• The Finance Minister presented the Interim Union Budget 2019 1st Feb as the general elections are scheduled later this year. The Interim Union Budget 2019 aims to provide benefits to the middle-class taxpayers especially salary earners, pensioners, and senior citizens. Key tax and regulatory proposals of the Interim Union Budget 2019 have been summarised herein under:
  • The end-date for obtaining approval from the competent authority to claim the profit-linked deduction by taxpayers engaged in the business of developing and building affordable housing projects extended from 31 March 2019 to 31 March 2020.
  • The threshold in a financial year for not deducting tax at source from payment of rent increased from INR180,000 to INR240,000.
  • The threshold in a financial year for not deducting tax at source on interest income from deposits with a banking company or co-operative society engaged in banking business or post- office increased from INR 10,000 to INR 40,000
  • The eligible rebate from income-tax payable enhanced up to INR 12,500 (currently up to INR 2,500) for resident individuals whose total income does not exceed INR 500,000 (currently up to INR 350,000).
  • The standard deduction in a financial year from salary income enhanced to INR50,000 (currently INR40,000).
  • The second Self Occupied Property (SOP) will not be subject to tax on a notional rent basis. Further, the aggregate deduction for interest on housing loan for both such SOPs capped at INR200,000.
  • The income tax exemption on Long Term Capital Gain (LTCG) from the sale of a residential house will be available even if re-invested in two house properties in India on a once in a lifetime basis provided such LTCG do not exceed INR20,000,000.
  • The period for which the Annual Value of house property held as stock in trade and not let out which is considered as NIL extended to two years from the end of the financial year of obtaining the completion certificate (currently this period is one year from obtaining such certificate).

CA Pankaj Kumar Mishra

Ineligible categories under MEIS

i.Supplies made from DTA units to SEZ units.

ii.Export of imported goods covered under paragraph 2.46 of FTP;

iii.Exports through trans-shipment, meaning thereby exports that are originating in third country but trans-shipped through India;

  1. Deemed Exports;

v.SEZ/EOU/EHTP/BPT/FTWZ products exported through DTA units;

vi.Export products which are subject to minimum export price or export duty

vii.Export made by units in FTWZ

Sl. No. Chapters Products under the following chapters are not eligible for incentive under MEIS
1 Chapter-01 Live animals
2 Chapter-02 Meat and edible meat offal
3 Chapter-10 Cereals
4 Chapter-24 Tobacco and manufactured tobacco substitutes
5 Chapter-25 Salt; sulphur; earths and stone; plastering materials, lime and cement
6 Chapter-26 Ores, slag and ash
7 Chapter-27 Mineral fuels, mineral oils and products of their distillation; bituminous substances; mineral waxes
8 Chapter-31 Fertilizers
9 Chapter-34 Soap, organic surface-active agents, washing preparations, lubricating preparations, artificial waxes, prepared waxes, polishing or scouring preparations, candles and similar articles, modelling pastes, “dental waxes” and dental preparations with a basis of plaster
10 Chapter-43 Furskins and artificial fur; manufactures thereof
11 Chapter-47 Pulp of wood or of other fibrous cellulosic material; recovered (waste and scrap) paper or paperboard
12 Chapter-77 (reserved for possible future use)

Export of goods through courier or foreign post offices using e-Commerce under MEIS:

Exports of goods through courier or foreign post office using e commerce, as notified in Appendix 3C,

– of FOB value up to Rs. 25000 per consignment shall be entitled for rewards under MEIS.

– of FOB value more than Rs 25000 per consignment then MEIS reward would be limited to FOB value of Rs.25000 only.

             (Such goods can be exported in manual mode through Foreign Post Offices at New Delhi, Mumbai and Chennai. )

Merchandise Exports from India Scheme (MEIS) under Foreign Trade Policy of India (FTP 2015-20):-

  1. What is the MEIS scheme?

    Merchandise Exports from India Scheme (MEIS) under Foreign Trade Policy of India (FTP 2015-20) is one of the two schemes introduced in Foreign Trade Policy of India 2015-20, as a part of Exports from India Scheme. (The other scheme is SEIS, Service Exports from India Scheme).

    The Government of India has brought in the Merchandise Exports Incentive Scheme (MEIS), replacing five other similar incentive schemes present in the earlier Foreign Trade Policy 2009-14. The schemes that have been replaced by the MEIS scheme include:

    • Focus Product Scheme (FPS)
    • Focus Market Scheme (FMS)
    • Market Linked Focus Product Scheme (MLFPS)
    • Agri. Infrastructure incentive scheme
    • Vishesh Krishi Gramin Upaj Yojna (VKGUY)

    As per the present FTP, the MEIS scheme does not aim to merely replace these five schemes but also aims to rationalize the incentives and enlarges their scopes by removing various restrictions.

  2. The Objective of the MEIS Scheme

    To offset infrastructural inefficiencies and the associated costs of exporting products produced in India giving special emphasis on those which are of India’s export interest and have the capability to generate employment and enhance India’s competitiveness in the world market.

  3. About the Scheme

    With the aim in making India’s products more competitive in the global markets, the scheme provides incentive in the form of duty credit scrip to the exporter to compensate for his loss on payment of duties. The incentive is paid as percentage of the realized FOB value (in free foreign exchange) for notified goods going to notified markets. To determine the quantity of incentive, the countries have been segregated into three groups. Incentives on export of each product at 8-digit level (ITC HS codes), depend on the group in which its destination country belong.

