GST Exemption: List of Exempted Goods and Services Under GST

• GST exemptions allow zero GST liability on eligible goods and services to reduce the tax burden on essential sectors and products.
• GST exemptions can be absolute, conditional, or partial. Each type of exemption has its own eligibility rules and ITC implications.
• There is a difference between GST exempt and nil-rated goods and services.
• The September 2025 GST 2.0 reforms expanded the exemption and nil-rate list to include several food items, life-saving medicines, etc.
• Businesses cannot claim ITC on exempt or nil-rated supplies
• Registration exemption thresholds vary based on the nature of the business and the state, with separate limits for goods and services businesses.

GST exemptions exclude specific goods or services from GST applications. The GST Act does not cover certain items or services. It's important to remember that these exemptions can differ from one country to another and may change over time. Governments grant exemptions from GST for several reasons. They may alleviate the tax burden on essential goods and services that citizens need. Furthermore, authorities can use exemptions to support particular sectors or industries. The list changed significantly on 22nd September 2025, when the GST Council's "GST 2.0" reforms moved many everyday items like food, medicines, and insurance, to the nil-rate or exempt list. This article reflects the post-reform position.

Understanding the list of exemptions from GST is as important as knowing what goods and services are. Like all other taxes, there are a few exemptions under GST where goods and services are exempt from tax liability. Examples of exemptions under Goods and Services Tax:

Also read: How Is GST Different From the Previous Tax Structure?

Every GST exemption falls into one of three buckets. Knowing which one applies to your goods or services tells you whether you can claim input tax credit (ITC) and whether the exemption depends on conditions you need to keep meeting.

• Absolute exemptions: apply unconditionally, with no turnover limit or end-use requirement. Basic food staples, core healthcare services, and school and university education fall here, as do services provided by the RBI.
• Conditional exemptions: depend on meeting a condition: a turnover threshold (small businesses under ₹20 lakh don't need GST registration at all) or an end-use requirement (for example, goods supplied to a special economic zone or agricultural inputs used strictly for farming).
• Partial exemptions: cover only part of a transaction or apply only up to a limit: for instance, an unregistered supplier's goods stay exempt under reverse charge only while the value supplied to a registered person stays below ₹5,000 a day. Exports and SEZ supplies are a related but separate case: they're zero-rated (0% GST) rather than partially exempt, and unlike most exemptions, the exporter can still claim ITC on them. GST 2.0 also folded compensation cess into the GST rate itself for specified luxury and sin goods, so partial exemptions on those items no longer carry a separate cess line.

These three terms get used interchangeably, but they work differently, and the difference decides whether you can claim ITC.

• Nil-rated supplies: GST rate is fixed at 0% by the rate schedule itself. No ITC is available on inputs used to make them. Examples: fresh vegetables, salt, unbranded cereals, and, since 22nd September 2025, UHT milk, paneer, chena, and Indian breads like roti, paratha, and khakhra.
• Exempt supplies: not taxed at all; there's no GST rate to apply because the supply itself is kept outside the tax net. No ITC is available on related inputs. Examples: healthcare services and now individual life and health insurance premiums.
• Zero-rated supplies: taxed at 0%, but unlike the other two, ITC is available, and you can claim a refund of unutilised credit. This rule applies specifically to exports and supplies to SEZs.

In short: if you can claim ITC on it, it's zero-rated. If you can't, it's either nil-rated (rate fixed at 0%) or exempt (outside GST altogether): the practical GST treatment for a small business is the same either way.

No. Under Section 17(2) of the CGST Act, 2017, ITC cannot be claimed on inputs, input services, or capital goods used to make exempt or nil-rated supplies.

If your business sells a mix of taxable and exempt goods or services, say, a grocery store selling both taxed packaged snacks and exempt fresh produce, you can't claim full ITC on shared costs like rent, electricity, or a delivery vehicle. Instead, you reverse a proportionate share of the credit, calculated using the formula: Credit attributable to exempt supplies = (value of exempt supplies ÷ total turnover) × common credit. Rule 42 of the CGST Rules covers this reversal for inputs and input services; Rule 43 covers it for capital goods.

Watch out: getting this reversal wrong is one of the most common GST audit flags for small businesses with mixed supplies: track exempt-vs-taxable turnover monthly rather than reconstructing it at year-end.

The 56th GST Council meeting (3rd September 2025) approved the biggest rate overhaul since GST was launched in 2017. The changes were notified on 17th September 2025 and took effect from 22nd September 2025.

