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CLASSIFICATION
(INCLUDING EXEMPTIONS)
BIRD’S EYE VIEW

Section 9 Section 11

Rates of Tax Exemption from GST

Section 8

Composite Supply vs. Mixed Supply

Notes:
 Section 9 of CGST Act, 2017 (charging section) which also provides for rates of tax for intra-state supplies is mutatis mutandis applicable for
rates of tax for inter-state supplies by virtue of Section 5 of IGST Act, 2017.
 Section 11 of CGST Act, 2017 which provides for exemption for intra-state supplies is mutatis mutandis applicable for exemption for inter-
state supplies by virtue of Section 6 of IGST Act, 2017.
 Section 8 of CGST Act, 2017 which provides for composite supply & mixed supply for intra-state supplies is mutatis mutandis applicable
for composite supply & mixed supply for inter-state supplies by virtue of Section 20 of IGST Act, 2017.

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RATES OF TAX
SECTION 9 OF CGST ACT, 2017

RATES

Rates for Goods Rates for Services

0% 0.25% 3% 5% 12% 18% 28% 0% 5% 12% 18% 28%

Notes:
 It is important to note that rates given above are Rates of IGST (i.e. Rate of CGST + Rate of SGST). It implies that if IGST rate is 28%,
generally CGST rate will be 14% and SGST rate will be 14%.
 Maximum rate of IGST is 40%. It implies that maximum rate of CGST is 20% and maximum rate of SGST is 20%.

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COMPOSITE SUPPLY VS. MIXED SUPPLY
SECTION 8 OF CGST ACT, 2017

Section 2(30) of CGST Act, 2017 Section 2(74) of CGST Act, 2017
Composite Supply Mixed Supply
Definition – Section 2(30) Definition – Section 2(74)
Supply made by a taxable person consisting of two or more taxable Supply made by a taxable person consisting of two or more
supplies of goods or services or any combination thereof, individual supplies of goods or services or any combination thereof,
 which are Naturally Bundled and  which are supplied for a Single Price and
 which are supplied in conjunction of each other in Ordinary  which are supplied in conjunction of each other where such
Course of Business, one of which is a Principal Supply supply is NOT Composite Supply

Tax Liability – Section 8 Tax Liability – Section 8

Two or more supplies, one of which is a Principal Supply, shall be Two or more supplies shall be treated as supply of that particular
treated as a supply of such Principal Supply supply that attracts Highest Rate of Tax

Examples Examples
 Supply of Readymade Garments with Packing Materials,  Supply of Canned Food, Sweets, Chocolates, Cakes, Dry Fruits,
Transport and Insurance is a Composite Supply where Supply Aerated Drink and Fruit Juices is a Mixed Supply if it is for a
of Readymade Garments is Principal Supply Single Price
 Supply of TV with Warranty & Maintenance contract with TV  Supply of Refrigerator with Storage Water Bottles is a Mixed
is a Composite Supply where Supply of TV is Principal Supply Supply if it is for a Single Price
 Supply of Education Servics with Hobby Class is a Composite  Supply of Recognized Course (Indian Law) with Unrecognized
Supply where Supply of Educaition Service is Principal Supply Course is a Mixed Supply if it is for a Single Price

Note: It is important to note that two or more supplies together may neither be Composite Supply nor be Mixed Supply if they are independent
of each other and price has be charged separately for each of them.

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Notes:
 Meaning of “Principal Supply” – Section 2(90) of CGST Act, 2017
Principal Supply
Means  Supply of goods or services which constitutes the predominant element of a composite supply and
 to which any other supply forming part of that composite supply is ancillary.

