The introduction of GST laws has created a uniform and transparent indirect tax structure in our country by unifying various taxes like vat, excise duty, service tax etc., benefiting both the consumers and the government. It is applicable to both buyers and sellers.
Filing GSTR-3B returns is mandatory for all businesses registered under GST. Moreover, calculating the accurate tax liability and filing GSTR-3B returns correctly is important, otherwise the taxpayers may be subjected to penalties and interest and other consequences. It is also important for them to understand the different types of GST tax supplies to ensure compliance with the tax laws. Here we discuss in detail the Exempt and Non-GST Supplies and how to deal with them in the GSTR-3B form.
Supplies that are exempted from GST are called exempt supplies. That means this type of supply does not attract tax at all. They are included in the list of exempted items in GST. Businesses cannot claim input tax credit on these supplies either. Examples of exempt supplies are essential food items, public transport services, healthcare services, educational services, and agricultural products. While reporting supplies in GSTR-3B, businesses should upload the exempt supplies in the relevant section while entering the invoice details in the GST portal, so that they are not included for calculation of GST or input tax credit. They are reflected in table 3.1(c) under the exempted section, in form GSTR-3B.
Supplies that do not attract GST are called non-taxable supplies. That is the supplier does not charge GST on these sales. These supplies are not considered for taxation under the GST law. They should not be uploaded in the GST portal, and are not included in any table in GSTR-3B. They also cannot be considered for claiming input tax credit. In India, items like alcohol for human consumption, natural gas, natural and aviation turbine fuel, petrol, and diesel are included in non-GST supplies.
Dealing with Exempt Supplies in GSTR-3B
To report exempt supplies in GSTR-3B businesses should follow certain steps:
- Correct Classification: Businesses need to identify the goods and services that qualify as exempt supplies as per GST law. The list of exempt items is provided by the government on their website.
- Separate Record Maintenance: Maintaining separate records of exempted supplies from taxable supplies makes it easier while filing the returns. Businesses have to ensure that the exempted supplies are not reflected in taxable turnover reported in table 3.1(a).
Dealing with Non-GST Supplies in GSTR-3B
Non-GST supplies must be included in table 5F of GSTR-9, column 4 of table 8 in GSTR-1, table 7B of GSTR-9C and in table 3.1(e) in GSTR-3B.
Impact of Exempted and Non-GST Supplies on ITC
Businesses should not include the GST paid on inputs related to exempt supplies. Such inputs should not be considered eligible for ITC credit. It is important for businesses to maintain records segregating the exempted and non-GST supplies so that it is easier to calculate the input tax credit while filing the GST returns.
Other Types of Supplies Exempted from GST
The other types of supplies exempted from GST which businesses should be aware of are Zero-Rated Supplies, Nil-Rated Supplies and Non-GST Supply or Non-Taxable Supply.
- Zero-Rated Supplies: Supplies in which the tax rate is zero are called zero rated supplies. In this type the supplier of the goods or services does not have to pay any GST, but they still can claim a refund of the input tax credit. These supplies are generally used for exports, international supplies, and other supplies that are not subject to GST. It includes the supply of goods or services to an SEZ (Special Economic Zone) and the supply of goods or services to an international tourist.
- Nil-Rated-Supply: Supplies in which the rate of tax is nil, but the supplier of the goods or services cannot claim any input tax credit. This type of supply is used for certain types of goods or services that are exempt from GST. It includes goods or services to an unregistered person, supply of goods or service to a person outside India and the supply of goods or services like agricultural produce.
- Non-GST Supply or Non-Taxable Supply: It is a type of supply which does not attract GST. That is the supplier does not charge GST on their sales, and also does not get the input tax credit. Items like alcohol, petrol and diesel are non-GST supplies.
Difference between Zero-Rated, Nil-Rated, Non-GST and Exempt Supplies
Zero rated supplies are goods and services that are subject to GST but exempt from paying it.
Nil-rated supplies are zero-rated supplies. Here the supplier is not required to charge GST for supply of goods or services and the recipient is also not eligible to claim any Input Tax Credit on the same.
Non-GST supplies are services provided by the Government, like postal, police, defense services, sale of agricultural produce, alcohol for human consumption, petroleum products, etc.
Exempt Supplies do not attract GST at all and cannot claim input tax credit on them. They include milk, curd, bread, fresh fruit, etc.
Conclusion: It is crucial for businesses to understand the different types of supplies and calculate the accurate tax liability while filing GSTR-3B. By correctly identifying exempt supplies and excluding them while calculating the tax liability and input tax credit calculations, businesses can ensure compliance and avoid any future legal tax consequences. Maintaining proper records can ease the process during filing the returns. By following the guidelines properly, businesses can streamline their GST filing process and fulfill their tax obligations in time.
Understand exempt and non-GST supplies thoroughly and maximize your tax savings and be tax compliant.