Introduction: Why the Updated ICAI Handbook Matters
Updated ICAI handbook on exempted supplies under GST is now live, offering detailed clarity for tax professionals, businesses, and consultants. This update addresses practical doubts, evolving interpretations, and recent legal changes impacting exemption claims under GST.
Whether you’re a CA, MSME owner, or GST practitioner, understanding exempted supplies is crucial to avoid errors, reduce tax liability, and maintain clean compliance records.
🔍 What Are Exempted Supplies Under GST?
As per Section 2(47) of the CGST Act, exempt supply means the supply of any goods or services that attract:
- Nil rate of tax, or
- Are wholly exempt under Section 11 (CGST Act) or Section 6 (IGST Act), or
- Are non-taxable under the Act.
These include:
- Healthcare services
- Education services
- Agricultural produce supply
- Certain financial services (interest on loans, savings a/c)
- Services by SEZ to SEZ
📗 Highlights from the Updated ICAI Handbook
Here’s what the latest ICAI release clarifies:
| Topic | Key Update |
|---|---|
| Mixed & Composite Supply | Clarified when exempt and taxable supplies are bundled |
| No-Invoice Transactions | Guidance on documenting exempt supplies |
| Reverse Charge Mechanism (RCM) | Treatment of exempt inward supplies under RCM |
| Agriculture Services | Updated scope of exemption for storage and loading |
| Education Sector | Clarification on online vs offline course exemptions |
| Interest on Deposits | Broader coverage of exempt financial services |
⚖️ Legal Backing: Circulars & Notifications
- Notification No. 12/2017-Central Tax (Rate): Key notification listing exempt services.
- CBIC Circular No. 177/09/2022-GST: Clarified place of supply and exemptions in transport/education.
- Supreme Court Ruling – Skill Lotto Solutions (2020): Defined distinction between actionable claims and exempt goods.
📌 Expert Tip from CA Practitioners
“Most exemption errors arise from misclassifying services. Always cross-check with the latest CBIC notifications and ICAI handbooks before filing returns.”
🔁 How Does This Affect Taxpayers?
- No GST on exempt supplies, but you must report them in GSTR-1 and GSTR-3B.
- No ITC can be claimed on inputs/input services used for exempt supplies.
- Helps businesses avoid unnecessary litigation by properly classifying transactions.
✅ Practical Checklist: Reporting Exempt Supplies
- Disclose exempt outward supplies in Table 8 of GSTR-1
- Mention in Table 3.1(c) of GSTR-3B
- Maintain supporting documents (e.g., educational course approvals, agricultural invoices)
- Segregate input credit in books to avoid ineligible ITC claims
❓ FAQ Section
Q1. Do I need to issue an invoice for exempt supplies?
A: A bill of supply suffices. No GST needs to be charged.
Q2. Can I claim ITC on exempted goods?
A: No. Inputs used for exempt supplies are ineligible for ITC.
Q3. Are SEZ services to another SEZ exempt?
A: Yes, they are zero-rated as per GST provisions.
🔚 Conclusion
The updated ICAI handbook on exempted supplies is a critical guide for tax professionals and businesses navigating GST complexity. Clear documentation and correct classification help avoid tax penalties and preserve input credit.
📞 Need help with GST classification or return filing?
Connect with our experts at Efiletax.in today.
🔍 Google Snippet Summary
ICAI’s updated handbook on exempted supplies under GST offers clarity on healthcare, education, agriculture, RCM, and documentation—vital for error-free filing.
Would you like a second version focused more on MSMEs or consultants?