GST Exemption List 2025: Goods & Services Not Taxed Under GST

The GST Exemption List 2025 outlines a wide range of goods and services that are not subject to taxation under the Goods and Services Tax (GST) regime in India. These exemptions are essential for ensuring the affordability of necessities, supporting public welfare, and facilitating economic growth in sensitive sectors.

What Does GST Exemption Mean?

A GST exemption refers to specific goods or services that are not subject to Goods and Services Tax. These items are either entirely excluded from the tax net or taxed at a 0% rate. The main purpose of GST exemptions is to reduce the financial burden on essential or socially critical products and services, such as healthcare, education, and basic food items. This ensures affordability and promotes public welfare, especially for lower-income groups and vulnerable sectors.

Types of GST Exemptions

GST exemptions are generally classified into two categories:

1. Absolute Exemptions: These are unconditional. Goods or services are always exempt, no matter the circumstances. Example: fresh fruits, vegetables.

2. Conditional Exemptions: These apply only under specific conditions. For example, services provided by charitable organizations are exempt only if they meet eligibility criteria defined under GST law.

List of GST Exempt Services in 2025

GST law also spares several socially critical services, including:

List of GST Exempt Goods in 2025

Here’s a summary of goods not taxed under GST in 2025:

• Unbranded agricultural produce (like fresh fruits, cereals, pulses)

• Milk and milk products (non-flavored, unprocessed)

• Unbranded flour, rice, and atta

• Books and newspapers

• Organic manure

• Blood and plasma

• Sanitary napkins

• Puja samagri (items used in religious rituals)

These exemptions ensure necessities remain affordable for the majority population.

What is a Supply Under GST?

The term “supply” includes all forms of sale, exchange, lease, or barter of goods and services for consideration. Only such supplies are taxable under GST.

If a supply falls under the exempt category, it is not taxable, even if made for consideration.

Difference Between Exempt, Nil Rated, Zero Rated, and Non-GST Supplies

These categories are crucial for accurate compliance:

GST Exemption from Composition Scheme vs Registration

Don’t confuse exemption from registration with Composition Scheme eligibility.

1. Exemption from registration: Means the business doesn’t have to register at all, due to the nature of their supply (only exempt goods/services) or low turnover.

2. Composition Scheme: A simplified scheme for small taxpayers with turnover up to Rs.1.5 crore. It’s not an exemption but rather an optional regime with lower tax rates and minimal compliance.

Notably, exempt supply businesses cannot opt for the Composition Scheme since they don’t need to be registered in the first place.

GST Exemption for E-commerce Sellers and Freelancers

In 2025, as the gig economy continues to rise, it’s important to understand how freelancers and e-commerce sellers fit into GST exemptions:

Freelancers

-If a freelancer provides online educational content, and it qualifies as a charitable or socially beneficial service, it may be exempt.

-Freelancers offering non-exempt services like graphic design, content creation, or consulting services must register under GST if they exceed the threshold.

E-commerce Sellers

-Sellers of exempt goods like unbranded organic groceries, handmade soaps, or khadi products don’t need GST registration if their turnover is below Rs.40 lakhs.

-However, inter-state selling on platforms like Amazon or Flipkart usually mandates registration, regardless of turnover—unless notified specifically for exempt goods.

In-depth: GST Exemptions and Charitable Trusts

Charitable trusts offering certain services like:

• Relief to the poor

• Educational services

• Public health initiatives

…are exempt from GST only when the services are provided without commercial interest.

For example:

• Trust organizing free health check-ups is exempt.

• A trust operating a hospital on a fee basis, however, may not be exempt unless it meets the government’s specific exemption criteria.

Also, renting property by charitable trusts is taxable if the rental value exceeds Rs.10,000 per month (as per 2025 regulations), unless used for exempt activities.

Impact of GST Exemptions on Input Tax Credit (ITC)

One of the biggest limitations for businesses dealing with exempt supplies is the loss of Input Tax Credit.

Let’s say a small clinic provides exempt healthcare services. While it pays GST on its purchases (like equipment, cleaning supplies, IT services), it cannot claim ITC since the output supply is exempt. This makes cost planning critical for exempt businesses, especially those incurring high inward GST costs.

Exceptions and Planning Tip:

If a business deals in both taxable and exempt supplies, they must approve ITC based on the value of each category. This involves detailed accounting and may affect profitability.

Sector-Wise Impact of GST Exemptions

1. Agriculture: Agriculture continues to benefit the most from GST exemptions. By keeping fertilizers, seeds, and unprocessed produce out of GST, the government ensures lower input costs and food security. Farmers can also sell directly in local mandis without facing tax burdens.

2. Education: Educational services, especially from government-recognized institutions, remain exempt. This eases pressure on students and ensures affordable learning from primary to senior secondary levels. However, commercialization in the private sector has led to stricter norms to differentiate exempt and non-exempt services.

3. Healthcare: Hospitals, diagnostic centers, and paramedical services remain GST-free. This keeps treatment costs reasonable, especially for underprivileged sections. With the addition of telemedicine and mental health services in 2025, the scope has broadened further.

4. Tourism & Hospitality: While economy-class travel remains exempt, luxury hospitality is now mostly taxable. The policy aims to tax consumption based on capacity to pay, without discouraging mass transit and domestic tourism.

How GST Exemptions Affect Business Reporting and Invoicing

If you’re a GST-registered business but you also supply exempt goods or services, you need to:

• Issue a bill of supply instead of a tax invoice for exempt items

• Mention “exempt supply” clearly on records

• Report on exempt turnover in GSTR-1 and GSTR-3B returns

Incorrect classification or failure to mention exempt sales properly can lead to scrutiny or penalties.

