Exempted Supplies Under GST :- V Chapter (Procedural Aspects)

Exempted Supplies Under GST :- V Chapter (Procedural Aspects)

1. Registration in cases of supply of exempt goods and/or services

Section 9 provides that a taxable person is liable to pay tax under the GST laws. Taxable person has been defined as a person who is registered or liable to be registered. Section 22 and Section 24 of the CGST Act provide the criteria which when fulfilled requires a person to take registration. Section 22 provides for registration of every supplier effecting the taxable supplies if his turnover exceeds the threshold limit of Rs.20 lacs and Rs.10 lacs in special category States. Every supplier shall be liable to be registered under the Act in the State from which he makes a taxable supply of Goods or Services or both. It is important to note that registration is required ‘in’ the State ‘from where’ taxable supplies are made. Section 24 lays down a list of persons who are required to obtain registration without any monetary limit i.e. even if they do not have supplies of Rs 20 Lakhs. Such person includes electronic commerce operators, input service distributors, non-resident taxable persons etc.

Further, Section 23 of the CGST Act provides that the following persons shall not be liable to take registration:

— any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under this Act or under the Integrated Goods and Services Tax Act;
— an agriculturist, to the extent of supply of produce out of cultivation of land.
— The Government may, on the recommendations of the Council, by notification, specify the category of persons who may be exempted from obtaining registration under this Act. Accordingly, the Central Government vide Notification No. 05/2017-Central Tax, dt. 19-06-2017 has, w.e.f 22nd June 2017 amended section 23 of CGST Act, 2017 to include the persons who are only engaged in making supplies of taxable goods or services or both, the total tax on which is liable to be paid on reverse charge basis by the recipient of such goods or services or both under section 9(3) of the CGST Act, 2017 in the category of persons exempt from obtaining registration under the aforesaid Act.

Thus, a person who is making exclusive supply of exempt goods or services or both is not required to obtain registration; however, if he is engaged in the supply of any taxable goods or services, he shall be required to take registration. It is worth noting that the above Rs 20 Lakhs limit as specified in Section 22 shall be arrived at after adding both taxable as well as exempt supplies. Thus, even if a person has Rs 19.5 lakhs of exempt supplies but Rs. 1 lakh of taxable supplies, he is required to take registration.

2. Documents, e-way bills and records required in case of exempt supplies and consequences on non-compliance

Document required to be issued in case of Exempt Supply:

Section 31(3)(c) of the CGST Act provides that a registered person supplying exempt goods or services or both or paying tax under the provisions of section 10 shall issue, instead of a tax invoice, a bill of supply containing such particulars and in such manner as may be prescribed. It is further provided that a registered person has an option not to issue bill of supply if the value of the goods or services or both supplied (per invoice) is less than Rs. 200/-, subject to the following conditions-

(i) the recipient is not a registered person; and (ii) the recipient does not require such invoice.
In such a situation, the registered person shall issue a consolidated bill of supply for such supplies at the close of each day in respect of all such supplies.

Contents of Bill of Supply
A bill of supply shall contain the following particulars-
(a) name, address and GSTIN of the supplier;
(b) a consecutive serial number not exceeding 16 characters;
(c) date of issue;
(d) name, address and GSTIN of registered recipient;
(e) HSN Code for goods or SAC for services;
(f) description of goods or services or both;
(g) value of supply of goods or services or both taking into account discount or abatement, if any; and
(h) signature or digital signature of the supplier or his authorised representative.
In terms of the First Proviso to rule 46, the Central Government vide Notification No. 12/ 2017-Central Tax, dated 28-Jun-2017 had specified the requirement of mentioning the number of digits of HSN code on invoice or bill of supply based on the annual turnover of previous financial year which is provided as under:

It is further provided that, in case of export of goods or services which are exempt under GST, the bill of supply shall carry an endorsement “supply meant for exports/ supply to SEZ developer/ unit for authorised operations under bond or LUT without payment of IGST” and shall specify the following details, namely-

(i) Name and address of the recipient;
(ii) Address of delivery; and
(iii) Name of the country of destination.