    There are essentially three country groups. Group A has India’s traditional destinations such as the EU countries and USA. Group B has the maximum number of countries and covers almost all of India’s major export destinations globally. It is worth mentioning here that Group B has the highest quantum of incentive. Group C on the other hand has no incentive at all. It can be divided into, SAARC, Australia and New Zealand, some EU and African countries.

  4. Revision of MEIS scheme

    The first schedule of the MEIS consisting of the definition of the country groups and the incentives on the 8-digit product lines was published along with the Foreign Trade Policy 2015-20 in April, 2015. However, after repeated representations from various industry associations and export promotion councils including us on the inadequacy of the incentives, the DGFT came out with a new schedule vide Public Notice No. 06 /2015-2020 published on 4th May, 2016. While the country groups have remained same in the new schedule, there has been a re-orientation of the incentive rates and in general the incentive basket has broadened. We have studied both the earlier schedule and the new one. The key changes include

    • Additions of some product lines (at 8 digits) to the list of beneficiaries under MEIS. For instance, products coming in the category of the medical and scientific instruments have been included in the MEIS schedule and incentives have been given for all three groups.
    • Amendment in the incentive rates for some product lines already included in the schedule. Here the most important change has been the grant of incentives to Group A countries for some product lines. This has obviously contributed towards expansion of the incentive market and has addressed one of our concerns

Conclusions with Brief Note on MEIS:-

Objective

To offset infrastructural inefficiencies and associated costs involved in export of goods/products, which are produced/manufactured in India, especially those having high export intensity, employment potential and thereby enhancing India’s export competitiveness.

Entitlement under MEIS

Exports of notified goods/products with ITC[HS] code, to notified markets as listed, shall be rewarded under MEIS ( @ 2 % or 3%,4%, 5% or 7% as applicable). (Appendix 3B- listed goods market and rates).

  Basis of Calculation of Rewards

The basis of calculation of reward would be on realized FOB value of exports in free foreign exchange, or on FOB value of exports as given in the Shipping Bills in free foreign exchange, whichever is less, unless otherwise specified.

Incentive or rewards given under this scheme may vary from product to product and from Country to Country. The Country/Market for which incentive are allowed are divided into three category.

 

    Category A    Category B  Category C
Traditional Markets (34)

•European Union

•USA

•Canada

Emerging & Focus Markets(140)

•Africa

•Latin America & Mexico

•CIS Countries

•Turkey ,western Asian countries

•ASEAN countries

•Japan, South Korea,China, Taiwan

Other Markets (65)

Export Promotion Capital Goods (EPCG) scheme

Export Promotion Capital Goods (EPCG) scheme allows import of capital goods including spares for pre production, production and post production at zero duty subject to an export obligation of 6 times of duty saved on capital goods imported under EPCG scheme, to be fulfilled in 6 years reckoned from Authorization issue date.
EPCG scheme covers manufacturer exporters with or without supporting manufacturer(s)/ vendor(s), merchant exporters tied to supporting manufacturer(s) and service providers. The Scheme also covers a service provider who is designated / certified as a Common Service Provider (CSP).

EPCG authorization holder can export either directly or through third party (s). Export proceeds are to be realized in freely convertible currency except for deemed exports. Import of capital goods imported under the EPCG scheme shall be subject to Actual User condition till export obligation is completed.

Export Obligation under EPCG scheme is required to be fulfilled (by Exporter) by export of goods manufactured/services rendered by the applicant.

There are two types of export obligation that are mandatory.

First, Annual Average in which export obligation is over and above, the average level of exports achieved by the authorization holder in the preceding three licensing years for the same and similar products within the overall export obligation period including extended period, if any. Such average would be the arithmetic mean of export performance in the last three years for the same and similar products.

Secondly, Specific Average which is 6 times the duty saved amount in which the Authorization holder shall also fulfill a minimum of 50% export obligation in each block of years – the first block being of 4 years and the second block is of 2 years.

Royalty payments received in freely convertible currency and foreign exchange received for R&D services shall also be counted for discharge under EPCG.

EPCG Authorization holder may also source capital goods from a domestic  manufacturer. Such domestic manufacturer shall be eligible for deemed export benefit under FTP. EPCG Authorization holders can opt for Technological Upgradation of existing capital good imported under EPCG Authorization. Import of
second hand capital goods is not permitted under the EPCG scheme.

To incentivize fast track companies to accelerate exports, there is a provision for early redemption and in cases where Authorization holder has fulfilled 75% or more of specific export obligation and 100% of Average Export Obligation till date, if any, in half or less than half the original export obligation period specified , remaining
export obligation shall be condoned.

Authorization holder is required to submit to RA concerned by 30th April of every year, report on fulfillment of export obligation.

The scheme allows one or more requests for grant of extension in export obligation period, on payment of composition fee equal to 2% of proportionate duty saved.

amount on unfulfilled export obligation or an enhancement in export obligation imposed to the extent of 10% of total export obligation imposed under authorization, as the case may be, at the choice of exporter, for each year of extension sought.

Such first extension in EO period can be for a maximum period of 2 years.

Extension in EO period beyond two years’ period may be considered, for a further extension upto 2 years with a condition that 50% of duty payable in proportion to the  unfulfilled export obligation is paid by authorization holder to Custom authorities before an endorsement of extension is made on EPCG authorization by RA concerned. In such cases, no composition fee is to be paid or additional EO is to be imposed. In case the firm is still not able to complete the export obligation, duty already deposited will be deducted from total duty plus interest to be paid for EO default.

In case, EPCG authorization holder fails to fulfil prescribed export obligation, he shall pay duties of Customs plus interest as prescribed by Customs authority. This facility can also be availed by EPCG authorization holder to exit at his option.

