Exemption from GST by Government

By | September 8, 2016


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Power to Government to grant exemption

Schedule to GST Law prescribe the rate of GST for supply of various goods and services.

As per clause 10(1) of GST Model Law, 2016 Central Government has been granted to reduce GST rates as per requirements, by issuing a general exemption notification. This notification can be issued only on basis of recommendation of GST Council. The exemption should be in public interest.

The general exemption can be general either absolutely or subject to such conditions as may be specified in the notification. The exemption can be absolute (unconditional) or subject to conditions.

The exemption can be in respect of goods and/or services of any specified description. Exemption can be from the whole or any part of the tax leviable thereon.

Exemption optional but absolute exemption compulsory

Explanation to clause 10(1) of GST Model Law, 2016 states that where an exemption under section 10(1) in respect of any goods and/or services from the whole of the tax leviable thereon has been granted absolutely, the taxable person providing such goods and/or services shall not pay the tax on such goods and/or services.

Thus, if a notification grants unconditional exemption from whole of GST to certain goods or services, the taxable person cannot pay GST on such goods or services.

Exemption in exceptional circumstances

General exemptions from duty can be granted under clause 10(1) of GST Model Law, 2016  by issuing a notification. However, clause 10(2) of GST Model Law, 2016authorises Central Government to grant exemption, in public interest, in exceptional circumstances by a special order. Such exemption can be only on recommendation of GST Council.

The exceptional circumstances should be specified in the order. It is not necessary to publish the order in Official Gazette.

Retrospective insertion of clarification to exemption notification

An exemption notification cannot be amended with retrospective effect. However, sometimes it is found that there is some drafting mistake or ambiguity in

(a) the general exemption notification or

(b) Special exemption order issued. Sometimes, taxable person gets unintended benefit while in some cases even intended benefit cannot be obtained due to drafting error in the exemption notification or exemption order.

To overcome this problem, clause 10(3) provides that Central Government, for the purpose of clarifying the scope or applicability of exemption notification or exemption order, may insert an explanation to the exemption notification or order within one year of such notification or order. Such Explanation to an exemption Notification will have retrospective effect from date of exemption notification. Such Explanation can be inserted in exemption notification only within one year of date of issue of notification and not thereafter.

Effective date of a notification

The exemption notification becomes effective on the date it is issued for publication in Gazette, unless otherwise provides. The notification shall be placed on official website of Government – clause 10(4) of GST Model Law, 2016


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