The four-slab structure (5%, 12%, 18%, and 28%) was collapsed to two main slabs: 5% and 18%, plus a special 40% slab for luxury and sin goods. Compensation Cess was discontinued as a separate charge and folded into the GST rate for those specified goods. Here's what moved onto the exemption or nil-rate list:

• Food: UHT milk, paneer, and chena moved from 5% to nil. All Indian breads: roti, paratha, khakhra, and porotta are now nil-rated (previously 5% or 18%).
• Medicines: 33 life-saving drugs and diagnostic kits moved from 12% to nil. Three additional drugs used for cancer, rare diseases, and other severe chronic conditions moved from 5% to nil. Other medicines (including Ayurveda, Unani, and homoeopathy) dropped from 12% to 5%.
• Insurance: GST on all individual life insurance policies (term, ULIP, and endowment) and all individual health insurance policies (including family floater and senior citizen plans), plus their reinsurance, was removed entirely: down from 18%.
• Not everything changed: cigarettes, pan masala, gutkha, zarda, unmanufactured tobacco, and bidis continue at their pre-reform GST and cess rates until the compensation cess loan and interest obligations are fully repaid: the switch date for these will be notified separately.

Here is a list of some commonly exempted goods under GST:

• Food: Fruits and vegetables, cereals, meat and fish, potatoes and other edible tubers and roots, tender coconut, tea leaves, jaggery, coffee beans, ginger, turmeric, milk, curd, etc. Also nil-rated since GST 2.0: UHT milk, paneer, chena, and Indian breads (roti, paratha, khakhra, and parotta).
• Raw materials: Silk waste, raw silk, raw jute fibre, unprocessed wool, handloom fabrics, cotton for khadi yarn, khadi, charcoal, and firewood.
• Tools/Instruments: Shovels, spades, agricultural tools, handmade musical instruments, hearing aids, and tools used by physically challenged individuals.
• Medicines: 33 life-saving drugs and diagnostic kits, plus 3 further drugs for cancer, rare diseases, and other severe chronic conditions: all nil-rated since 22nd September 2025.
• Miscellaneous: Contraceptives, semen, human blood, vaccines, organic manure, earthen pots, beehives, live animals (except horses), maps, books, journals, newspapers, non-judicial stamps, kites, and pooja props.
• Grains: Wheat, rice, oats, barley, etc.
• Fish: Fresh or frozen
• Cosmetic products & Ornaments: Bindi, kajal, etc./plastic or glass bangles

The above list of exempted goods is listed under the GST rules, but may be subject to change as the council suggests. Also, the above-mentioned are examples of a few exempted goods, and more goods qualify for Nil GST.

Also read: 3 Biggest Reasons Why GST is Good for the Country.

• All agriculture-related services, including harvesting, cultivation, supply, packaging, warehousing, renting or leasing machinery, etc., are exempted from GST.
• However, this exemption does not include the rearing of horses.
• Transportation of individuals via public transport, metered cabs, auto-rickshaws, metro, etc.
• Transport of agricultural produce and of goods outside India.
• Transportation of goods where the total amount of charges is less than Rs 1500.
• Government and foreign diplomatic services.
• Services provided by RBI or any foreign diplomatic mission in India are also exempt from GST.
• Services are provided to diplomats, including those at the United Nations.
• Certain healthcare and educational services are also exempt from GST, such as catering for midday meals and services provided by a vet, clinic, or paramedics.
• Services by ambulances and charities are also included in the list.
• Since 22nd September 2025, all individual life insurance policies (term, ULIP, endowment) and individual health insurance policies (including family floater and senior citizen cover) are also fully exempt from GST.

Some of the other exemptions of services under the GST exemption list include the following:

• Services provided by tour guides to foreign tourists.
• Library services.
• Services for conducting religious ceremonies.
• Distribution of electricity. Services provided by authorised sports organisations.

Note: The above list includes a few examples of services exempt from GST, and more services also qualify for nil GST. The above list is also subject to timely change as per the rules of the GST council.

• As a taxpayer, you can provide a consolidated report of items exempted from GST through sections 8A, 8B, 8C, and 8D and title it Nil Rated Supplies in GSTR-1 returns.
• You should ideally report the details of exempted outward supplies in Section 3.1 and title it "Tax on outward and reverse charge inward supplies".
• Similarly, details of exempt GST inward supplies in Section 5 can be titled as "Exempt, nil and non-GST inward supplies" as part of the GSTR-3B return. \
• Any credit applied to exempt supplies must be reversed using the following formula: Credit attributed to exempt supplies = Aggregate value of exempt supplies (for supplies other than taxable and zero-rated supplies) / Total taxpayer turnover in that tax period * Common credit.
• Common credit will be the total input credit reduced by tax attributable exclusively to non-business purposes, exempt supplies, taxable supplies, and ineligible credits as per regulations.