The EPCG Scheme provides for in addition, a specific EO of 75% of normal Export Obligation for export of Green Technology Products. The scheme also provides for Post Export EPCG duty credit scrip(s) which are available to exporters who intend to import capital goods on full payment of applicable duties in cash and choose to opt
for this scheme.

Further, for units located in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, Tripura and Jammu &Kashmir, specific EO shall be 25% of the EO.

Thanks

CA Pankaj Kumar Mishra

FCA, M-COM, B-COM, ISC( Mathematics)

The Ministry of Corporate Affairs (MCA) has notified the Companies (Indian Accounting Standards (IND AS)) Rules 2015, which stipulates the adoption and applicability of IND AS in a phased manner beginning from the Accounting period 2016-17 and subsequently, issued Amendment Rules 2016 to amend the 2015 rules.

Phase of adoption

MCA has notified phase-wise convergence to IND AS from current accounting standards. IND AS shall be adopted by specific classes of companies based on their Net worth and listing status. Let’s see the each of the phases in detail below:

Phase I

Mandatorily applicability of IND AS from 1st April 2016 to all companies provided:

  • It is a listed or unlisted company
  • Its Net worth is greater than or equal to Rs. 500 crores

Net worth shall be checked for previous three Financial Years (31.03.2014, 31.03.2015 and 31.03.2016).

Phase II

Mandatorily applicability of IND AS from 1st April 2017 provided:

  • It is a listed company or is in the process of being listed (as on 31.03.2016)
  • Its Net worth is greater than or equal to Rs. 250 crores but less than Rs. 500 crores (on any of the above dates).

Net worth shall be checked for previous four Financial Years i.e. as on 31.03.2014, 31.03.2015 & 31.03.2016 & as on 31.03.2017.

Phase III

Mandatorily applicability of IND AS to Banks, NBFC, Insurance companies from 1st April 2018 whose:

  • Net worth is more than or equal to INR 500 crores with effect from 1st April 2018.

IRDA shall notify the separate set of IND AS for Banks & Insurance Companies with effect from 1st April 2018.NBFC includes core investment companies, stock brokers, venture capitalists, etc. Net Worth shall be checked for 3 years i.e. 31.03.2016, 31.03.2017 & 31.03.2018

Phase IV

NBFC whose Net worth is more than or equal to INR 250 crores but less than 500 crores shall have mandatorily applicability of IND AS  with effect from 1st April 2019.

Applicable to one, applicable to all other

If IND AS becomes applicable to a company then, IND AS shall be automatically applied to all subsidiaries, holding companies, associated companies and joint ventures irrespective of individual qualification of such companies.

In the case of foreign operations of an Indian Company, the preparation of stand-alone financial statements may continue with its jurisdictional requirements and need not be prepared as per the IND AS.

However, these entities will still have to report their IND AS adjusted numbers for their Indian parent company to prepare consolidated IND AS accounts.

Net Worth Calculation

Net worth will be determined based on the standalone accounts of the company as on 31st March 2014 or the first audited period ending after that date. Net Worth is the total of Paid-up share Capital and all reserves out of profit & securities premium account after deducting accumulated losses, deferred expenditure and miscellaneous expenditure not written off. Only capital Reserve arising out of Promoters Contribution and Govt. Grant Received can be included. Reserves created out of revaluation of assets, write back of depreciation cannot be included.

Voluntary adoption

Companies can voluntarily adopt IND AS for accounting periods beginning on or after April 01, 2015 with comparatives for the period ending 31 March 2015 or thereafter. However, once they have started reporting as per the IND AS, they cannot revert.

SEBI Clarification

For all the issuer companies whose offer document is filed with SEBI on or after 1st April 2016, SEBI has issued a clarification on the applicability of the Indian Accounting Standards or IND AS and disclosure made in the offer documents. Typically, SEBI requires issuer companies to disclose financial information for the previous 5 financial years immediately preceding the filing of the offer document, while following uniform accounting policies for each of the financial years. For those issuer companies filing an offer document –

  1. Up to March 31, 2017, all of the financial statements filed by them can be under Indian GAAP.
  1. Between April 1, 2017, and March 31, 2018, disclosures in the latest previous three financial years will have to be made under the IND AS principles while disclosures for the remaining two financial years may be done under Indian GAAP. However, as far as disclosures for the third latest financial year are concerned, suitable restatement adjustments to the accounting heads from their values as on the date of transition following accounting policies consistent with that used at date of transition to IND AS.
  2. Between April 1, 2018, and March 31, 2019, disclosures in the latest previous three financial years will have to be made under the IND AS principles while disclosures for the remaining two financial years may be done under Indian GAAP.
  3. Between April 1, 2019, and March 31, 2020, disclosures in the latest previous four financial years will have to be made under the IND AS principles while disclosures for the remaining one financial year may be done under Indian GAAP.
  4. On or after April 1, 2020, disclosures in all the previous five financial years will have to be made under the IND AS principles.

SEBI has also provided discretion to issuer companies to present financial statements for all five financial years under IND AS for companies on a voluntary basis. This clarification does not apply to issuer companies coming out with the rights issue.

Thanks & Regards

CA Pankaj Kumar Mishra

 

The Central Board of Indirect Taxes and Customs (CBIC) has asked its field offices to levy GST on goods in customs warehouse only at the time of final clearance. The move is aimed at ensuring ease of doing business for importers. In a circular to principal chief commissioners and chief commissioners, the GST policy wing of the CBIC said, “transfer/sale of goods while being deposited in a customs bonded warehouse” is a common trade practice whereby the importer files an ‘into-bond’ bill of entry and stores the goods in a customs bonded warehouse.

