GST Exemptions in India: A Complete Guide

Goods and Services Tax (GST) is a unified indirect tax system in India that applies to the supply of most goods and services. However, certain items are exempt from GST to make essential goods and services more affordable. These are known as GST exemptions. Understanding these exemptions is important for businesses, small traders, and service providers. It helps them avoid unnecessary tax liabilities and plan better. Knowing which goods and services are exempt under GST in India also ensures smooth compliance. In this blog, you will learn about the GST exemptions in India.

What are GST Exemptions?

GST exemptions apply to certain goods, services, suppliers, or transactions that the Central or State Government has excluded from taxation. These exemptions are designed to reduce the financial burden on essential sectors, support social welfare, and make basic needs more affordable. They help protect vulnerable groups and ensure that vital services, such as healthcare and education, remain accessible to all.

Types of GST Exemptions in India

Below are the types of GST exemptions in India:

1. Supplier-Based Exemption

The government allows certain suppliers to operate without charging GST, regardless of the goods or services they offer. This exemption supports entities that serve the public interest or carry out non-commercial activities. These include charitable institutions, religious trusts, and government-supported welfare agencies. These suppliers do not collect GST even if their services are not otherwise exempt.

Example: A registered charitable trust that offers vocational training does not pay GST on its services.

2. Supply-Based Exemption

Some goods and services are exempt from GST due to their essential nature. The exemption applies only to the product or service itself, not to the identity of the supplier. This helps reduce the cost of basic needs and ensures affordability for the general public. Essential items like fresh fruits, vegetables, healthcare services, and school education fall under this category.

Example: A private hospital that offers general medical services does not charge GST on patient treatment.

3. Absolute Exemption

This exemption removes GST from specific supplies without placing any conditions or restrictions. It applies to all suppliers and consumers involved in the transaction. The government uses this method for services that are critical to everyday functioning or public welfare. There is no requirement to meet any limits or follow any specific rules for this exemption.

Example: Electricity distribution services from a state power company remain fully exempt from GST.

4. Conditional or Partial Exemption

This exemption depends on meeting specific criteria. The government grants it only when the supply satisfies certain limits, purposes, or values. This type helps reduce the tax burden in specific cases without affecting the broader tax structure. It may include limits on service charges, business turnover, or daily supply value.

Example: A hospital does not pay GST on room charges if the per-day cost stays within Rs. 5,000. Another example is when an unregistered supplier delivers goods within a value of Rs. 5,000 per day within the same state; such supplies stay exempt under reverse charge provisions.

How are GST Exemptions Granted?

The Central or State Government decides which goods or services get GST exemptions. These exemptions aim to serve the public interest and support key sectors. The government announces them through official notifications after receiving recommendations from the GST Council. Exemptions may be absolute, meaning they apply to all cases, or conditional, which means they apply only when specific requirements are fulfilled.

Who Is Eligible for GST Exemptions?

Here is the list of entities that are eligible for GST exemptions:

• Agriculturists

Individuals engaged in natural crop cultivation do not need to pay GST on sales of farm produce. Even if the buyer does not register under GST, the sale remains tax-free. Farmers are not required to obtain GST registration or file returns for such income, ensuring rural economic support.

• Recipients of Low-Value Inward Supplies (Under Reverse Charge)

A registered person does not have to pay GST under the Reverse Charge Mechanism (RCM) just because they buy from an unregistered supplier. RCM applies only if the purchase falls under the notified categories in Section 9(4). The earlier Rs. 5,000 daily exemption is no longer valid.

• Charitable and Recognised Welfare Institutions

Organisations involved in religious or welfare activities enjoy exemptions for services like serving food to the poor, organising events, or providing shelter. These exemptions apply when the institution follows CBIC notification conditions and stays within turnover limits. This must be registered under Section 12AA of the Income Tax Act.

• Skill Training Providers Under NSDC

Training centres linked with the National Skill Development Corporation (NSDC) are exempt from GST. This applies when the training follows government-approved skill development programs aimed at job creation.

• Special Economic Zone (SEZ) Suppliers – E-Invoice Relief

Suppliers operating in SEZs are exempt from e-invoicing rules, regardless of turnover. However, they must still comply with regular GST return filing and payments. This eases compliance burdens for SEZ units.

