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Unit 3 of 4 · B.Com Sem 5

Unit 3: Exemptions & GST liability

Goods and Services Tax notes · PTU syllabus (BCOM 502-18)

4 min read5 topics10 exam questions
On this page
  1. Unit summary
  2. Exemptions under GST (Section 11)
  3. Time of supply (Sections 12–13)
  4. Value of supply (Section 15)
  5. Place of supply (IGST Act, Sections 10–13)
  6. Input tax credit and GST liability
  7. Key terms
  8. Quick revision
  9. Important questions

Unit summary

Not every supply is taxed, and taxing the rest requires knowing when, where and on what value. This unit covers the power to grant exemptions and basic exemptions, time of supply, value of supply, place of supply, and input tax credit with computation of GST liability.

After this unit you can

  • Explain the power to grant exemptions and important exemptions under GST
  • Determine time and value of taxable supply
  • Determine the place of supply and type of tax
  • Compute input tax credit and net GST liability

PTU syllabus topics

  • Power of granting exemptions
  • basic exemptions under GST
  • concept of time
  • value and place of taxable supply
  • input tax credit and computation of GST liability
ProcessInput tax credit at work
  1. 1Buy inputs

    Pay ₹1,800 GST on purchases

  2. 2Sell goods

    Collect ₹3,000 GST on sales

  3. 3Claim credit

    Set off the ₹1,800 already paid

  4. 4Pay the difference

    Net GST payable ₹1,200

1

Topic 1

Exemptions under GST (Section 11)

  • The Central Government, on the recommendation of the GST Council, may exempt goods or services generally (by notification — absolutely or conditionally) or specially (by special order in exceptional circumstances).
  • Exempt supply includes nil-rated, non-taxable and wholly exempt supplies; no ITC is available on inputs used for exempt supplies.

Important exemptions

GoodsServices
Fresh fruits and vegetables, cereals (unbranded/unpacked)Health care by clinical establishments and doctors
Fresh milk, curd, eggsEducation by an educational institution up to higher secondary and approved courses
Salt, jaggeryServices by RBI, government (certain)
Books, newspapersAgricultural services — cultivation, storage, warehousing of agricultural produce
Human blood, contraceptivesTransport of passengers by public transport (non-AC buses, metro, rail in second class)
Handloom products (some)Residential dwelling rented for residence (to unregistered person)
Individual life and health insurance (from 22 September 2025)Services by charitable entities for specified activities
ComparisonExempt vs zero-rated supply
Exempt supply
Zero-rated supply

Tax on output

Nil

Nil (exports, SEZ supplies)

Input tax credit

Not available

Available or refund allowed

Purpose

Relief to consumers

Competitive exports

2

Topic 2

Time of supply (Sections 12–13)

Time of supply fixes the point at which tax liability arises.

ProcessTime of supply — goods (forward charge)
  1. 1Earlier of
  2. 2Date of issue of invoice (or last date by which invoice should be issued)
  3. 3Date of receipt of payment (no longer applies to advances for goods — Notification 66/2017)
ProcessTime of supply — services (forward charge)
  1. 1Invoice issued within 30 days of supply

    Earlier of invoice date and payment date

  2. 2Invoice not issued in time

    Earlier of date of provision of service and payment date

  3. 3Otherwise

    Date of entry in the recipient's books

  • Reverse charge: for goods — earliest of receipt of goods, payment, or 31st day after invoice; for services — earlier of payment or 61st day after invoice.
  • Change in rate (Section 14) rules decide the applicable rate when supply, invoice and payment fall on different sides of a rate change.
3

Topic 3

Value of supply (Section 15)

  • Transaction value — the price actually paid or payable, when the supplier and recipient are not related and price is the sole consideration.
ClassificationInclusions in value (Section 15(2))
Transaction value includes

  • Taxes other than GST

    Levied under other laws (e.g., certain cesses)

  • Amounts paid by the recipient on behalf of the supplier

  • Incidental expenses

    Packing, commission, delivery charged to recipient

  • Interest, late fee or penalty for delayed payment

  • Subsidies linked to price

    Except government subsidies

  • Exclusions: discounts given before or at the time of supply recorded in the invoice; post-supply discounts if agreed beforehand and linked to invoices with ITC reversed by the recipient.
  • Valuation Rules (Rules 27–35): used for related persons, barter, agents — open market value, like-kind value, cost + 10%, residual method.