Thanks

CA Pankaj Kumar Mishra

Pharma sector is seeking clarification on various provisions of GST. Treatment of expired medicines at the time of return from retailer to whole seller and from whole seller to manufacturer needs clarification. Let us go into detail to understand the implication of various provisions.

Mechanism to book return of goods and time limit in GST:

Section 34 (1) of CGST Act provides for the mechanism for the return of goods by recipient. The section requires the supplier to issue a credit note. Let us have a look on the provisions of the in its own language.

“Section 34(1) Where a tax invoice has been issued for supply of any goods or services or both and the taxable value or tax charged in that tax invoice is found to exceed the taxable value or tax payable in respect of such supply, or where the goods supplied are returned by the recipient, or where goods or services or both supplied are found to be deficient, the registered person, who has supplied such goods or services or both, may issue to the recipient a credit note containing such particulars as may be prescribed.”

Further section 34(2) put a limit on declaration of details of credit note on the return.

(2) Any registered person who issues a credit note in relation to a supply of goods or services or both shall declare the details of such credit note in the return for the month during which such credit note has been issued but not later than September following the end of the financial year in which such supply was made, or the date of furnishing of the relevant annual return, whichever is earlier, and the tax liability shall be adjusted in such manner as may be prescribed”

In GST law the way to claim reduction in outward tax liability corresponding to the amount of credit note pass through the route of matching. The data entered in GSTR 1 by the supplier is accepted by the recipient and then matched data is finalise and rest of data remains unmatched and is added to the output tax liability of the recipient till the final matching.

But due to this provision the supplier will not be able to show this credit note data in his GSTR 1 after September of the concerned financial year. In case of medicine their expiry date may vary from month to years. It may extend to 5-6 years. Sometimes government also instruct companies to pause the sale of any medicine if it is unfit for consumption. In this case how the benefit of sales return will be available. Also the supplier will not be able to go with credit note mechanism then whether the dealer will have to show it as fresh sales in place of purchase return. Then do they need to reverse the ITC they have taken on the purchase of those medicines? We will seek the answers of all these questions in the last part of this article. Let us elaborate more with the other relevant provisions.

Reversal of ITC for the goods destroyed as given in section 17(5)(h) of CGST Act

Apart from the provisions discussed above section 17 also require the reversal of credit in case of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. In the care of expired medicines the manufacturer is required to take them back from the market and then destroy them. Let us say if it is after five years do they need to reverse the credit on inputs used for those medicines. Also do they also need to pay interest on that ITC amount?

Practical issues with pharma companies

Pharma companies have various natures of products. There are different reasons for buy back of those products from the market. Let us understand some terms first.

Expired medicines: Every medicine has an expiry date aftr which it is not fit for consumption. Pharma companies are mandatorily required to mention their expiry date.

This expiry date is known already but it may be after the time limit allowed to make the sales return in GST. Now Pharma Company will have to get those medicines back and also they need to destroy it. It will be a hardship on them First they don’t get any benefit of tax on the sales return. They also need to incur some cost in destroying the medicines. Also they need to reverse the credit taken by them on the goods so destroyed. They will no doubt pass on this burden to the consumer and it will make the medicines even expensive. In a developing country like India medicines shall be given special exemption but then we have such a harsh provision for pharma industry.

Resolution provided by cbec and its analysis

All these issues were raised by the Pharma association before the CBEC and they also get reply via letter 349/57/2017-GST dated 26/12/2017. Many issues of pharma industry are resolved via that letter.

Main points cleared in the letter are:

  1. Return on expired/damaged goods from distributor to manufacturer will be treated as return of goods and not as a fresh supply.
  2. A credit note may be issued at the time of return of expired medicines.
  • If the goods are return within the prescribed limit (Sept of FY) tax can also be reversed but if they are returned after that limit no tax reversal will be available. But credit note can still be issued.
  • The company will although be required to reverse their ITC which belongs to those expired goods

Conclusion and solution:

Based on the above provision we can say that most of issues are answered by this letter. Let us have a detail understanding of both issue and its solution now.

  • Whether the distributor is required to show his return as fresh supply?

Ans: No, because he can show it as a purchase return as he can issue a credit note.

  • Whether the manufacturer will get the tax reduction?

Ans: If goods are returned under the time limit given in section 34(2) then yes. But if the goods were returned after that limit then no, although credit note can be issued because this time limit is only for declaration of that credit note in return and not for issuance of credit note. That credit note will be accounted in books but will not be a part of GST return

  • Whether the distributor is required to reverse his ITC on the goods returned?

Ans: If goods were returned under the time limit then Yes. If goods were returned after the time limits then No, because the reversal of ITC is corresponding to the reduction in tax liability of seller. In case the tax liability is not reduced by the seller no need for reversal of ITC by buyer making the purchase return.

  • Whether the manufacturer is required to reverse the ITC on the goods destroyed?

Ans:  Yes the manufacturer (Pharma company) will be required to reverse the ITC under the provisions of section 17(5)(h).

  • Whether the manufacturer is also required to pay the interest on the amount of reversal of ITC?

Ans: No, The interest on undue claim of ITC is twenty four percent. But in this case the ITC become reversible only when the goods were destroyed and is reversed at that time. No liability of interest payment will arise due to that reversal if made at the time of destroying the goods.

Authored By:

CA Pankaj Kumar Mishra

 

1. Services by Government or a local authority excluding the following services—

(i) services by the Department of Posts by way of speed post, express parcel post, life insurance, and

agency services provided to a person other than Government;

(ii) services in relation to an aircraft or a vessel, inside or outside the precincts of a port or an airport;

(iii) transport of goods or passengers; or

(iv) any service, other than services covered under clauses (i) to (iii) above, provided to business entities.

