Fairfield Institute of Management and Technology

GOODS AND SERVICES TAX

309

Explain CGST and SGST and does exemption

from CGST automatically exempted from SGST

NAAC
ACCREDITED

Submitted to: Submitted by:

Ms Kiran Yadav Ajay Dhoundiyal
Assistant professor 41951401718
BBA(G) V-C
 Table of Content
S No. Topic Page No. Signature

1. Objective

2. Assignment Questions

3. Conclusion

4. Bibliography
OBJECTIVE
The objective of the assignment is to understand the basic concept of GST and its various
subtypes like SGST and CGST. Also, to know that exemption of CGST can lead to
exemption of SGST
GOODS AND SERVICES TAX
Goods and Services Tax (GST) is an indirect tax (or consumption tax) used in India on the
supply of goods and services. It is a comprehensive, multistage, destination-based tax:
comprehensive because it has subsumed almost all the indirect taxes except a few state taxes.
Multi-staged as it is, the GST is imposed at every step in the production process, but is meant
to be refunded to all parties in the various stages of production other than the final consumer
and as a destination-based tax, it is collected from point of consumption and not point of
origin like previous taxes.
Goods and services are divided into five different tax slabs for collection of tax - 0%, 5%,
12%, 18% and 28%. However, petroleum products, alcoholic drinks, and electricity are not
taxed under GST and instead are taxed separately by the individual state governments, as per
the previous tax system. There is a special rate of 0.25% on rough precious and semi-precious
stones and 3% on gold. In addition a cess of 22% or other rates on top of 28% GST applies
on few items like aerated drinks, luxury cars and tobacco products.[2] Pre-GST, the statutory
tax rate for most goods was about 26.5%, Post-GST, most goods are expected to be in the
18% tax range.
GST Exemption Based on Aggregate Turnover 
The GST Act defines “aggregate turnover” as the aggregate value of all taxable supplies
(excluding charges paid on reverse charge mechanism), exempt supplies, inter-state supply of
goods as well as all goods and services exported. There are however a few notable exclusions
when calculating the aggregate turnover of businesses. The following payouts are excluded
from calculation of aggregate turnover:   
Any IGST, CGST or SGST paid by the investor. Value of inward supplies of goods and
services. Taxes payable on the basis of reverse charge mechanism.
Value of non-taxable supplies of goods/services.

GST Exemption for Goods

A number of goods are not taxable under GST and the list of goods eligible for GST
exemption is liable to change periodically. However, the reasons for exemption of a good
under GST rules may vary depending on whether the good is zero rated, GST exempt, nil
rated or considered as a non-GST supply. In a majority of cases, unprocessed goods such as
raw silk, etc. are GST exempt however once processed, goods such as readymade apparel
made from silk are taxable. Exemption from GST though announced by the government is
usually in line with recommendations made by the GST council.

GST Exempt Supplies

Supply of a good may not attract GST in the following cases:
The good is non-taxable under GST rules. This applies to goods such as petrol and alcohol
for human consumption which are not taxable under the GST Act. This can change at a later
date.
The good is part of the zero rated list i.e. the tax rate for the good has been fixed at 0%.
Examples include fresh milk, fresh vegetables, etc.
The supply of the good has been declared GST exempt through a notification from the
government. Such as exports and supply of goods made to a SEZ (Special Economic Zone) or
SEZ developer.
In the above cases, the supply of these goods attract zero GST, however, no input tax credit
benefit is available to GST registered individuals/businesses for these goods.

Reasons for GST Exemption on Goods

Government may decide to implement GST exemption on goods in the following cases:
The exemption is recommended by the GST council
Such exemption from GST is deemed to be in public interest.
In exceptional circumstances, government may grant exemption through special order
Exemption on supply of specific goods is done through an official notification

