GST Reference · FY 2025-26
GST Exemption List in India —
What Is Tax-Free?
The current list of GST-exempt and nil-rated goods and services after the GST 2.0 reform of 22 September 2025 — plus how "exempt", "nil rated" and "zero rated" differ, and when Input Tax Credit must be reversed.
Updated for FY 2025-26 GST 2.0 Reflected Expert Reviewed
0%Exempt & nil rate
22 Sep 25GST 2.0 effective
NilLife & health insurance
₹40L/₹20LReg. threshold
Quick Answer
GST-exempt and nil-rated supplies carry 0% GST — no tax is charged and none is collected. Core exempt categories are essential food (fresh milk, UHT milk, paneer, eggs, unbranded cereals, fresh fruit & vegetables), all Indian breads (roti, chapati, paratha), healthcare, education, individual life & health insurance (exempted under GST 2.0 from 22 Sep 2025), public transport and residential rent to individuals. The catch: Input Tax Credit on inputs used for exempt supplies must be reversed.
Essential food & milk 0%
Indian breads 0%
Life/health insurance 0%
ITC on inputs Reverse
At a glance
GST Exemptions by Category — FY 2025-26
Every major exempt category with the common taxable exceptions. Branded/packaged or processed versions of an exempt item often attract GST at 5% or 18%, so classification matters.
| Category | Exempt / Nil (0%) | Taxable exceptions |
|---|---|---|
| Food & dairy | Fresh & UHT milk, paneer/chhena, eggs, unbranded cereals & pulses, fresh fruit/vegetables, jaggery, common salt | 5% branded/pre-packaged staples; processed food 18% |
| Indian breads | Roti, chapati, paratha, parotta, bread, pizza bread (all Indian breads now nil) | Cakes, pastries, rusk & branded bakery 5%+ |
| Healthcare | Hospital treatment (IPD/OPD), diagnostics by clinical establishments, ambulance, 33+ life-saving drugs, contraceptives | Cosmetic/aesthetic surgery 18%; retail pharmacy per medicine |
| Insurance | Individual life & health insurance premiums — term, ULIP, family floater, senior-citizen cover | Group/corporate & other general insurance still taxable |
| Education | Pre-school to higher-secondary tuition, board-approved fees, printed textbooks | Private coaching/tuition 18% |
| Transport | Metered auto/taxi, stage-carriage (state bus), metro, local train, ferry | App-based cabs 5%; air travel 5%/18% |
| Housing | Residential dwelling let to an individual for personal residence | Commercial rent 18%; residential to a business (RCM) 18% |
| Agriculture | Unprocessed farm produce, APMC services, agricultural extension/warehousing of produce | Processed/branded agri-products taxable |
| Charity & religion | Services by registered charitable/religious trusts, entry to registered religious places | Commercial hall/room letting above prescribed limits taxable |
Rates reflect the GST 2.0 two-slab structure (5% / 18% + 40% demerit) effective 22 September 2025 — most 12% and 28% slabs were removed. Confirm the specific HSN/SAC on the official portal before invoicing.
Effective 22 September 2025
What GST 2.0 Made Exempt
The GST 2.0 rationalisation collapsed the old four-slab structure into two main slabs — 5% and 18% — with a 40% demerit rate on tobacco, pan masala, aerated drinks and a few luxury items. Alongside the rate cuts, several everyday goods and financial-protection services were moved to a full exemption (0%).
- UHT milk, paneer and chhena — now nil, whether loose or pre-packaged.
- All Indian breads — roti, chapati, paratha, parotta and plain bread — uniformly exempt.
- Individual life and health insurance — term plans, ULIPs, family floaters and senior-citizen policies — fully exempt.
- 33+ life-saving drugs, plus certain gene-therapy and rare-disease medicines, exempted.
- Education stationery — pencils, erasers, sharpeners, notebooks, maps and printed charts — nil.
Exemption is not always a saving for the supplier
When your output becomes exempt, you can no longer claim ITC on the GST paid on inputs — that tax becomes an embedded cost. Insurers and hospitals, for example, lose credit on their input GST when their service is exempt. Model the ITC impact before assuming an exemption reduces your overall cost.
Not sure whether your product or service is exempt after GST 2.0?