2. Services by the Reserve Bank of India

3. Services by a foreign diplomatic mission located in India

4. Services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce by way of—

(i) agricultural operations directly related to production of any agricultural produce including

cultivation, harvesting, threshing, plant protection or testing or

(ii) supply of farm labour;

(iii) processes carried out at an agricultural farm including tending, pruning, cutting, harvesting,

drying, cleaning, trimming, sun drying, fumigating, curing, sorting, grading, cooling or bulk

packaging and such like operations which do not alter the essential characteristics of agricultural

produce but make it only marketable for the primary market;

(iv) renting or leasing of agro machinery or vacant land with or without a structure incidental to its use;

(v) loading, unloading, packing, storage or warehousing of agricultural produce;

(vi) agricultural extension services;

(vii) services by any Agricultural Produce Marketing Committee or Board or services provided by a

commission agent for sale or purchase of agricultural produce.

5. Service by way of access to a road or a bridge on payment of toll charges

6. Transmission or distribution of electricity by an electricity transmission or distribution utility

Service Tax Exemptions to be continued in GST as decided by GST Council

7. Services by way of renting of residential dwelling for use as residence

8. Services by way of—

(i) extending deposits, loans or advances in so far as the consideration is represented by way of interest

or discount (other than interest involved in credit card services);

(ii) inter se sale or purchase of foreign currency amongst banks or authorised dealers of foreign

exchange or amongst banks and such dealers;

9. Services by way of transportation of goods

(i) by road except the services of—

(A) a goods transportation agency; or

(B) a courier agency;

(ii) by inland waterways;

10. Services provided to the United Nations or a specified international organization.

Exemption may be notified by way of issuing notification under section 55 of CGST/SGST Act.

11. Services provided by operators of the Common Bio-medical Waste Treatment Facility to a clinical

establishment by way of treatment or disposal of bio-medical waste or the processes incidental thereto;

12. Services by a veterinary clinic in relation to health care of animals or birds;

13. Services by an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) by way of charitable activities;[Charitable activities may be defined as presently in notification No 25/2012-ST.

14. Services by a specified organisation in respect of a religious pilgrimage facilitated by the Ministry of External Affairs of the Government of India, under bilateral arrangement;

15. Services provided by

(a) an arbitral tribunal to –

(i) any person other than a business entity; or

(ii) a business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year;

(b) a partnership firm of advocates or an individual as an advocate other than a senior advocate, by way of legal services to-

(i) an advocate or partnership firm of advocates providing legal services;

(ii) any person other than a business entity; or

(iii) a business entity with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year; or

(c) a senior advocate by way of legal services to-

(i) any person other than a business entity; or

(ii) a business entity up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year;


16. Services provided,-

(a) by an educational institution to its students, faculty and staff;

(b) to an educational institution, by way of,-

(i) transportation of students, faculty and staff;

(ii) catering, including any mid-day meals scheme sponsored by the Government;

(iii) security or cleaning or house-keeping services performed in such educational institution;

(iv)services relating to admission to, or conduct of examination by, such institution;

upto higher secondary.

Provided that nothing contained in clause (b) of this entry shall apply to an educational institution other than an institution providing services by way of pre-school education and education up to higher

secondary school or equivalent

17. Services provided by the Indian Institutes of Management, as per the guidelines of the Central

Government, to their students, by way of the following educational programmes, except Executive

Development Programme, –

(a) two year full time residential Post Graduate Programmes in Management for the Post Graduate

Diploma in Management, to which admissions are made on the basis of Common Admission Test

(CAT), conducted by Indian Institute of Management;

(b) fellow programme in Management;

(c) five year integrated programme in Management.


18. Services provided to a recognized sports body by

(a) an individual as a player, referee, umpire, coach or team manager for participation in a sporting event organized by a recognized sports body;

(b) another recognised sports body;

19. Services by an artist by way of a performance in folk or classical art forms of (i) music, or (ii)dance, or

(iii)theatre, if the consideration charged for such performance is not more than one lakh and fifty

thousand rupees:

Provided that the exemption shall not apply to service provided by such artist as a brand ambassador;

20. Services by way of collecting or providing news by an independent journalist, Press Trust of India or United News of India;

21. Services by way of giving on hire –

(a) to a state transport undertaking, a motor vehicle meant to carry more than twelve passengers; or

(b) to a goods transport agency, a means of transportation of goods;


22. Transport of passengers, with or without accompanied belongings, by
 –

(a) air, embarking from or terminating in an airport located in the state of Arunachal Pradesh, Assam,

Manipur, Meghalaya, Mizoram, Nagaland, Sikkim, or Tripura or at Bagdogra located in West Bengal;

(b) non-airconditioned contract carriage other than radio taxi, for transportation of passengers, excluding tourism, conducted tour, charter or hire; or

(c) stage carriage other than air-conditioned stage carriage

 

23. Services of life insurance business provided by way of annuity under the National Pension System

regulated by Pension Fund Regulatory and Development Authority of India (PFRDA) under the Pension

Fund Regulatory And Development Authority Act, 2013 (23 of 2013)


24. Services of life insurance business provided or agreed to be provided by the Army,
 Naval and Air Force Group Insurance Funds to members of the Army, Navy and Air Force, respectively, under the Group Insurance Schemes of the Central Government


25. Services provided by an incubatee
 up to a total turnover of fifty lakh rupees in a financial year subject to the following conditions, namely:-

(a) the total turnover had not exceeded fifty lakh rupees during the preceding financial year; and