Also read: Types of GST Returns

Section 16 contains the regulations around the input tax credit, which are the conditions to be fulfilled by taxpayers to claim GST input tax credit (ITC). They are as follows:

• ITC can only be claimed if the goods or services purchased are used for business and not personal purposes.
• The taxpayer claiming GST must have the invoice at the time of claiming.
• The IT supplier should have filed the details of the supply of goods or services purchased by the taxpayer in Form GSTR-1, which are reflected in the taxpayer's
• Form GSTR-2B. The receipt of goods or services by the taxpayer is completed. This means that the goods have been received or the services have been provided before claiming ITC.
• The last lot of goods has been received in instalments.
• The taxpayer has filed the GSTR-3B return.
• The payment has happened within 180 days of the invoice date. If not, the ITC has to be reversed.
• In the case of capital goods, ITC cannot be claimed when depreciation has been claimed.
• Common tax credits must be calculated, and ITC on exempt supplies or nil-rate supplies must be reversed.

In order to receive a GST refund, the taxpayer must go through a lengthy process and submit all necessary supporting documentation and proof to the GST authorities. Examples against which a refund can be claimed include

• The cash balance in the electronic cash ledger that was deposited in excess,
• The tax that was mistakenly paid, or
• The accrued Input Tax Credit (ITC) could not be used for tax payments due to zero-rated sales.

Depending on the type of GST refund being requested, different forms are used to submit claims. For instance, it is only necessary to disclose information in GSTR-1 and GSTR-3B to request a refund of IGST paid on exports (with tax payment). The form RFD-01 must be used to request a refund for any cash paid in excess of the electronic cash ledger. As a result, depending on the type of GST refund, the procedures or processes vary.

GST is an indirect tax that is meant to tax the consumption of goods and services. Therefore, the consumer is always the one paying GST. An input tax credit or refund of GST cannot be claimed when the goods or services are used for personal use.

Any business can get a GST registration, but it is mandatory for businesses to get a GST registration if they cross a certain threshold of turnover. This threshold varies depending on the kind of business and the state where it is located. In India, the exemption limit for GST (Goods and Services Tax) varies based on the type of business and the state in which it operates. For businesses engaged in the supply of goods, the exemption limit is Rs. 40 lakhs turnover per annum, except for the following states and UTs:

• Arunachal Pradesh,
• Manipur,
• Meghalaya,
• Mizoram,
• Nagaland,
• Sikkim,
• Uttarakhand,
• Tripura.

For businesses in these states, the exemption limit is Rs. 20 lakhs turnover per annum. Businesses engaged in the supply of services have an exemption limit of Rs. 20 lakhs turnover per annum, except for the following states and UTs:

• Manipur,
• Meghalaya,
• Mizoram,
• Nagaland,
• Arunachal Pradesh,
• Sikkim,
• Uttarakhand,
• Tripura.

For businesses in these states, the exemption limit is Rs. 10 lakhs turnover per annum. If a business provides a 100% supply of exempt goods or services, they are not required to be registered for GST even if they cross the threshold limit. These thresholds have been unchanged since 1st April 2019 and were not altered by the September 2025 GST 2.0 reforms.

If you run a small business, two separate GST rules matter more than the general exemption list: the registration threshold and the Composition Scheme.

• Registration threshold: if your aggregate turnover stays below ₹40 lakh (goods) or ₹20 lakh (services) in most states, ₹20 lakh and ₹10 lakh in the special category If you are in the states listed above, you are entirely exempt from GST registration. You can still register voluntarily to claim ITC or build credibility with larger buyers.
• Composition Scheme: Once you're registered, if turnover stays under ₹1.5 crore (goods, most states) or ₹75 lakh (special category states), you can opt into the composition scheme instead of standard GST. You pay a flat rate on turnover: typically 1% for traders/manufacturers and up to 6% for restaurants without alcohol. File a simpler quarterly return (CMP-08), and skip most invoice-level compliance. Independent service providers and mixed suppliers of goods and services with a turnover of up to ₹50 lakh can opt for a similar 6% flat-rate scheme (3% CGST + 3% SGST).
• The trade-off: Composition Scheme taxpayers cannot claim ITC and cannot charge GST separately on invoices to customers. It's worth checking against your margins before opting in, especially if your customers are GST-registered businesses that would otherwise claim ITC on your invoice.

Understanding the list of GST-exempted gods and services is important for both businesses and consumers. While consumers can understand the savings that they get from the absence of GST, businesses can file accurate GST returns and adhere to the compliance norms. Moreover, for businesses, the exemption also affects their input tax credit, so understanding them becomes important.

The GST 2.0 reforms have expanded the list of GST-exempted goods and services, making the tax more consumer-friendly.

So, stay updated with the latest GST exemption rules and file returns correctly, claim eligible benefits, and remain compliant with evolving tax regulations.

Also read: What is GSTIN? Understanding its Structure, Eligibility, and Benefits