No Tax relief under GST for entities enjoying Tax Exemption

In recent times, the Goods and Services Tax (GST) has been a topic of discussion for many business owners in India. The GST is an indirect tax that has replaced many indirect taxes that were levied by the state and central governments, such as excise duty, service tax, and value-added tax (VAT). One of the contentious issues that have arisen with the implementation of GST is the tax relief for entities that enjoy tax exemption. In this article, we will explore the topic of no tax relief under GST for entities enjoying tax exemption.

What is GST?

GST is a taxation system that was introduced in India on July 1, 2017, to replace the existing indirect taxation system. It is a tax on the supply of goods and services that is levied at every step of the value chain. GST is a destination-based tax, which means that it is levied where the consumption of goods and services takes place. The GST is divided into three categories: CGST (Central Goods and Services Tax), SGST (State Goods and Services Tax), and IGST (Integrated Goods and Services Tax).

Tax Exemption under GST

Tax exemption is granted to entities that meet certain criteria. The government has provided exemptions for certain goods and services under GST to promote specific sectors or industries. For example, small businesses with a turnover of less than Rs. 20 lakhs are exempt from GST, and certain agricultural products are also exempt from GST.

Entities that enjoy tax exemption are not required to pay GST on their goods and services. However, they are also not eligible for tax relief under GST. This means that they cannot claim input tax credit (ITC) on their purchases. ITC is a credit that is available to businesses for the tax paid on their purchases. It can be used to offset the tax liability on their sales.

No Tax Relief under GST for Entities enjoying Tax Exemption

Entities that enjoy tax exemption are not eligible for tax relief under GST. This means that they cannot claim ITC on their purchases. The rationale behind this is to prevent the double benefit of tax relief. If entities that are exempt from tax also get tax relief, it would result in an unfair advantage over other entities that are not exempt from tax.

The government has clarified that entities that are exempt from tax cannot claim ITC, even if they purchase goods and services from entities that are registered under GST. This means that if a business that is exempt from tax purchases goods from a registered dealer, they cannot claim ITC on the tax paid by the registered dealer.

Conclusion

In conclusion, entities that enjoy tax exemption are not eligible for tax relief under GST. They cannot claim ITC on their purchases, which is available to other entities that are registered under GST. This is to prevent the double benefit of tax relief and to ensure a level playing field among businesses. Business owners must be aware of these regulations and plan their purchases accordingly.