Exemptions on Supplies Made to Government, Entry by Entry

Exemptions on Supplies Made explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.

Entries 3 and 3A get all the attention. Nine other entries exempt supplies to government bodies, each with its own recipient list and its own condition — and the recipient lists do not match.

Entry 3B — five services to a Governmental Authority. Entry 11A — fair price shop commission. Entry 16 — regional connectivity flights against viability gap funding, for three years. Entry 21B — GTA services to a TDS-only registrant. Entry 22 — vehicles given on hire to a State Transport Undertaking or an electric vehicle to a local authority. Entry 40 — insurance where the whole premium is paid by Government. Entry 44A — R&D against grants. Entry 66A — affiliation to Government schools. Entry 72 — training where 75% or more of expenditure is borne by Government.

Entry 3B — five services to a Governmental Authority

Exempt: services provided to a Governmental Authority by way of (a) water supply, (b) public health, (c) sanitation conservancy, (d) solid waste management, and (e) slum improvement and upgradation.

This is the only entry keyed exclusively to a Governmental Authority, and it survived the 1 January 2022 withdrawal that removed that category from entries 3 and 3A. A body that qualifies — DMFTs and RERA, per Circulars 206/18/2023 and 228/22/2024 — therefore retains an exemption on these five inputs that it lost on everything else. Governmental Authority defined →

Entry 11A — fair price shops

Exempt: service provided by fair price shops to the Central Government, State Government or Union territory by way of sale of food grains, kerosene, sugar, edible oil, etc. under the Public Distribution System, against consideration in the form of commission or margin.

The Handbook describes the model: FPS "are run by allottees of State Government who incur all expenses in running the shop and are compensated in the form of commission on sale of food grains etc. at government nominated price."

Two limits. The recipient must be Central Government, State Government or Union territory — a local authority is not named. And "any other consideration earned by such FPS shall be taxable" — only commission or margin is exempt.

Entry 16 — regional connectivity, and its three-year clock

Exempt: services to the Central Government by way of transport of passengers by air, embarking from or terminating at a regional connectivity scheme airport, against consideration in the form of viability gap funding — "Provided that nothing contained in this Entry shall apply on or after the expiry of a period of three years from the date of commencement of operations of the regional connectivity scheme airport as notified by the Ministry of Civil Aviation."

The Handbook explains the scheme: RCS caps air fares at ₹2,500 per hour of flight; selected airlines offer lower fares on 50% of total aircraft seats and receive subsidy or viability gap funding from the Centre and the State.

Four conditions: air transport of passengers; to the Central Government; flights originating from or terminating at an RCS airport; and within three years of the airport's commencement of operations.

Entry 21B — GTA to a TDS-only registrant

Exempt: services by a goods transport agency, by way of transport of goods in a goods carriage, to (a) a department or Establishment of the Central Government, State Government or Union territory, (b) a local authority, or (c) Governmental agencies, which has taken registration under the CGST Act only for the purpose of deducting tax under section 51 and not for making a taxable supply.

Inserted by Notification No. 28/2018-CT(R) dated 31.12.2018, w.e.f. 01.01.2019.

The Handbook explains why it exists: "Quite a number of Departments of Central Government and State Government, local authority and Government agencies get covered within this. These persons only possess TDS registration but not the normal registration under GST. Any services provided by GTA to these persons will be exempted."

Its example: the Ministry of Commerce, registered only to deduct tax under section 51, engages a GTA to transport construction materials for the renovation of its building. Those services stand exempt.

Note how it pairs with the reverse charge notification. The first proviso to entry 1 of Notification No. 13/2017-CT(R) disapplies reverse charge for the same category of recipient. So the recipient neither pays under RCM nor bears forward charge — the supply is simply exempt.

Entry 22 — hire, which includes renting

Exempt: services by way of giving on hire —

• (a) to a State transport undertaking, a motor vehicle meant to carry more than twelve passengers;
• (aa) to a local authority, an electrically operated vehicle meant to carry more than twelve passengers — inserted by Notification No. 13/2019-CT(R) dated 31.07.2019, w.e.f. 01.08.2019.

"State transport undertaking" takes its meaning from section 2(42) of the Motor Vehicles Act, 1988 — an undertaking providing road transport service carried on by the Central or a State Government, a Road Transport Corporation under section 3 of the Road Transport Corporations Act, 1950, any municipality or any corporation or company owned or controlled by the Central or one or more State Governments, or a Zilla Parishad or similar local authority.

"Electrically operated vehicle" means a Chapter 87 vehicle "run solely on electrical energy derived from an external source or from one or more electrical batteries fitted to such road vehicle."

The hire-versus-renting dispute, and its resolution. An AAR had held that entry 22 exempts giving on hire and not renting, drawing on service tax case law. The Handbook answers it on two grounds. Schedule II, entry 5(f) declares the transfer of the right to use goods to be a supply of service; and the issue went to the 45th GST Council meeting on 17.09.2021, which recommended that "the expression 'giving on hire' in Sl. No. 22… includes renting of vehicles."