Types of GST Exemption

The GST Act specifies three types of exemption from GST for goods:
Absolute exemption: Supply of the specific good is GST exempt irrespective of who the
supplier/receiver is and whether the good is supplied intrastate/interstate.
Conditional exemption: Supply of such goods is GST exempt subject to some specific terms
and conditions specified in the GST Act, amendment or notification.
It is notable that SGST or CGST exemption does not immediately grant IGST exemption to
the supply of a specific good unless otherwise specified by GST Act, amendment or
applicable notification.
Examples of GST Exempt Goods
The following are some key examples of GST Exempt Goods*:
Fresh and dried vegetables including potatoes, onions, sweet potatoes and various
leguminous vegetables etc.
Live fish, fresh fish, bird’s eggs in shell, fresh milk etc.
Fresh ginger, garlic, grapes, melon, unroasted coffee beans, unprocessed green tea leaves, etc.
Corn, rice, wheat, maize, soyabean, hulled cereal grains, etc. not put into branded containers.
Human blood and various components of the same.
Raw silk, silk worm, coccon, jute fibres (unspun), khadi yarn, khadi fabric, etc.
Slates, slate pencils, chalk sticks, parts used to manufacture hearing aids, handloom, etc.   
*The above list is indicative and there are many more goods that qualify for nil GST. The
applicable list is as per GST rates correct as of the 1st of January 2019. Use Paisabazaar’s
handy GST rate finder tool for the complete list of zero GST goods.
GST Exempt Services
A number of services too are exempt from GST. It is notable that the GST exemption for
businesses involved in the supply of services is Rs. 10 lakh annual turnover for
hill/northeastern states and Rs. 20 lakh for other states. The following is a short list of
services that qualify for exemption under the GST Act and are classified under the heading
“support services to agriculture, forestry, fishing and animal husbandry”:  Services related to
cultivation of plants and animal husbandry (except horse farming) Supply of labour for farms.
Services carried out in the course of farming such as tending, cutting, pruning, sun drying,
threshing, sorting, etc. which do not alter the essential characteristics of the product
 Renting/leasing of agro machinery/vacant land for use in agricultural activities
 Loading, unloading, packing, storage, warehousing of agricultural produce and fumigation of
warehouses.
Services related to pre-conditioning/precooling, ripening, waxing, retail packing
Some other services that qualify for GST exemption under existing GST Rules
are*:  Transportation of passengers public transport/metered cabs/auto
rickshaws/metro/tramway, etc. Transportation of goods outside of India, services related to
transport of agricultural produce, milk, salt, rice, etc. Various Services provided by the
Reserve Bank of India, IRDAI, central government, state government, NPS, etc.
Banking services on Basic Saving Bank Deposit (BSBD) account opened under the Pradhan
Mantri Jan Dhan Yojana (PMJDY). Services provided by veterinary clinic with respect to
healthcare of animals/birds.
 Services by an artist through performance in classical or folk art forms of music, dance,
theatre, etc.
*The above list of nil GST services in indicative and subject to periodic change. Use
Paisabazaar’s handy GST rate finder tool for the complete list of nil GST services.
About GST (Goods and Service Tax)

The Meaning of CGST with Full Form

CGST means Central Goods and Service Tax. CGST is a part of goods and service tax. It is
covered under Central Goods and Service Tax Act 2016. Taxes collected under Central
Goods and Service tax will be the revenue for central Government. Present Central taxes like
Central excise duty, Additional Excise duty, Special Excise Duty, Central Sales Tax, Service
Tax etc. will be subsumed under Central Goods and Service Tax.

The Meaning of SGST with Full Form

SGST means State Goods and Service Tax. It is covered under State Goods and Service Tax
Act 2016. A collection of SGST will be the revenue for State Government. After the
introduction of SGST all the state taxes like Value Added Tax, Entertainment Tax, Luxury
Tax, Entry Tax etc. will be merged under SGST. For example, if goods are sold or services
are provided within the State then SGST will be levied on such transaction.