Common Mistakes Related to GST Exemptions

Many businesses, especially small and unregistered ones, make the following errors:

• Assuming low turnover automatically means exemption, even when supplying taxable services

• Not updating their billing formats for exempt items

• Claiming ITC on exempt goods/services, which is not allowed

• Misclassifying zero-rated exports as exempt supplies, affecting refund claims

A sound understanding of exemption rules and professional advice is vital to avoid such issues.

Updates to GST Exemption List for 2025

Every financial year, the GST Council revises the exemption list based on economic needs, policy shifts, and sectoral performance. In 2025, some notable updates have reshaped the landscape of indirect taxation:

New Inclusions

1. Organic agricultural products from certified farms are now fully exempt.

2. Telemedicine services have been added to the exemption list to support healthcare accessibility in rural areas.

3. Eco-friendly goods such as solar panels and biodegradable packaging have received full exemption to promote green initiatives.

Removed Exemptions

1. Certain luxury hotel services below Rs.1000 per day were earlier exempt but have now been made taxable to broaden the tax base.

2. Pre-recorded educational services, especially those from non-recognized online platforms, are now taxable.

Sector-Specific Impacts

These updates aim to balance social support with revenue collection. While healthcare and environment-focused services saw relaxation, segments enjoying undue benefit under older norms were reclassified for taxation.

Challenges Faced Due to GST Exemptions

Though well-intentioned, exemptions under GST aren't without drawbacks:

1. Complexity in ITC Management: Businesses dealing in both exempt and taxable supplies face difficulty in segregating Input Tax Credit (ITC). They must reverse ITC on inputs used for exempt supplies, complicating accounting.

2. Increase in Cost Due to ITC Blockage: When ITC isn't claimable, businesses often pass the input tax cost to consumers, increasing the final price of the exempted good or service.

3. Compliance Burden: Even businesses engaged in exempt supplies must issue compliant invoices and maintain proper records. This adds to the administrative burden, especially for small enterprises.

4. Misclassification Risks: The thin line between exempt, nil-rated, and zero-rated supplies can lead to confusion or unintentional non-compliance, risking penalties during GST audits.

Outlook of GST Exemptions in India

India’s GST regime is still evolving. Going forward, we can expect:

1. Rationalization of Exemptions: The government is considering a fewer and well-targeted exemptions approach to reduce misuse and improve transparency. A single rate for essential categories might be introduced.

2. Digitalization of Exempt Supplies: With e-invoicing already in place for large businesses, even exempt suppliers may soon be required to digitally report their supplies for better tracking and control.

3. Integration with Social Schemes: There’s potential to link GST exemptions with direct benefit transfers or social IDs (like Aadhaar or Jan Dhan), making targeted subsidies more efficient while reducing blanket exemptions.

4. Global Alignment: India might also align its exemption strategy with global best practices, especially for cross-border supplies, healthcare, and education.

Examples of GST Exemptions in Real-World Scenarios

To help understand the impact and relevance of GST exemptions in daily business, let’s consider a few practical examples:

Case 1: An Ayurvedic Doctor's Clinic

An ayurvedic doctor offering consultation and herbal treatments falls under the healthcare exemption category. Therefore, no GST is applicable to his services.

Case 2: A Rural Private School

A private school in a rural area providing education up to a higher secondary level is exempt under educational services.

Case 3: A Handloom Business Owner

A weaver producing traditional handloom sarees with a turnover of Rs.35 lakhs annually is exempt due to both the product nature and the turnover threshold.

Final Thought

The GST Exemption List 2025: Goods & Services Not Taxed Under GST reflects India’s commitment to inclusive growth and economic equity. While supporting sectors like agriculture, education, and healthcare, these exemptions also promote affordable living and social welfare.

However, they come with challenges like input tax disallowance, complex compliance, and occasional ambiguity. The 2025 updates show a strong intent toward balancing welfare with fiscal responsibility, refining which goods and services genuinely need exemption.

As India moves towards a more mature tax system, we can expect further simplification, rationalization, and digital integration of GST exemptions in the coming years. For now, understanding the nuances of exempted goods, services, and registration rules is vital for businesses and consumers alike.

If you have any queries regarding GST Exemption, then you can connect with Compliance Calendar LLP experts through email info@ccoffice.in or Call/Whatsapp at +91 9988424211.

Frequently Asked Questions

Q1. What is the GST Exemption List 2025?

Ans. The GST Exemption List 2025 includes goods and services that are not liable to GST either fully or conditionally.

Q2. Which services are exempt under GST in 2025?

Ans. Healthcare, education, public transport, and certain government and charitable services are exempt in 2025.

Q3. Are all agricultural products GST exempt in 2025?

Ans. Yes, unprocessed and unbranded agricultural produce continues to be GST exempt.

Q4. Do small businesses need to register for GST if they only deal in exempt goods?

Ans. No, businesses exclusively supplying exempt goods or services are not required to register under GST.

Q5. Can Input Tax Credit (ITC) be claimed on exempt goods or services?

Ans. No, ITC cannot be claimed for supplies that are GST exempt.

Q6. What is the difference between zero-rate and exempt supply?

Ans. Zero-rated supplies attract 0% GST but allow ITC, while exempt supplies do not allow ITC.

Q7. Has the GST exemption list changed in 2025?

Ans. Yes, the 2025 list includes new exemptions like telemedicine services and eco-friendly products.