Area-Based Exemption Under GST: Exploring Its Relevance and Application

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Introduction to Area-Based Exemption

The area-based exemptions under the GST regime are very specific to location and the concessions are offered to the businesses that operate in that specific location. Such assumptions are typically implemented on the liability to pay GST or other tax rates, aim to gather major investments and improve employment opportunities as well as economic activity in specified areas. Such exemptions will also vary depending on certain areas and objectives of the government.

Exploring the Concept of Area-Based Exemption

Several different aspects define the area’s past exemptions under the GST regime:

  • A targeted approach: these are the exemptions that are being provided to certain locations, keeping in mind the remoteness of the area, lack of infrastructure as well as how backwards the area is. the area-based exemptions have been a powerful tool to target development in different areas. For example, it has helped the Jammu and Kashmir region to flourish its tourism so it has helped the Himachal Pradesh region to flourish its apple farming. Hence, the area-based exemptions have excellent development of different sectors.
  • Driven upon incentivization: what can easily be considered exemptions as an incentive for the businesses so that it can expand its operations in different areas which will lead to creating different jobs as well as promoting economic development. For instance, in the agriculture sector, the exemptions have allowed farmers to be more profitable and also have helped customers to goods at lower prices. Hence it has increased the overall economic activity around farming. In such a way incentivised has held different industries flourish in their way.
  • Variability in scope: such exemptions will travel different qualities of GST that include the rate of tax turnover or specific services and goods.
  • The dynamism of policy: the government will be able to modify or bring about new exemptions based on areas which are implemented considering the different priorities and needs the economy demands. in addition to the dynamic places, different exemptions are bound by time and face-out plans as well. This will provide a tempting support to different areas without creating a complete defence on such rules and policies.

Also Read: Is There Any Concept Of Area-Based Exemption Under GST?

Understanding the Relevance of Area-Based Exemption

The objective of area-based exemptions has been discussed here:

  • Development of the region: this exemption acts as a motivator for businesses to set up since it eases their operations, therefore, it is used as a tool to attract different businesses towards a geography that has disadvantages in terms of employability, job creation and overall economic development. Apart from the benefits, such exemptions will help in the development of the healthcare industry as well as educational institutions. Access to different immunities will also improve, thereby improving the targeted area as a whole.
  • Creating jobs: since different businesses tend to set up in these areas, therefore, employment improves theirs by benefiting the local community and producing unemployment.
  • Infrastructure development: since more and more investments, are being attracted to this area. It often shows how improved the infrastructure is thereby further promoting development in the region.
  • Improving export: export is a very important part of the nation’s GDP. The area-based exemptions promote target-based exemptions in export-oriented areas. Therefore, it boosts the competitiveness of the export activity of the businesses by generating foreign exchange which improves the influx of foreign cash flow in the nation.
  • Fiscal decentralisation: this exemption will empower the local authorities by giving them some breath of incentives on sectors within the different jurisdictions, thereby providing them regional autonomy as well as some kind of accountability.

Implementation and Compliance of Area-Based Exemption

Implementing and complying with the area-based exemptions will involve certain steps:

  • Government notification: the government will officially notify the different areas where the specific assumptions are being implemented. Based on those notifications, businesses will be able to gauge whether or not they are entitled to enjoy the exemptions.
  • Criteria for eligibility: the businesses that operate in certain areas must fulfil certain eligibility criteria which include minimum investment or the different types of activity in which the businesses do
  • Measures for compliance: the compliance will be outlined by the government which will help the businesses to avail the exemptions. It will also include the process of documentation as well as the process of verification that the businesses ought to do
  • Evaluating and monitoring: the government will monitor the effectiveness of the exemptions requiring modification of the different aspects of the prescription which will further impact the economic condition of the area.
  • Accessibility, and transparency There should be clear communication of the designated regions, and different businesses as well as specific exemptions which ensure accessibility and reduce misuse. Simplifying the registration process and compliance procedure will encourage participation further as well.
  • Integrating technology: online platforms for the rest of verification and other claim processing will streamline the process of compliance, which will further reduce the Atri button and as the transparency of the GST regime.
  • Review impact assessment: monitoring the economic, social as well as environmental impact regularly. With the impact of the exemptions on a positive piece reviewing the exemptions and adjusting them periodically will be effective for the GST regime of the nation.

Case Studies and Success Stories

Exempting GST in special economic zones: these are the exemptions which will also include zero-rated GST on the defence services and codes that enter and exit the different special economic zones. This has made the areas very attractive for foreign direct investments. The major special economic zones are Chennai, Visakhapatnam, and many more which have witnessed growth in its IT industry as well as the electronic and pharmaceutical sectors. Growth has been propagated due to the high exports that exceed dollars as well as the creation of thousands of jobs.