The operation of the taxing statute needs flexibility along with certain power for the smooth
implementation of the provisions. Sec 11 of CGST Act 2017 provides the power and
flexibility to the Government to grant exemptions on the recommendation of GST Council.
2. Sec 11(1) of CGST Act – Statutory Provision :
Where the Government is satisfied that it is necessary in the public interest so to do, it may,
on the recommendations of the Council, by notification, exempt generally, either absolutely
or subject to such conditions as may be specified therein, goods or services or both of any
specified description from the whole or any part of the tax leviable thereon with effect from
such date as may be specified in such notification. – Sec 11(1) of CGST Act 2017
2.1 Explanation:– The relevant points under sec 11 (1) of CGST Act 2017 about
Government’s power to grant exemptions are as follows:-
(a) Central/State Government has the power to reduce GST rates by issuing exemption
notification.
(b) The exemption should be in the public interest.
(c) The exemption notification can be issued only based on the recommendation of GST
Council.
(d) The exemption can either be absolute (unconditional) or subject to conditions
(e) The exemption can be in respect of goods or services or both of any specified description
(f) The exemption can be from the whole or any part of the tax leviable thereon
(g) The exemption notification becomes effective on the date as specified in the notification
issued by the Central/State Government.
Sec 11(2) of CGST Act – Statutory Provision :
Where the Government is satisfied that it is necessary in the public interest to do so , it may,
on the recommendations of the Council, by special order in each case, under circumstances of
an exceptional nature to be stated in such order, exempt from payment of tax on any goods or
services or both on which tax is leviable
3.1 Power to grant Exemption by Special Order:-
(a) The Central Government has the power to grant the exemption, in the public interest, in
exceptional circumstances by special order.
(b) Such exemption can be only on the recommendation of GST Council.
(c ) It is not necessary to publish the order in Official Gazette.
(d) This is an ad hoc exemption and can be granted even retrospectively.
(e) A special exemption can be granted to a specific category of person/sector. The
Government has power granting exemption to public sector undertakings giving reasons for
such exemption, but not giving similar exemption to private persons It was held in Jain
Exports P Ltd. v. UOI that such permission by the Government is permissible and will not be
treated as discriminatory.
4. Sec 11(3) of CGST Act – Statutory Provision :
The Government may if it considers necessary or expedient so to do to clarify the scope or
applicability of any notification issued under sub-section (1) or order issued under sub-
section (2), insert an explanation in such notification or order, as the case may be, by
notification at any time within one year of issue of the notification under sub-section (1) or
order under sub-section (2), and every such explanation shall have effect as if it had always
been the part of the first such notification or order, as the case may be.
4.1 Insertion of clarification to Exemption notification: Exemption notification issued by
the Government may have some drafting mistake or ambiguity which creates confusion in
taxpayers minds. As a result taxable person gets unintended benefit while in some cases even
intended benefit cannot be obtained.
To overcome this problem, section 11(3) of CGST Act provides that Central Government, in
order to clarify 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.
The time limit for inserting the explanation in exemption notification is only one year of the
date of issue of notification and not thereafter.
Explanation of an exemption Notification will have a retrospective effect from the date of the
exemption notification.
The retrospective insertion can be made only to explain or clarify as the purpose of
‘explanation’ is to clarify the scope or applicability of an exemption notification or
exemption order.
The clarification to exemption notification/order cannot be added with retrospective effect to
restrict the scope of notification/order or to insert a condition that was not there.
5. Explanation to Sec 11(3) of CGST Act – Statutory Provision :
Explanation.––For this section, where an exemption in respect of any goods or services or
both from the whole or part of the tax leviable thereon has been granted absolutely, the
registered person supplying such goods or services or both shall not collect the tax, over the
effective rate, on such supply of goods or services or both.
5.1 The Government vide notifications grant absolute ( unconditional ) or conditional
exemption. If a notification grants unconditional exemption from GST and specifies the rate
of goods and /or services as the NIL rate, the taxable person cannot collect and pay tax on
such a supply of goods and/ or services.
6. Difference between Notifications under Section 11 & Sec 9 of CGST Act 2017
Notifications under section 11 of CGST Act 2017 issued for supply of any goods or /and
services which attracts nil rate of tax or which may be wholly exempt and includes Non-
Taxable supply also, whilst section 9 is a charging section which Act notifies rates of goods
and services
Notification No. 02/2017- Central Tax (Rate) for goods and Notification No. 12/2017-
Central Tax (Rate) for services have been issued by using power given under section 11 of
CGST ACT. So goods and services mentioned in these two notifications are exempted goods
as per the definition of exempt supply.
Section 9 of the CGST Act notifies rates of goods and services vide Notification No.
01/2017- Central Tax (Rate) which contains six schedules specifying tax rates at 2.5%, 6%,
9%, 14%, 1.5%, and 0.125%. There is no schedule levying tax at 0% i.e. NIL rated.
 CONCLUSION
After completing the assignment I understand the basic concept of GST and its subtypes of
SGST and CGST and its various exemptions set under it. By understanding this I will be able
to perform better in the subject.
 BIBLIOGRAPHY

 Wikipedia
 Investopedia