rated = 0% in the tariff (still exempt per 2(47)); non-taxable = outside the charge altogether; zero-rated [IGST s.16, exports/SEZ] = taxable in law with ITC/refund available — the opposite of exempt, which blocks ITC.
- Dating a Sec 11(3) explanation from its own issue date — it operates retrospectively from the entry’s inception [Circular 120/39/2019].
- Taxing only the excess when a ceiling breaks — Entries 77 (₹7,500 RWA) and 78 (₹1,50,000 artist) tax the entire amount on breach; and the RWA threshold applies per apartment, not per person.
- Confusing governmental authority (function limited to Art. 243G/243W) with Government Entity (ANY function entrusted by Govt) — and calling DDA/BDA “local authorities” when Sec 2(69) is a closed list.
- Calling every truck operator a GTA — the consignment note is the sine qua non; a non-issuing operator falls under general Entry 18 instead.
- Conflating the three precinct-renting thresholds of Entry 13: rooms ₹1,000/day, halls/open area ₹10,000/day, shops ₹10,000/month.
- Keying every ceiling to the registration threshold — only Entries 7/45 use the ₹20L/₹10L registration threshold; Entries 9/74/77/78/81/9D/12A/41/44 carry their own independent monetary ceilings.
Quick revision cards
Exempt supply [Sec 2(47)] in one line?
Nil-rated + wholly exempt supplies, INCLUDING non-taxable supply [2(78)] — liquor + 5 petro (crude, HSD, petrol, NG, ATF).
Absolute vs conditional exemption?
Absolute = mandatory, cannot collect tax even if willing; conditional = optional, supplier may avail or pay tax.
Precinct renting thresholds (Entry 13)?
Rooms ₹1,000/day; halls/kalyanmandapam/open area ₹10,000/day; shops ₹10,000/month — three separate thresholds.
Hospital room rent rule?
₹5,000/day ceiling; ICU/CCU/ICCU/NICU excluded from the cap — always exempt regardless of charge.
Educational institution — three limbs?
Pre-school to HSC; curriculum for a law-recognised qualification; approved vocational course. Input services (transport/catering/security) only for pre-school–HSC.
Entry 6 — four exclusions from Govt-services exemption?
Posts/Railways; aircraft/vessel at port-airport; transport of goods/passengers; services to business entities above threshold.
GTA-to-unregistered — which 6 recipients stay taxable?
Factory, society, co-op society, body corporate, partnership/AOP, registered casual taxable person.
Banking — what stays taxable around interest?
Credit-card interest always; fees/charges over interest; penal interest embedded in goods price (separate loan transaction stays exempt).
BF/BC exemption condition?
Rural-area branch only (bank or insurer). BF only refers/facilitates; BC can transact as the bank’s agent.
Entry 41 leasing conditions?
Lease ≥30 years, upfront amount (any instalment count if fixed upfront), lessor ≥20% Govt-owned; breach → joint & several liability with interest + penalty.
Artist exemption (Entry 78)?
Folk/classical music/dance/theatre only, ≤₹1,50,000 — above that the ENTIRE amount is taxable; brand ambassador always taxable.
Right-to-admission ceilings?
Museum/national park/wildlife sanctuary/tiger reserve/zoo/protected monument — no ceiling (79, 79A); circus/award function/concert/sporting event/planetarium — ≤₹500/person (81).