(b) a period of three years has not been elapsed from the date of entering into an agreement as

an incubatee;


26. Service by an unincorporated body
 or a non- profit entity registered under any law for the time being in

force, to its own members by way of reimbursement of charges or share of contribution –

(a) as a trade union;

(b) for the provision of carrying out any activity which is exempt from the levy of GST; or

(c) up to an amount of five thousand rupees per month per member for sourcing of goods or services

from a third person for the common use of its members in a housing society or a residential complex;


27. Services by an organiser to any person in respect of a business exhibition held outside India
;


28. Services by way of slaughtering of animals;


29. Services received from a provider of service located in a non- taxable territory by –

(a) Government, a local authority, a governmental authority or an individual in relation to any purpose

other than commerce, industry or any other business or profession;

(b) an entity registered under section 12AA of the Income tax Act, 1961 (43 of 1961) for the purposes of providing charitable activities; or

(c) a person located in a non-taxable territory;

Provided that the exemption shall not apply to –

(i) online information and database access or retrieval services received by persons specified in clause (a)or

clause (b); or

(ii) services by way of transportation of goods by a vessel from a place outside India up to the customs

station of clearance in India received by persons specified in clause (c);


30. Services of public libraries by way of lending of books, publications
 or any other knowledge-enhancing

content or material;


31. Services by Employees’ State Insurance Corporation to persons governed under the Employees’

Insurance Act, 1948 (34 of 1948);


32. Services by way of transfer of a going concern, as a whole or an independent part thereof;


33. Services by way of public conveniences
 such as provision of facilities of bathroom, washrooms, lavatories, urinal or toilets;


34. Services by government
, local authority or governmental authority by way of any activity in relation to any function entrusted to a municipality under Article 243 W of the Constitution.


35. Services received by the Reserve Bank of India
, from outside India in relation to management of foreign exchange reserves;


36. Services provided by a tour operator to a foreign tourist
 in relation to a tour conducted wholly outside India.


37. Services by way of pre-conditioning
, pre-cooling, ripening, waxing, retail packing, labelling of fruits and vegetables which do not change or alter the essential characteristics of the said fruits or vegetables;


38. Services by way of admission to a museum, national park, wildlife sanctuary, tiger reserve or zoo
;


39. Services provided by Government or a local authority to a business entity
 with a turnover up to rupees twenty lakh (ten lakh rupees in a special category state) in the preceding financial year.

Explanation.- For the purposes of this entry, it is hereby clarified that the provisions of this entry shall not

be applicable to (a) services at S. No. 1 (i), (ii)and (iii); and

(b) services by way of renting of immovable property;


40. Services provided by Employees Provident Fund Organisation
 (EPFO) to persons governed under the Service Tax Exemptions to be continued in GST as decided by GST Council

Employees Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952);


41. Services provided by Insurance Regulatory and Development Authority of India
 (IRDA) to insurers under the Insurance Regulatory and Development Authority of India Act, 1999 (41 of 1999);

42. Services provided by Securities and Exchange Board of India (SEBI) set up under the Securities and Exchange Board of India Act, 1992 (15 of 1992) by way of protecting the interests of investors in securities and to promote the development of, and to regulate, the securities market;


43. Services provided by National Centre for Cold Chain Development 
under Ministry of Agriculture,

Cooperation and Farmer’s Welfare by way of cold chain knowledge dissemination;


44. Services by way of transportation of goods by an aircraft
 from a place outside India upto the customs station of clearance in India.


45. Services provided by Government or a local authority to another Government or local authority
:

Provided that nothing contained in this entry shall apply to services at S. No. 1 (i), (ii)and (iii) above


46. Services provided by Government or a local authority by way of issuance of passport
, visa, driving licence, birth certificate or death certificate.


47. Services provided by Government or a local authority by way of tolerating non-performance of a contract
 for which consideration in the form of fines or liquidated damages is payable to the Government or the local authority under such contract;


48. Services provided by Government or a local authority by way of
– (a) registration required under any law for the time being in force; (b) testing, calibration, safety check or certification relating to protection or safety of workers, consumers or public at large, including fire license, required under any law for the time being in force;


49. Services provided by Government or a local authority by way of assignment of right to use natural resources
 to an individual farmer for cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products;


50. Services by Government, a local authority or a governmental authority by way of any activity
 in relation to any function entrusted to a Panchayat under article 243G of the Constitution:

this shall be continued by way of notification undersection 7(2)(b) of CGST/SGST Acts.

51. Services provided by Government or a local authority by way of assignment of right to use any natural resource where such right to use was assigned by the Government or the local authority before the 1st
April, 2016: Provided that the exemption shall apply only to service tax payable on one time charge payable, in full upfront or in installments, for assignment of right to use such natural resource;


52. Services provided by Government or a local authority by way of allowing a business entity
 to operate as a telecom service provider or use radiofrequency spectrum during the period prior to 1st April, 2016, on payment of licence fee or spectrum user charges, as the case may be;


53. Services provided by Government by way of deputing officers after office hours or on holidays
for inspection or container stuffing or such other duties in relation to import export cargo on payment of Merchant Overtime charges (MOT).

 

54. Services by an acquiring bank, to any person in relation to settlement of an amount upto two thousand rupees in a single transaction transacted through credit card, debit card, charge card or other payment card service.

