Taxes can have a big effect on all types of businesses and change how they make money and pay taxes. This is why small and medium businesses need to understand GST.
While GST works as a whole and is a good system of indirect taxation in India, certain companies fit into particular categories for specific exemptions, which can, in turn, be advantageous or disadvantageous to their business.
In this blog post, we will learn what GST exemption means, which goods and services are exempted from GST, and how these exemptions impact MSMEs.
What is GST Exemption?
Simply put, GST exemption means that certain goods and services are not subject to GST tax. This means businesses dealing with these exempted commodities are not required to pay GST to sell those goods. This typically applies to sensitive commodities and services such as foodstuffs, health products, and educational services, providing a clear understanding of the GST implications.
MSMEs should understand another significant aspect of GST: the GST exemption limit. The GST exemption limit is Rs. 20 lakhs for services and Rs. 40 lakhs for commodities. Companies with yearly incomes under these limits are not required to register for GST, but they are free to choose to do so.
This straightforward exemption of GST, relieves small firms, allowing them to operate without the requirement of filing GST and making legal compliance easier.
How Does GST Tax Exemption Work?
GST exemptions can apply to businesses in two fundamental ways:
- Goods and Services Exempted from GST: Many products, such as fresh produce, and many more services, such as healthcare, among others, will be excluded, thereby relieving MSMEs of the burden of collecting and or remitting taxes on such goods and services.
- Turnover-Based Exemption: Businesses and companies earning below a prescribed limit of INR 40 lakhs can work without the GSTIN or Goods and Services Tax Identification Number, reducing compliance burden.
GST Exemption List for Services
The goods exempted from GST and exempted GST services provide relief to businesses, particularly MSMEs, by reducing their tax liability. The GST exemption list for goods and the GST exemption list for services cover various sectors, including healthcare, education, and select agricultural products.
Here is the list of some of the GST Exemptions for Services:
| Category | GST-Exempt Services |
| Healthcare | Hospital services, medical tests, and doctor’s consultations |
| Education | Courses offered by government-approved schools and colleges |
| Agriculture | Warehousing, loading, and unloading of farm produce |
The list of exempted goods under GST continues to evolve, providing various tax benefits to different industries. Websites like GST India provide current data on GST-exempt items and the latest policies for GST-exempt services.
GST Exemption Limit and Its Importance for MSMEs
The GST tax exemption limit is a crucial consideration for MSMEs. As discussed above, the exemption limit for commodity enterprises is fixed annually. MSMEs under this limit can choose not to register for GST, allowing them to operate without obtaining a GSTIN and saving time and effort on compliance responsibilities. However, a better understanding of GST verification can make things smoother and more transparent.
If an MSME exceeds this limit, they must register for GST and begin filing returns. Hence, maintaining operations below the limit could be beneficial for small enterprises with limited resources, but those aiming to expand may need to consider additional tax compliance.
How To Activate the GST Number If It Got Suspended?
How GST Exemption Impacts MSMEs
The GST exemption limit for services or goods significantly affects how MSMEs plan their operations. These impacts can be:
- Reduced Compliance Costs
For MSMEs, reporting GST can involve significant expenditures, like employing accounting experts or investing in software. The exemption allows enterprises not to do GST registration, cutting compliance-related expenses and allowing them to use their resources more effectively.
- Reasonably Priced
This means MSMEs exempted from GST can afford to offer products or services at lower prices in the market as they are relieved from GST obligations. Pricing below costs can assist MSMEs in increasing their market share as it is a significant selling tool in a price-sensitive market.
- Growth From Exemption
The GST exemption can help reduce many operational costs by eliminating costly and time-consuming audits and multiple filings. MSMEs usually qualify for exemption from the GST registration category to operate more flexibly and focus on growth rather than regulatory issues.
Moreover, GSTIN exemption can simplify the documentation required for businesses, especially in cases of exemption under GST provisions.
0% GST Items List
Here is the non-GST item lists in India –
Food: Fresh fruits, vegetables, milk, curd, pulses, unbranded cereals, jaggery, natural honey, and eggs.
Health & Education: Health services, school/college education, printed books.
Agriculture: Fresh produce, seeds, organic manure, animal fodder.
Essentials: Firewood, unbranded flour, salt, water (non-packaged), newspapers.
Others: Handlooms, khadi, human blood.
Key Takeaways
To run a business smoothly, MSMEs must know about GST tax exemptions and compliance. These exemptions can lower their tax burden. However, they may only sometimes benefit larger enterprises. So, it’s essential to weigh the pros and cons carefully.
GST Business Loan can help you to get funds without collateral. Borrow amounts range from ₹50,000 to ₹50 lakhs. You can choose a repayment period between 12 to 36 months. The interest rate starts at just 1.5%.
This loan can help you pay your GST, grow your business, or manage your cash flow. It’s a simple way to get the necessary funds without any hassle.
FAQs
- What are goods exempted from GST?
Goods exempted from GST include essentials like food, grains, milk, and certain healthcare items, as per the GST exemption list.
- What is the GST exemption limit for services?
The GST exemption limit for services is Rs. 20 lakh annually, with specific states setting it at Rs. 10 lakh for certain service providers.
- How do I know if a service qualifies for GST exemption?
You can check the official GST portal or refer to the latest GST exemption list for service to see if your service can be exempted from GST.
- Do I need to register if I provide only exempted services?
If you provide only exempted GST services and fall under the GST exemption limit, you need not register for GST.