Circular No. 164/20/2021-GST dated 06.10.2021 then clarified that services where such vehicles are rented or given on hire to STUs or local authorities are eligible for the exemption "irrespective of whether such vehicles are run on routes, timings as decided by the State Transport Undertakings or Local Authorities and under effective control."

One boundary the Handbook flags: "the above exemption is given for giving the vehicle for hire to the specified person. In this exemption, the person has not been given exemption for actual transportation." And per CBIC FAQ question 26, "supplies of motor vehicles to Government Departments other than the STUs are taxable."

Entry 40 — insurance where Government pays the whole premium

Exempt: services to the Central Government, State Government, Union territory under any insurance scheme for which total premium is paid by them.

Three conditions, each restrictive. The exemption "is available to insurance companies only"; the recipient list excludes local authorities, Governmental Authorities and Government Entities; and the total premium must be paid by the specified Governments, individually, severally or in combination — "any scheme where the specified Governments only pays a part of the premium and balance is paid by the beneficiary or any other person is not covered."

Entry 44A — research and development against grants

Exempt from 10.10.2024: research and development services against consideration received in the form of grants supplied by (a) a Government Entity, or (b) a research association, university, college or other institution notified under clause (ii) or (iii) of section 35(1) of the Income-tax Act, 1961 — with the condition that the institution is so notified at the time of supply.

Note the timing condition. Notification after the supply does not retrospectively exempt it.

Entry 66A — affiliation of Government schools

Exempt from 10.10.2024, by Notification No. 08/2024-CT(R) dated 08.10.2024: affiliation services provided by a Central or State Educational Board or Council or similar body to a school established, owned or controlled by the Central Government, State Government, Union Territory, local authority, Governmental Authority or Government Entity.

The background matters, because it is a narrow exemption from a general charge. Circular No. 234/28/2024-GST dated 11.10.2024 explains that affiliation "is to monitor and ensure whether the institution possesses the required infrastructure in terms of space, technical prowess, financial liquidity, faculty strength etc." Affiliation services by universities to colleges "are not by way of services related to the admission of students to such colleges or the conduct of examinations by such colleges", so they fall outside the educational-institution exemptions and attract GST.

Entry 66A carves Government schools out of that charge, and nothing more.

Entry 72 — training funded 75% or more

Exempt: services to the Central Government, State Government, Union territory administration under any training programme for which 75% or more of the total expenditure is borne by them.

Three conditions:

• Recipient — "It is important to note that Governmental Authority, Governmental Entity, Government Companies and even local authorities are not covered… Thus, training programs where Government is merely a sponsor and not organiser are not covered."
• Training programme — "any activity in relation to training like provision of space etc. is not covered." A narrower test than the "in relation to" language of entry 3.
• 75% or more — "where the expenditure is shared by any other entity or person, no exemption is available towards the portion of consideration paid by Government."

One clarification widens it usefully. Circular No. 164/20/2021-GST dated 06.10.2021 confirms that entry 72 is wide enough to cover free coaching by coaching institutions and NGOs under the central scheme of "Scholarships for students with Disabilities", where total or at least 75% of expenditure is borne by Government by way of grant-in-aid.

Key takeaways

• The recipient lists differ entry by entry — Government only, Government and local authority, Governmental Authority, or Government Entity. Read each.
• Entry 3B survives for a Governmental Authority on five services.
• Entry 11A exempts only commission or margin of a fair price shop, and not to a local authority.
• Entry 16 runs out three years after an RCS airport commences operations.
• Entry 21B exempts GTA services to a TDS-only registrant — and reverse charge is separately disapplied.
• Entry 22 covers renting as well as hire — 45th Council and Circular No. 164/20/2021 — but not transportation, and not vehicles to Government Departments other than STUs.
• Entry 40 needs the whole premium paid by Government, and reaches insurers only.
• Entries 44A and 66A both operate from 10.10.2024.
• Entry 72 needs 75% of expenditure, an organiser rather than a sponsor, and does not cover ancillary services such as space.

Read next

• Entries 3 and 3A: Pure Services and the 25% Rule
• Entry 6 and Its Four Exclusions: Services by Government
• Governmental Authority and Government Entity, Defined

Disclaimer: Positions stated as on 5 September 2026, based on entries 3B, 11A, 16, 21B, 22, 40, 44A, 66A and 72 of Notification No. 12/2017-Central Tax (Rate) as amended, Notification Nos. 28/2018, 13/2019 and 08/2024-Central Tax (Rate), section 2(42) of the Motor Vehicles Act, 1988, section 35(1) of the Income-tax Act, 1961, and Circulars No. 164/20/2021-GST and 234/28/2024-GST, as reproduced in the ICAI Handbook on Government Supplies under GST (Including TDS Provisions), updated to 15 April 2026.