GST SCHEME: EXEMPTIONS
By: – Nagesh Bajaj
Goods and Services Tax – GST
Dated:- 8-8-2011
The prevalent indirect tax structure in India has a number of exemptions. At central level, 330 exemptions are allowed under CENVAT. These exemptions to service providers and manufacturers depend on the fulfillment of various conditions which are specific to each exemption. Around 99 items are presently exempted under VAT. Individual states can expand this list even for the goods of local importance. It is not possible for the provider of exempt services or manufacturers of exempt goods to avail the benefit of input tax credits. This hampers the free flow of credits down the supply chain and increases the cascading effect. Ultimately whol
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iii) Other commercial departments
iv) Public sector enterprises
v) Banks and Insurance
vi) Health and Education services
b) Any service transactions between an employer and employee either as a service provider, recipient or vice-versa.
c) Any unprocessed food article which is covered under the public distribution system should be exempt regardless of the outlet through which it is sold.
d) Education services provided by non-governmental schools and colleges.
e) Health services provided by non-governmental agencies.
The exemption list proposed by the Task Force leaves a corner for debate as it consists of services which are rendered by the government in the course of the discharge of the sovereign functions of the state. Sovereign
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sovereign function, service tax is leviable provided there is a sale of the service on the basis of an invoice or a bill or voucher. Even if it is a statutory function and only a fee is charged, it is still conceptually a commercial sale. And the tax is leviable. The Report of Task Force should have said that these functions are not taxable.
Department of Revenue (DOR) in its comment on the first discussion paper on GST favoured for a common list of exemptions for CGST and SGST. Efforts will be made by centre to substantially reduce the number of items presently exempted under CENVAT regime. Around 99 items presently exempted under VAT may continue to remain exempted in GST regime. There should be no scope, with individual states, for expa
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