Explanation. — For the purposes of this entry, “acquiring bank” means any banking company, financial

institution including non-banking financial company or any other person, who makes the payment to any person who accepts such card


55. Services of leasing of assets
 (rolling stock assets including wagons, coaches, locos) by Indian Railways Finance Corporation to Indian Railways


56. Services provided by any person for official use of a foreign diplomatic mission
 or consular post in India or for personal use or for the use of the family members of diplomatic agents or career consular officers posed therein. This exemption is available on reciprocal basis based on a certificate issued by MEA (Protocol Division): this shall be continued by way of notification under section 55 of CGST/SGST Acts.

 

57. Taxable services, provided or to be provided, by a Technology Business Incubator (TBI) or a Science and Technology Entrepreneurship Park (STEP) recognized by the National Science and Technology Entrepreneurship Development Board (NSTEDB) of the Department of Science and Technology, Government of India or bio-incubators recognized by the Biotechnology Industry Research Assistance Council, under Department of Biotechnology, Government of India;


58. Taxable service provided by State Government Industrial Development Corporations
/ Undertakings to industrial units by way of granting long term (thirty years, or more) lease of industrial plots from so much of tax leviable thereon, as is leviable on the one time upfront amount (called as premium, salami, cost, price, development charges or by any other name) payable for such lease.

 

59. Services provided to the government by way of transport of passengers with or without accompanied belongings, by air, embarking from or terminating at a regional connectivity scheme airport, against consideration in the form of viability gap funding (VGF).

Provided that nothing contained in this entry shall apply on or after the expiry of a period of 1 year from the date of commencement of operations of the regional connectivity scheme airport as notified by the Ministry of Civil Aviation


60. Services provided by cord blood banks by way of preservation of stem cells or any other service in relation to such preservation
;


61. Services by way of training or coaching in recreational activities relating to
,-

(i) arts or culture. or

(ii) sports by charitable entities registered under section 12AA of Income tax Act, 1961;


62. Any services provided by,
 _

(i) the National Skill Development Corporation set up by the Government of India;

(ii) a Sector Skill Council approved by the National Skill Development Corporation;

(iii) an assessment agency approved by the Sector Skill Council or the National Skill Development

Corporation;

(iv) a training partner approved by the National Skill Development Corporation or the Sector Skill

Council

in relation to

(a) the National Skill Development Programme implemented by the National Skill Development

Corporation; or

(b) a vocational skill development course under the National Skill Certification and Monetary Reward

Scheme; or

(c) any other Scheme implemented by the National Skill Development Corporation.


63. Services of assessing bodies
 empanelled centrally by Directorate General of Training, Ministry of Skill Development and Entrepreneurship by way of assessments under Skill Development Initiative (SDI)

Scheme


64. Services provided by training providers
 (Project implementation agencies) under Deen Dayal Upadhyaya Grameen Kaushalya Yojana under the Ministry of Rural Development by way of offering skill or vocational training courses certified by National Council For Vocational Training.


65. Services by way of sponsorship of sporting events organised,

(a) by a national sports federation, or its affiliated federations, where the participating teams or

individuals represent any district, State, zone or Country;

(b) by Association of Indian Universities, Inter-University Sports Board, School Games Federation of India,

All India Sports Council for the Deaf, Paralympic Committee of India or Special Olympics Bharat;

(c) by Central Civil Services Cultural and Sports Board;

(d) as part of national games, by Indian Olympic Association; or

(e) under Panchayat Yuva Kreeda Aur Khel Abhiyaan (PYKKA) Scheme;


66. Services provided by way of pure labour contracts of construction
, erection, commissioning, installation, completion, fitting out, repair, maintenance, renovation, or alteration of a civil structure or any other original works pertaining to the Beneficiary-led individual house construction / enhancement under the Housing for All (Urban) Mission/Pradhan Mantri Awas Yojana (PMAY);


67. Services by way of pure labour contracts of construction
, erection, commissioning, or installation of original works pertaining to a single residential unit otherwise than as a part of a residential complex;


68. Services of general insurance business provided under following schemes
 –

(a) Hut Insurance Scheme;

(b) Cattle Insurance under Swarnajaynti Gram Swarozgar Yojna (earlier known as Integrated Rural

Development Programme);

(c) Scheme for Insurance of Tribals;

(d) Janata Personal Accident Policy and Gramin Accident Policy;

(e) Group Personal Accident Policy for Self-Employed Women;

(f) Agricultural Pumpset and Failed Well Insurance;

(g) Premia collected on export credit insurance;

(h) Weather Based Crop Insurance Scheme or the Modified National Agricultural Insurance Scheme,

approved by the Government of India and implemented by the Ministry of Agriculture;

(i) Jan Arogya Bima Policy;

(j) National Agricultural Insurance Scheme (Rashtriya Krishi Bima Yojana);

(k) Pilot Scheme on Seed Crop Insurance;

(l) Central Sector Scheme on Cattle Insurance;

(m) Universal Health Insurance Scheme;

(n) Rashtriya Swasthya Bima Yojana; or

(o) Coconut Palm Insurance Scheme;

(p) Pradhan Mantri Suraksha BimaYojna;

(q) Niramaya Health Insurance Scheme implemented by Trust constituted under the provisions of the

National Trust for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 (44 of 1999); or

(r) Any other insurance scheme of the State Government as may be notified by Government of India on the recommendation of GSTC.


69. Services of life insurance business provided under following schemes
 –

(a) Janashree Bima Yojana (JBY); or

(b) Aam Aadmi Bima Yojana (AABY);

(c) Life micro-insurance product as approved by the Insurance Regulatory and Development Authority,

having maximum amount of cover of fifty thousand rupees;

(d) Varishtha Pension BimaYojana;

(e) Pradhan Mantri Jeevan JyotiBimaYojana;

(f) Pradhan Mantri Jan DhanYogana;

(g) Pradhan Mantri Vaya Vandan Yojana; and

(h) Any other insurance scheme of the State Government as may be notified by Government of India on the recommendation of GSTC.