It is important to note here that vide Circular No. 45/ 19/ 2018-GST, dated 30-May-2018, it has been clarified that in case of export of exempted or non-GST goods without payment of IGST LUT/ bond is not required. Under such a scenario, a view can be taken that in case of export of exempted goods or services, the bill of supply may carry endorsement as “supply meant for exports/ supply to SEZ developer/ unit for authorised operations”.
It is also clarified in rule 49 that any invoice issued under any other Act in respect of non-taxable supply shall be treated as bill of supply under GST. For example, invoice issued under State VAT Act, for supply of alcoholic liquor meant for human consumption shall be considered as bill of supply for the purpose of GST Act.

Invoice-cum-bill of supply

Rule 46A of CGST Rules, 2017 overrides rule 46 or rule 49 or rule 54, to provide that a registered person supplying taxable goods as well as exempted goods or services or both to an unregistered person may issue a single “invoice-cum-bill of supply” for all such supplies.

Provisions relating to issue of documents by registered person can be summarized as follows-

E-way Bill in case of exempt supplies

Section 68 of CGST Act, 2017 read with rule 138 of CGST Rules, 2017 requires every registered person who causes movement of goods of consignment whose value is exceeding Rs. 50,000/- to generate an e-way bill on the common portal in respect of such supply, before commencement of movement of goods. Explanation 2 to rule 138(1) provides that the consignment value of goods shall be the value, determined in accordance with the provisions of section 15, declared in an invoice, a bill of supply or a delivery challan, as the case may be, issued in respect of the said consignment and also includes the central tax, State or Union territory tax, integrated tax and cess charged, if any, in the document and shall exclude the value of exempt supply of goods where the invoice is issued in respect of both exempt and taxable supply of goods. Thus, value of exempted goods shall not be considered for the purpose of computing the limit of Rs 50,000. Thus, in case of pure supply of exempted goods, other than de-oiled cake as specified in rule 138(14) of CGST Act, 2017, no e. way bill is required.

However, rule 55A of CGST Rules, 2017 requires the person-in-charge of the conveyance to carry a copy of the tax invoice or the bill of supply issued in accordance with the provisions of rules 46, 46A or 49 in a case where such person is not required to carry an e-way bill.

Example :

•  If a registered person transporting goods of consignment value of Rs. 70,000/- which includes exempt supply of Rs. 30,000/-, then, the e-way bill is not required to be generated because the consignment value is calculated as Rs. 40,000/- which is below the limit of Rs. 50,000/-.
•  A registered person transporting exempt goods of consignment value of Rs. 70,000/- is not required to generate e-way bill but the person-in-charge of the conveyance must carry the bill of supply.

Records required to be maintained by supplier of taxable/ exempt supplies

As per section 35(1) of CGST Act, 2017, every registered person shall keep and maintain, at his principal place of business mentioned in its registration certificate, a true and correct account of the following:

•  Production and manufacture of goods.
•  Inward and outward supply of goods or services or both – Such detail should include names and complete addresses of suppliers from whom he has received the goods or services chargeable to tax under the Act.
•  Stock of goods – It has been provided that such accounts shall contain particulars of the opening balance, receipt, supply, goods lost, stolen, destroyed, written off or disposed of by way of gift or free sample and the balance of stock including raw materials, finished goods, scrap and wastage thereof.
•  Input tax credit availed.

•  Output tax payable and paid.
•  Such other particulars as may be prescribed.

Thus, every supplier of exempted goods also needs to maintain proper sale purchase register, stock register and manufacturing records.

In addition to the above, rule 56 requires every registered person to keep and maintain the following records-

•  Account of the goods or services imported or exported
•  Account of supplies attracting payment of tax on reverse charge
•  Account of advances received, paid and adjustments made thereto.
•  A register of tax delivery challan issued or received during any tax period.

It is important to mention that other requisites of books of accounts including the place at which these are required to be maintained, manner in which these are to be maintained, manner of making entries in registers etc. has to be complied with. Section 36 of CGST Act, 2017 requires a registered person to keep and maintain books of accounts or other records for a period of 72 months from the due date of furnishing the annual return (i.e. 31st December of subsequent financial year) for the year pertaining to such accounts and records. Thus, records for FY 2017-18 are to be maintained till 31st December 2025.

Consequences on Non-Compliances

Section 122 of CGST Act, 2017 provides penalty for certain offences. A registered person supplying exclusively exempted goods or services or both shall have to pay a penalty of Rs. 10,000/- if he fails to keep, maintain or retain books of account and other documents in accordance with the provisions of this Act or the rules made thereunder.

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