 Whether Service is Bundled in Ordinary Course of Business or Not

No straight jacket formula can be laid down to determine whether a service is naturally bundled in the ordinary course of business. Each
case has to be individually examined in the backdrop of several factors some of which are as follows:
(a) Perception of Service Recipients: If large number of service receivers of such bundle of services reasonably expect such services to be
provided as a package then such a package could be treated as naturally bundled in the ordinary course of business.
(b) Rule of Majority: Majority of service providers in a particular area of business provide similar bundle of services. For example, bundle
of transport by air and catering on board is a bundle offered by a majority of airlines.
(c) Nature of Services: The nature of the various services in a bundle of services will also help to determine whether the services are
bundled in the ordinary course of business or not. If the nature of service is such that one of the services is the main service and the
other services combined with such service are in the nature of incidental or ancillary services which help in better enjoyment of a main
service, then they are bundle in the ordinary course of business. For example, stay in hotel is often combined with laundry services.
Such laundry service is ancillary service to the hotel service which is the main service.
(d) Other Factors:
(i) There is a single price or the customer pays the same amount, no matter how much of the package they actually receive or use.
(ii) The elements (i.e. services) are normally advertised as package.
(iii) The different elements (i.e. services) are not separately available.
(iv) The different elements (i.e. services) are integral to one overall supply i.e. if one or more element is removed, the nature of the
supply would be affected.
The above principles explained in the light of what constitutes a naturally bundled service can be gainfully adopted to determine whether a
particular supply constitutes a composite supply under GST and if so what constitutes the principal supply so as to determine the right
classification and rate of tax of such composite supply.

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Notes:
(1) Clarification on Taxability of Printing Contracts – CBIC Circular 11/11/2017
Issue Whether supply of books, pamphlets, brochures, envelopes, annual reports, leaflets, cartons, boxes etc., printed with design,
logo, name, address or other contents supplied by the recipient of such supplies, would constitute supply of goods falling
under Chapter 48 or 49 of the First Schedule to the Customs Tariff Act, 1975 or supply of services falling under heading
9989 of the scheme of classification of services annexed to Notification No. 11/2017-CT(R)?
Clarification In the above context, it is clarified that supply of books, pamphlets, brochures, envelopes, annual reports, leaflets, cartons,
boxes etc. printed with logo, design, name, address or other contents supplied by the recipient of such printed goods, are
composite supplies and the question, whether such supplies constitute supply of goods or services would be determined on
the basis of what constitutes the principal supply.
Principal supply has been defined in Section 2(90) of the CGST Act as supply of goods or services which constitutes the
predominant element of a composite supply and to which any other supply forming part of that composite supply is ancillary.
(a) In the case of printing of books, pamphlets, brochures, annual reports, and the like, where only content is supplied by
the publisher or the person who owns the usage rights to the intangible inputs while the physical inputs including paper
used for printing belong to the printer, supply of printing [of the content supplied by the recipient of supply] is the
principal supply and therefore such supplies would constitute supply of service falling under heading 9989 of the scheme
of classification of services.
(b) In case of supply of printed envelopes, letter cards, printed boxes, tissues, napkins, wall paper etc. falling under Chapter 48
or 49, printed with design, logo etc. supplied by the recipient of goods but made using physical inputs including paper
belonging to the printer, predominant supply is that of goods and the supply of printing of the content [supplied by the
recipient of supply] is ancillary to the principal supply of goods and therefore such supplies would constitute supply of
goods falling under respective headings of Chapter 48 or 49 of the Customs Tariff.

(2) Clarification on Classification of Cut Pieces of Fabrics under GST (Unstitched Salwar Suits) – CBIC Circular 13/13/2017
Clarification Before becoming readymade articles or an apparel, the fabric is cut from bundles or thans and sold in that unstitched state.
The consumers buy these sets or pieces and get it stitched to their shape and size. Fabrics are classifiable under Chapters 50 to
55 of the First Schedule to the Customs Tariff Act, 1975 on the basis of their constituent materials.
Mere cutting and packing of fabrics into pieces of different lengths from bundles or thans, will not change the nature of these
goods and such pieces of fabrics would continue to be classifiable under the respective heading as the fabric.

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(3) Clarification regarding Classification in case of Service of Vehicles – CBIC Circular 47/21/2018 – CGST
Issue How is servicing of cars involving both supply of goods (spare parts) and services (labour), where the value of goods and
services are shown separately, to be treated under GST?
Clarification The goods and services would be liable to tax at the rates as applicable to such goods and services separately.