70. Services by way of collection of contribution under Atal Pension Yojana (APY)
.

 

71. Services by way of collection of contribution under any pension scheme of the State Governments.


72. Service of transportation of passengers, with or without accompanied belongings, by—

(i) railways in a class other than—

(A) first class; or

(B) an air-conditioned coach;

(ii) metro, monorail or tramway;

(iii) inland waterways;

(iv) public transport, other than predominantly for tourism purpose, in a vessel between places located in India; and

(v) metered cabs or auto rickshaws (including E-rickshaws);


73. Services by a person by way of-

(a) conduct of any religious ceremony;

(b) renting of precincts of a religious place meant for general public, owned or managed by an entity

registered as a charitable or religious trust under section 12AA of the Income-tax Act, 1961

(hereinafter referred to as the Income-tax Act), or a trust or an institution registered under sub

clause (v) of clause (23C) of section 10 of the Income-tax Act or a body or an authority covered

under clause (23BBA) of section 10 of the Income-tax Act:

Provided that nothing contained in (b) of this exemption shall apply to,-

(i) renting of rooms where charges are Rs 1000/- or more per day;

(ii) renting of premises, community halls, kalyanmandapam or open area, etc where charges are Rs

10,000/- or more per day;

(iii) renting of shops or other spaces for business or commerce where charges are Rs 10,000/-or

more per month.


74. Services by a hotel, inn, guest house, club
 or campsite, by whatever name called, for residential or lodging purposes, having declared tariff of a unit of accommodation less than one thousand rupees per day or equivalent;


75. Services by way of transportation by rail or a vessel from one place in India
 to another of the following goods –

(a) relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap;

(b) defence or military equipments;

(c) newspaper or magazines registered with the Registrar of Newspapers;

(d) railway equipments or materials;

(e) agricultural produce;

(f) milk, salt and food grain including flours, pulses and rice; and

(g) organic manure


76. Services provided by a goods transport agency, by way of transport in a goods carriage
 of,-

(a) agricultural produce;

(b) goods, where gross amount charged for the transportation of goods on a consignment transported in a single carriage does not exceed one thousand five hundred rupees;

(c) goods, where gross amount charged for transportation of all such goods for a single consignee does not exceed rupees seven hundred fifty;

(d) milk, salt and food grain including flour, pulses and rice;

(e) organic manure;

(f) newspaper or magazines registered with the Registrar of Newspapers;

(g) relief materials meant for victims of natural or man-made disasters, calamities, accidents or mishap; or

(h) defence or military equipment’s;


77. Services by the following persons in respective capacities
 –

(a) business facilitator or a business correspondent to a banking company with respect to accounts in its rural area branch;

(b) any person as an intermediary to a business facilitator or a business correspondent with respect to services mentioned in clause (g); or

(c) business facilitator or a business correspondent to an insurance company in a rural area;


78. Carrying out an intermediate production process as job work
 in relation to cultivation of plants and rearing of all life forms of animals, except the rearing of horses, for food, fibre, fuel, raw material or other similar products or agricultural produce;


79. Services by way of loading, unloading, packing, storage or warehousing of rice
;

80. Services by way of right to admission to, –

(i) circus, dance, or theatrical performance including drama or ballet;

(ii) award function, concert, pageant, musical performance or any sporting event other than a recognized sporting event;

(iii) recognised sporting event;

where the consideration for admission is not more than Rs 250 per person in (i), (ii) and (iii) above.


81. Services provided by Government or a local authority where the gross amount charged 
for such services does not exceed Rs.5000/.

Provided that nothing contained in this entry shall apply to services S. No. 1 (i), (ii)and (iii) above:

Provided further that in case where continuous supply of service, as defined in sub-section (33) of

section2 of the CGST Act, 2017, is provided by the Government or a local authority, the exemption shall apply only where the gross amount charged for such service does not exceed Rs. 5000/- in a financial

year; [This may be continued by way of an omnibus threshold exemption from payment of GST under

section 9 (4) of CGST/SGST Act in respect of supplies upto Rs 10,000/-].


82. (i) Health care services by a clinical establishment, an authorised medical practitioner or para-medics
;

(ii) Services provided by way of transportation of a patient in an ambulance, other than those specified in

(i) above;


83. New Exemption:

Services provided by the Goods and Services Tax Network (GSTN) to the Central Government or State

Governments/Union Territories for implementation of Goods and Services Tax (GST)

List of GST service exemption inserted on 11th June 2017

84.  Pure services (excluding works contract service or other composite supplies involving supply of any goods) provided to Government, a local authority or a Governmental authority by way of any activity in relation to any function entrusted to a Panchayat under Article 243G of the Constitution or to any function entrusted to a Municipality under Article 243W of the Constitution

85. Services provided to the Government under any insurance scheme for which total premium is paid by Government

86. Services provided to the Government under any training programme for which total expenditure is borne by the Government

Amendment on 05th August 2017

New crop insurance schemes  Pradhan Mantri Fasal Bima Yojana (PMFBY)  introduced from Kharif  2016- 17 in place of National Agricultural Insurance Scheme (NAIS) and Modified National Agricultural Insurance Scheme (MNAIS), and Restructured Weather Based Crop Insurance Scheme (RWCIS) introduced in place of Weather Based Crop Insurance Schemes , shall be extended exemption from GST.

Authored by: CA Pankaj Kumar Mishra

ACA, MCOM, B-COM(CS) ISC ( Mathematics)