Definition of Exempt Supplies, Goods Inputs- Revised Draft GST Law

With the implementation of the GST regime, the Indian taxation system underwent a major overhaul. One of the most significant changes introduced by GST was the concept of exempt supplies. The revised draft GST law provides clarity on the definition of exempt supplies, as well as the treatment of goods and inputs under the new tax regime.

Definition of Exempt Supplies

Exempt supplies refer to goods or services that are not subject to the GST. However, businesses engaged in making exempt supplies are not eligible for input tax credit (ITC) on the inputs used for such supplies. The revised draft GST law has provided a comprehensive definition of exempt supplies. As per the law, exempt supplies include:

Goods and services that are not taxed under GST
Goods and services that are exempt from tax under specific notifications issued by the government
Goods and services that are not liable to tax under GST, either by virtue of being outside the scope of GST or due to being specifically exempted from GST

It is important to note that businesses engaged in making exempt supplies are not eligible for input tax credit on the inputs used for such supplies. This can have a significant impact on the cash flow of businesses.

Goods and Inputs Under GST

The revised draft GST law has also provided clarity on the treatment of goods and inputs under the new tax regime. As per the law, goods and inputs are broadly classified into three categories:

Taxable goods and inputs: These are goods and inputs that are subject to GST, and businesses can claim input tax credit on the tax paid on such goods and inputs
Exempt goods and inputs: These are goods and inputs that are not subject to GST, but no input tax credit can be claimed on the tax paid on such goods and inputs
Non-GST goods and inputs: These are goods and inputs that are outside the scope of GST, and businesses cannot claim input tax credit on the tax paid on such goods and inputs

It is important to note that businesses engaged in making exempt supplies are not eligible for input tax credit on the inputs used for such supplies. Therefore, businesses need to carefully evaluate the impact of exempt supplies on their cash flow and take necessary steps to manage their working capital requirements.

Conclusion

The revised draft GST law provides clarity on the definition of exempt supplies, as well as the treatment of goods and inputs under the new tax regime. Businesses need to carefully evaluate the impact of exempt supplies on their cash flow and take necessary steps to manage their working capital requirements. Additionally, businesses need to ensure that they comply with the GST regulations and file their GST returns in a timely and accurate manner.