(4) Clarification regarding Classification of Retreading of Tyres – CBIC Circular 34/08/2018 – CGST
Issue Whether retreading of tyres is a supply of goods or services?
Clarification In retreading of tyres, which is a composite supply, the pre-dominant element is the process of retreading which is a supply of
service. Rubber used for retreading is an ancillary supply. Which part of a composite supply is the principal supply, must be
determined keeping in view the nature of the supply involved. Value may be one of the guiding factors in this determination,
but not the sole factor. The primary question that should be asked is what is the essential nature of the composite supply and
which element of the supply imparts that essential nature to the composite supply.
However, supply of retreaded tyres, where the old tyres belong to the supplier of retreaded tyres, is a supply of goods.

(5) Clarification regarding Classification of activity of Bus Body Building – CBIC Circular 52/26/2018 – CGST
Issue Whether activity of bus body building, is a supply of goods or services?
Clarification Fabrication of buses may involve the following two situations:
(a) Bus body builder builds a bus, working on the chassis owned by him and supplies the built-up bus to the customer, and
charges the customer for the value of the bus. The supply made is that of bus, and accordingly supply would attract GST
rate that of the bus treating it as supply of goods.
(b) Bus body builder builds body on chassis provided by the principal for body building, and charges fabrication charges
(including certain material that was consumed during the process of job-work). Fabrication of body on chassis provided
by the principal (not on account of body builder), the supply would merit classification as service, and GST rate as
applicable for service will be charged treating it as supply of services.

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EXEMPTION FROM GST
SECTION 11 OF CGST ACT, 2017

General Exemption Notification Special / Adhoc Exemption Order

Applicable to All Assessees Applicable to Specified Assessees

Special Request is NOT required Special Request is generally required
Exemption is given by Exemption Notification Exemption is given by Special Order
Notes:
 Type of Exemption: Exemption can be 100% or Partial AND Exemption can be Conditional or Unconditional (Absolute)
 Authority for Exemption: Exemption Notification or Special Order are issued in Public Interest by Government on recommendation of GST
Council
 Explanation to Exemption: Explanation can be added for clarifying the SCOPE or APPLICABILITY
 within 1 Year of Noti. / Order and such Explanation will have Retrospective Effect (i.e. it will have effect from the date of Noti. / Order)
 after 1 Year of Noti. / Order and such Explanation will have Prospective Effect (i.e. it will have effect from the date of Explanation)
 Mandatory or Optional: If an exemption is absolute (i.e. unconditional), it is mandatory for the assessee to go by such exemption whether
such exemption is 100% or partial exemption (i.e. assessee cannot ignore such exemption and charge GST). If an exemption is conditional, it
is optional for the assessee to go by such exemption whether such exemption is 100% or partial exemption (i.e. assessee can ignore such
exemption and charge GST).
 General Points of Exemption: Following are the general points of exemption notification
Particulars Explanation
Interpretation Strict interpretation of conditions and limitations. Procedural lapse may be ignored.
Burden of Proof Burden of proof is on the person claiming exemption.
Multiple Exemptions Assessee can choose exemption whichever is more beneficial
Stage of claiming Assessee can claim exemption at any time. Assessee can even apply for refund subject to Doctrine of Unjust
exemption Enrichment.

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Clarifications on Effective Date of Insertion of Explanation in Notification – CBIC Circular 120/39/2019 – CGST
Issue Section 11(3) of CGST Act provides that the Government may insert an explanation in any notification issued under Section 11
for the purpose of clarifying its scope or applicability, at any time within 1 year of issue of notification and every such
explanation shall have effect from the date as if it had always been the part of first such notification.
Clarification  It is hereby clarified that the explanation having been inserted under Section 11(3) of CGST Act is effective from the
inception of the entry in notification and NOT from the date from which notification (that inserted said explanation)
becomes effective.
 For example, principal Notification No. 11/2017-CT (Rate) came into force with effect from 01-07-2017. Thereafter, a new
entry – Entry No. 3(vi) is inserted w.e.f. 21-09-2017. Subsequently, an explanation is also inserted with respect to Entry No.
3(vi) on 26-07-2018. Although the effective date mentioned in notification which inserted said explanation is 27-07-2018,
said explanation will be effective from the inception of entry in notification i.e. 21-09-2017 and not 27-07-2018.