Example

List price ₹50,000; trade discount 10% in invoice; packing ₹1,000; transport charged ₹2,000; late payment interest ₹500 later. Value = 45,000 + 1,000 + 2,000 + 500 = ₹48,500; GST at 18% = ₹8,730 (the interest is taxed when charged).

4

Topic 4

Place of supply (IGST Act, Sections 10–13)

Place of supply decides whether a supply is intra-state (CGST + SGST) or inter-state (IGST).

SituationPlace of supply
Goods involving movementLocation where movement terminates for delivery
Goods delivered on direction of a third person (bill-to ship-to)Principal place of business of the third person
Goods without movementLocation of goods at delivery
Goods installed or assembled at sitePlace of installation
Goods on board a conveyancePlace where goods are taken on board
Services — general rule (B2B)Location of the registered recipient
Services — general rule (B2C)Location of recipient if address on record, else location of supplier
Immovable property, hotelsLocation of the property
Restaurant, beauty, health servicesLocation where services are performed
Event admissionPlace where the event is held

Example

A Ludhiana supplier sells goods to a Delhi buyer; goods move to Delhi → inter-state → IGST. A Ludhiana hotel room booked by a Mumbai company → place of supply Punjab → CGST + SGST.

5

Topic 5

Input tax credit and GST liability

Input tax credit (ITC) — GST paid on inputs, input services and capital goods used in the course of business can be set off against output tax.

Conditions (Section 16)

  • Possession of a tax invoice/debit note; goods or services received; supplier has paid the tax and the invoice appears in GSTR-2B; recipient files returns; payment to supplier within 180 days (else ITC reversed with interest).
  • Time limit: ITC must be claimed by 30 November following the end of the financial year (or the annual return date, if earlier).

Blocked credits (Section 17(5))

Motor vehicles for passenger transport (≤ 13 persons, except for specified businesses), food and beverages, outdoor catering, beauty treatment, health services, club membership, travel benefits for employees on vacation, works contract and construction of immovable property (other than plant and machinery), goods lost, stolen, destroyed or given as free samples, tax paid under composition, personal consumption.

ProcessOrder of utilisation of ITC (Section 49)
  1. 1IGST credit

    First against IGST, then CGST and SGST in any order and proportion

  2. 2CGST credit

    Against CGST, then IGST — never SGST

  3. 3SGST credit

    Against SGST, then IGST — never CGST

  4. 4IGST credit must be fully used before CGST or SGST credit

Example

Output tax: IGST ₹50,000, CGST ₹30,000, SGST ₹30,000. ITC: IGST ₹60,000, CGST ₹20,000, SGST ₹15,000. Use IGST credit: ₹50,000 against IGST, remaining ₹10,000 against CGST. CGST payable = 30,000 − 10,000 − 20,000 = 0. SGST payable = 30,000 − 15,000 = ₹15,000 in cash.

  • Apportionment (Section 17(1)–(2)): ITC on inputs used partly for exempt supplies is reversed proportionately (Rules 42–43).

Key terms

Exempt supply
Supply attracting nil tax or wholly exempt, with no ITC
Zero-rated supply
Exports and SEZ supplies with nil tax and ITC allowed
Time of supply
Point when GST liability arises
Transaction value
Price actually paid where parties are unrelated and price is the sole consideration
Place of supply
Location deciding intra-state or inter-state nature of supply

Quick revision

  • Exemptions by Section 11 on Council's recommendation; exempt ≠ zero-rated.
  • Time of supply: invoice/payment rules; RCM 31/61 days.
  • Value: transaction value + inclusions − pre-agreed discounts.
  • Place of supply: movement terminates (goods), recipient's location (B2B services).
  • ITC: Section 16 conditions; Section 17(5) blocked; IGST used first.

Important exam questions

Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).

Short-answer questions

  1. Q1.Who can grant exemptions under GST?
  2. Q2.Distinguish exempt and zero-rated supply.
  3. Q3.What is time of supply of services?
  4. Q4.What is included in the value of supply?
  5. Q5.What is the place of supply for hotel accommodation?
  6. Q6.State the conditions for claiming ITC.

Long-answer questions

  1. Q1.Explain the power to grant exemptions and important exemptions under GST.
  2. Q2.Explain the provisions relating to time and value of supply.
  3. Q3.Explain the rules for determining place of supply.
  4. Q4.Explain input tax credit and compute GST liability with an illustration.

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