  • Success story: after the GST had been implemented. The special economies of Bangalore served that there had been a rise in investment by 30% which also led to the creation of 5000 jobs. This goes to show that the exemptions of GST implemented in special commitment zones have benefited economically.

North-east India: exemptions in GST in the tourism and other related services sector. Also, the infrastructure projects in Manipur and Meghalaya have resulted in the growth of tourism which has helped this area to enjoy a higher inflow of cash from businesses, thereby promoting economic growth. Progress in the form of connectivity, fire reload and airways have enhanced the accessibility to these places. Hence, these areas are available to promote their regional culture to the nation which is created to be one of the most attractive places to visit. Also, the fact that there has been a community engagement, it has held people in the area to develop their skills further as well as coding and service can go at what they want to perceive to promote their cultural heritage.

  • Success story: in Arunachal Pradesh, the exemption of GST on the hydroelectric projects has resulted in attracting higher investment in the energy-generating sector also creating sustainable jobs which has helped the economic prospects of the state. This demonstrated how such exemptions drive economic growth in the traditionally driven areas. Attractive investments in terms of hydropower, as well as green energy transmission, have boosted the economic activity in those areas. In doing so, it has become a hub of generating electricity from which the area can generate a dedicated amount of revenue which can be used for their economic development. Overall, the diversification from one business to another has been proposed by the assumptions that have been implemented by the current GST regime in those states. to those states.

Jammu and Kashmir: to support the economic recovery after the conflict, the government has offered exemptions on different items of food items and materials for construction as well as handicraft products. It has reduced the pressure of local businesses and consumers. Promoting products such as Kashmiri Pashmina, shawls and Sozni embroidery through the GI tax has improved the plan value of those products. They were reducing the chances of counterfeiting as well as ensuring that these artisans were paid the price for their skills. Apart from that the eco-tourism and an inclination to renew energy have helped the homestays in those areas to promote sustainability which has resulted in attracting tourism activity even further.

  • Success story: The Jammu and Kashmir handicraft industry has been revived due to the changes made in the GST regime. The traditional artisans have noticed the increase in income and revenue which shows that these exemptions have empowered the different sectors that are majorly responsible for generating revenue in the Jammu and Kashmir region.

There are other success stories beyond the major examples given above. Such stories are discussed:

  • Himachal Pradesh: in the state, the government has exempted the need for GST on Apple farming which has improved the competition in the market as well as allowed the pharma to export it easily. In the domestic market, there has been a reduction in the price of Apple which has improved the affordability of the customers, thereby improving the overall economic activity Surrounding this fruit.
  • Andaman Nicobar Island: The exemption of GST on tourism in this area has promoted better tourism by making it more affordable for customers. It has also created jobs in the hospitality industry and selected sectors as well.

Note: the aforementioned success stories discuss how the different exemptions can:

  • Create jobs: exemptions in tourism. The majority of states have improved jobs as well as benefits. The local community has improved the existing condition of the people who are working in that very industry.
  • Boosting specific sectors: as seen in Jammu Kashmir and Himachal Pradesh, the functions include Apple farming as well as tourism in another state. Improvement in sectors helps economic development, which further includes the condition of the nation.
  • Attracting investments: idiom exemptions and attraction for different businesses. Therefore, these businesses are more inclined towards setting up in these areas. Hence, if this area observes higher infiltration of businesses, then the probability of improvement of inflow of cash increases as well.


The area-based exemptions under the GST regime have been a powerful tool towards targeted regional development as well as the growing economy of the nation. Understanding the concept of such exemptions will allow the origin of the developmental gaps and creation of jobs which will foster inclusive economic progress in the nation where every region takes a major part.

Also Read: How to Calculate GST in an Excel Sheet: Step-by-Step Guide


  • What do you mean by area-based exemptions GST?

These are the different tax concessions that specific businesses are being offered in order to promote job creation, investment and overall economic development.

  • Give me some examples of these exemptions

The decline in GST rates on services and goods of certain areas, GST, exemptions in small businesses, reimbursement of HGS and CGST by different businesses.

  • What is the importance of these exemptions?

These exemptions allow businesses to enjoy a lower operating cost. Also, helps the market with job creation and overall economic development for the nation.

  • Tell me a few success stories revolving around area exemptions

Creating numerous jobs in SEZs, exemptions in north-east India towards Hyderabad, and GST rebates on the handicraft industry of Jammu and Kashmir.

  • What are a few of the challenges with these exemptions?

Effective target mechanism, misuse and abuse and recurring monitoring and evaluation.

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Arghyadeep Bose Equity Research Associate
I am a passionate writer with a deep understanding of the financial world. I believe in making complex financial concepts accessible and engaging for everyone. With my corporate experience and love for storytelling, I craft compelling narratives that educate and inspire. I am always looking for ways to bridge the gap between finance and creativity, and I am excited to share my insights with the world.

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