GST was introduced in India on 1st July 2017. It was a major reform as it is one taxation system for the whole nation. The GST Council is the sole authority to decide the tax rates for different goods and services. It decides on the exemption rules and the final date of submission of the GST forms. It is responsible for formulating all the tax-related laws and also specific exemptions applicable to some of the Indian States. There are few supplies of goods and services that are not considered as supplies and are kept outside the scope of GST. These are covered under Schedule III of the GST Act. Since they have been kept outside the scope, GST cannot be levied on them.
Did you know?
France was the first country where GST was implemented.
Difference between Nil Rated, Zero Rated, Exempt, Non-GST, and Schedule III
|
Nil Rated Supply |
Exempt Supply |
Zero-Rated Supply |
Non-GST Supply |
Schedule III Supply |
|
|
Meaning |
These supplies have 0 tax rate notified under the GST Act |
These are supplies that are taxable under the GST Act, however specific exemptions have been given to them due to which GST is exempt |
These are those supplies in which sales, as well as input both, are free of GST |
These are those supplies that have been kept out of the scope of GST |
Those transactions that would have been supplied and chargeable to GST if they would not have been kept in Schedule III. Since they have been kept in Schedule III, hence not considered as supply and thus GST is not levied. |
|
Is it Supply |
Yes |
Yes |
Yes |
No |
No |
|
Is ITC Available |
Available |
Not Available |
Available |
Not Available |
Not Available |
|
Examples |
Salt, Jaggery, Grains, etc. |
Bread, Fresh Milk, Fresh Fruits, etc. |
SEZ supplies |
Petrol, Natural Gas, High-Speed Diesel, etc. |
High Sea Sales, Sale of land and building, services by court or tribunal, etc. |
Also read: List Of Goods Exempted Under GST in India with HSN Code
Negative List of GST- Schedule III of the GST Act
The different sectors which are exempted from GST are included in Schedule III and include:
- Legal Services
- Employment Services
- Services in relation to a deceased
- Duties performed by officials
- Sale of Land and Building
- Actionable Claims except for Betting, Gambling, and Lottery
- High Sea Sale
- Merchant Trade supply
Following are all the relevant details regarding the same:
Legal Services
GST does not apply to legal services provided by any Tribunal or court formed under any law in effect at the time. This means that court and tribunal fees are not subject to GST. Here the court includes the High Court, District Court, and Supreme Court.
Services rendered by an employee to the employer under the regular course of employment
If an employee renders service to their employer which is in the regular course of their employment then that transaction is not considered as supply. Employer-employee relationships are among the related parties, raising worries about whether employment services will be covered by the GST statute. By including it in this list, it has been clarified that the GST is not applicable to employment services. According to the new circular in 2020 Under the reverse charge system, in the hands of the company, remuneration to independent directors or other non-executive directors who are not employees is taxable under GST. In a case where the services were provided by an employer to an employee, these are chargeable to GST except in the case of gifts up to the value of Rs. 50,000.
Services Related to a deceased
Services related to burial, funeral, mortuary, or crematorium including transportation of the deceased are not covered under GST.
Duties performed by officials
The following persons, in positions of power are exempt from paying GST on their duties.
-
Members of Parliament, the State Legislature, Panchayats, Municipalities, and other local governments
-
Any person who is not an employee of the government or a local body and holds the position of Director/Chairperson/Member in a body formed by the government or a local body under the provisions of the Constitution.
However, legal services supplied by the same MLAs/MPs will be chargeable under GST if they’re provided to a business entity but will be exempt if they’re provided to anyone else.
Sale of Land and Building
Under the Goods and Services Tax Act, proceeds from the sale of land and buildings are not subject to GST. The GST Act, on the other hand, applies to the construction of a new structure. But if any consideration for the sale of a building, complex, or civil structure is received before the completion certificate is issued, the full sale consideration will be subject to GST as a supply of services.
Also read: Types of GST in India – What is CGST, SGST and IGST?
High Sea Sale
High sea sale Supply is a type of supply in which commodities are sold while in transit, that is, after they have been dispatched from the port of origin but before they arrive in Indian territory/home custom clearance. The following items are included in the High Sea Sales: Supply of goods by the importer of goods to any other person/entity, by the endorsement of documents of title, after the goods have been dispatched from the port of origin located outside India but before clearance from the customs for home consumption.
Merchant Trade supply
The supply of products from one location in a non-taxable region to another location in a non-taxable territory without the items entering India is beyond the jurisdiction of GST. Third–Country Export is another name for this. As a result, GST applies only if the requirement of goods “entering India” is met for a supply from a non-taxable territory Out-and-out supplies (i.e. merchant dealing), sales of goods in customs bonded warehouses, and high-sea transactions are not considered supplies under the GST Act and are not subject to the tax.
Actionable Claims (except Lottery, Betting, and Gambling):
Actionable claims are those that can only be enforced by legal action or a lawsuit. For example, bill of exchange, a promissory note, a beneficial interest in movable goods not in the claimant’s possession. A book debt is not good because though it can be transferred, it cannot be sold under the Transfer of Property Act. Under the Negotiable Instruments Act, a bill of exchange or a promissory note can be delivered or endorsed, but not sold. Neither the delivery of products nor the provision of services are actionable claims. They can be thought of as a kind of money substitute. As a result, these activities will be exempt from GST. Lotteries, betting, and gaming, on the other hand, are subject to a higher GST rate as exceptions in actionable claims. Gambling and betting are services, whereas the lottery is good.
Items not covered under GST
Some of the items not covered under GST include bread, and milk products like fresh milk, fresh fresh curd, lassi and buttermilk. Some of the other goods include fresh vegetables like onions, tomatoes, potatoes, garlic, cereals, jaggery, coffee beans, as well as tender coconut.
Non-inclusion in terms of goods under GST
Supply of the following items not included under GST:
- Natural Gas
- Alcohol used for human consumption
- Petrol, crude oil, high-speed diesel, aviation turbine fuel, etc.
- Electricity
Also read: Know About GST On Labour Charges In India
Conclusion
Although most of the things are covered under GST, there are still certain items that are excluded from GST. The negative list of GST forms a very important part of the GST Act, as these are the transactions on which GST is not levied. The complete knowledge of these items is necessary so that the wrong GST is not charged on these transactions. Also, it is important to know which items are not included under GST.
Do you have issues with payment management and GST? Install the Legal Tree app, a friend-in-need and one-stop solution for all issues related to income-tax or GST filing, employee management and more. Try it today!