Example 1: Exemption – Mandatory or Optional Example 2: Exemption – Mandatory or Optional

Particulars Mandatory / Optional Particulars Mandatory / Optional
Conditional EN + Full EN Unconditional EN + Full EN
Conditional EN + Partial EN Unconditional EN + Partial EN

Example 3: Exemption – Effective Date of Explanation to EN Example 4: Exemption – Effective Date of Explanation to EN
Particulars Dates Particulars Dates
Date of Issue of EN 01-04-2019 Date of Issue of EN 01-04-2019
Date of adding Explanation to EN 01-02-2020 Date of adding Explanation to EN 01-06-2020
Effective Date of Explanation to EN Effective Date of Explanation to EN

Example 5: Exemption – Effective Date of Explanation to Entry in EN Example 6: Exemption – Effective Date of Explanation to Entry in EN
Particulars Dates Particulars Dates
Date of Issue of EN 01-07-2017 Date of Issue of EN 01-07-2017
Date of adding Entry to EN 01-04-2019 Date of adding Entry to EN 01-04-2019
Date of adding Explanation to Entry 01-02-2020 Date of adding Explanation to Entry 01-06-2020
Effective Date of Explanation to Entry Effective Date of Explanation to Entry

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TAXABLE SUPPLY VS. NON-TAXABLE SUPPLY VS. EXEMPT SUPPLY

Section 2(108) of CGST Act, 2017 Section 2(78) of CGST Act, 2017
Taxable Supply Non-Taxable Supply
MEANS MEANS

Supply of goods and/or services which is chargeable to tax under Supply of goods or services or both which is not leviable to tax under
CGST Act. CGST Act or under IGST Act.
Note: Supply of Alcoholic Liquor and 5 notified Petroleum Products are
Non-Taxable Supply.

Section 2(47) of CGST Act, 2017

Exempt Supply
MEANS INCLUDES

Supply of any goods or services or both Non-Taxable Supply

 which attracts Nil rate of tax or
 which may be wholly exempt from tax under Section 11 of
CGST Act or Section 6 of IGST Act
Note: In this chapter, the supply that is fully exempt by notification is referred to as “Exempt” and the supply that is not exempt by notification
is referred to as “Taxable” for differentiation purposes.

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DISREGARDED SUPPLY VS. NON-TAXABLE SUPPLY

Particulars Disregarded Supply (Not Supply) Non-Taxable Supply

Meaning Transactions not regarded as supply at all Transactions which do not attract levy under GST Law
Example: Neither supply of goods nor supply of Example: Alcoholic liquor, 5 notified petroleum
services products
Definitions Not defined Defined under Section 2(78) of CGST Act, 2017
Legal Provisions Section 7(2) of CGST Act, 2017 Section 2(78) of CGST Act, 2017
Schedule III Activities + Notified Activities Supply of goods or services or both which is not
leviable to tax under CGST Act or under IGST Act.
GST Liability No levy of GST No levy of GST
ITC Eligibility No No
(i.e. ITC in relation to Disregarded Supply is NOT (i.e. ITC in relation to Non-Taxable Supply is NOT
available OR if availed, it has to be reversed available OR if availed, it has to be reversed
proportionately) proportionately)
For example, as per Section 17 of CGST Act, 2017, sale
of land / completed building structure is treated as
exempt supply of service and stamp duty value shall be
considered for the purposes of ITC apportionment
Inclusion in Aggregate Not included Included
Turnover (As per Section 2(6) of CGST Act, 2017) (As per Section 2(6) of CGST Act, 2017)
Example: High Sea Sales, Sales of Warehoused Goods, Example: Sale of Alcoholic Liquor for Human
etc. covered by Schedule III are NOT included in Consumption and Sales 5 Notified Petroleum Products
Aggregated Turnover. are included in Aggregated Turnover.

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