List of GST Exemptions in India

Below is the list of GST Exemptions in India:

1. List of GST Exemptions on Goods

The following list of the most common goods that are GST exempt –

b)   List of GST Exemptions on Services

Below is the list of GST exemptions on Services:

Reasons for Exemption under GST

The following are the reasons for exemption under GST:

1. Social Welfare and Public Interest: The government exempts basic goods and services such as food grains, milk, education, and healthcare. These items meet everyday needs and help low-income groups by keeping essential commodities affordable.
2. Support for Small Businesses: Businesses with a limited annual turnover do not need to register under GST. The threshold varies depending on the type of business and region. The Composition Scheme also offers lower tax rates and simpler filing for small businesses, reducing their compliance burden.
3. Promotion of Exports: Exports play a key role in generating foreign income. Under GST, exports are zero-rated, which means they attract a 0% tax. Exporters do not bear any GST burden, keeping Indian goods competitive in international markets.
4. Encouragement of Inter-State Trade: To support the smooth movement of goods across states, the government may offer exemptions or concessional rates on specific inter-state supplies. This boosts trade and economic coordination between states.
5. Support for Agriculture: To help farmers, the government exempts unprocessed farm produce, seeds, and farming services. These exemptions reduce costs and protect the agricultural sector, which supports a large part of India’s population.
6. Government and Local Authority Services: Services provided by the government or municipal bodies, like issuing permits or maintaining public records, are exempt. This avoids double taxation and keeps administrative services affordable.
7. Relief for Financial Services: Interest on loans, basic banking, and some insurance services are exempt due to the complex nature of financial transactions. These exemptions prevent tax overlap and simplify compliance.
8. Respect for Cultural and Religious Practices: Goods and services used in religious or charitable work, such as temple services or free community meals, are exempt. This preserves cultural traditions and supports social harmony.
9. Simplification of Tax Structure: The government exempts low-value or low-volume supplies to reduce administrative workload. This helps businesses focus on important transactions and cuts down compliance efforts.
10. Transitional Relief during GST Rollout: To help businesses shift smoothly to GST, temporary exemptions and reduced tax rates were introduced. These measures eased the transition from the old tax regime to the new one.

Latest Updates on GST Exemptions

Here are the latest updates on GST exemptions in India:

1. Exemption for Raisins by Agriculturists

CBIC issues Circular No. 247/04/2025 GST (April 2025), which confirms that farmers who sell raisins directly after cultivation do not pay GST. They do not need GST registration under Section 23(1) of the CGST Act.

2. 55th GST Council Clarifications (December 2024)

In Circular No. 245/02/2025 GST (January 2025), CBIC reaffirmed the following exemptions:

• No GST on Bank/NBFC Penal Charges

CBIC issues Circular No. 245/02/2025 GST (January 2025) clarifying that penal charges imposed by banks or NBFCs (under RBI rules) do not attract GST, as such charges aim to enforce contract terms rather than purchase any service.

• Partial Exemption for RBI-Regulated Payment Aggregators

CBIC clarifies that RBI-regulated payment aggregators receive GST exemption for transaction settlement services up to Rs 2,000 per transaction. It excludes payment gateway functions.

• R&D Services Funded Through Grants

Grant-funded R&D services offered by the government, educational institutes, or universities remain exempt. The CBIC regularises past tax liabilities from 1 July 2017 to 9 October 2024.

• GST Exemption for NSDC-Approved Skill Training

Services by NSDC-approved training partners continue to enjoy exemption starting 16 January 2025. The past period (10 Oct 2024 to 15 Jan 2025) gets automatic regularisation.

3. Electricity Utility Support Services

CBIC issues Circular No. 246/03/2025 GST (30 January 2025) and Notification 06/2025-CTR clarifying that support services—meter rental, shifting, testing, billing, connection—do not attract GST from 10 October 2024 to 15 January 2025.

Conclusion

GST exemptions help ease tax burdens for essential sectors, small businesses, and charitable services. They also support agriculture, promote exports, and ensure basic goods and services remain affordable. Staying informed about these exemptions is important for every taxpayer to ensure compliance and avoid unnecessary costs. As GST rules evolve, regular updates help businesses and individuals make better financial decisions and take advantage of available tax reliefs. For instance, if you want to do a GST registration, contact Online Legal India to get expert assistance.