Talk to a GST Expert →Get the category right
Nil Rated vs Exempt vs Zero Rated
All three carry 0% GST on the invoice, but they are legally distinct — and the difference decides whether you keep or lose your Input Tax Credit.
| Feature | Nil rated | Exempt | Zero rated (exports/SEZ) |
|---|---|---|---|
| Output GST | 0% | 0% | 0% |
| Legal basis | Rate set at 0% in the GST tariff | Notification under Sec 11, CGST Act | Sec 16, IGST Act |
| Examples | Salt, fresh vegetables, eggs | Healthcare, education, insurance | Exports; supplies to SEZ |
| ITC on inputs | Reverse | Reverse | Full · refundable |
| Document | Bill of supply | Bill of supply | Tax invoice (LUT/bond or with IGST) |
| Reported in | GSTR-1 nil/exempt table | GSTR-1 nil/exempt table | GSTR-1 Table 6A/7 |
Zero-rated is the only 0% category where ITC is preserved and refundable — exporters should file under LUT to avoid blocking working capital.
0%
Exempt / nil — ITC blocked
- No GST on the bill of supply
- ITC on related inputs must be reversed
- Covers food, health, education, insurance
- Small suppliers may stay unregistered
vs
0%
Zero rated — ITC preserved
- Exports and supplies to SEZ units
- Full ITC allowed on inputs
- Unutilised ITC is refundable
- Registration mandatory; file under LUT
The compliance catch
ITC Reversal on Exempt Supplies
If you make both taxable and exempt supplies, you cannot keep the full ITC. A proportionate share tied to your exempt turnover must be reversed under Rule 42 (inputs and input services) and Rule 43 (capital goods).
Common ITC — Rule 42 reversal
Common input GST (month)₹1,00,000
Exempt turnover₹8,00,000
Total turnover₹40,00,000
Reverse (8/40 share)₹20,000
What stays claimable
ITC used only for taxable supplyFull
ITC used only for exempt supplyNil
ITC on common inputsProportionate
Net ITC retained₹80,000
- Identify exempt/nil outward supplies
- Segregate ITC — taxable, exempt, common
- Apply Rule 42 monthly on common inputs
- Apply Rule 43 on capital goods (60 months)
- Report reversal in GSTR-3B Table 4B
- Issue bill of supply (not tax invoice)
- Annual true-up in GSTR-9
- Keep working papers for audit
TaxClue Insight
Mixed suppliers are the ones caught in scrutiny — a purely exempt business rarely errs, but a business with, say, 10% exempt turnover often forgets the monthly Rule 42 reversal and faces interest at 18% plus penalty. Automate the split at the invoice stage rather than reconciling at year-end.
Government sourcesRates & exemption notifications: gst.gov.in · CBIC rate/exemption finder: cbic-gst.gov.in · GST 2.0 exemptions: Notification 09/2025 & 10/2025-CT(R) (eff. 22 Sep 2025) · ITC reversal: Rules 42 & 43, CGST Rules 2017; exemption power: Section 11, CGST Act 2017
People also ask
GST Exemption — Frequently Asked Questions
Exempt Goods
Which food items are exempt from GST?
Fully exempt (0%) food items include fresh and pasteurised milk, UHT milk, paneer and chhena, eggs, unbranded/unpacked cereals (rice, wheat, jowar, bajra, ragi), fresh fruit and vegetables, unprocessed pulses, fresh meat, fish and poultry, jaggery (gur), common salt and natural drinking water. Branded, sealed or pre-packaged versions of the same staples can attract 5% GST, and processed foods such as biscuits, chocolates and packaged snacks are taxable at 5% or 18% under the GST 2.0 slabs.
Is roti, chapati or paratha exempt from GST?
Yes. Under the GST 2.0 reform effective 22 September 2025, all Indian breads — roti, chapati, paratha, parotta, plain bread and pizza bread — are exempt at 0% GST. Earlier there was ambiguity where ready-to-cook parottas were taxed at 18%; that has been resolved and all Indian breads are now uniformly nil-rated.
Is milk and paneer GST-free?
Yes. Fresh milk, pasteurised milk and UHT milk are exempt, and paneer/chhena is exempt whether sold loose or pre-packaged after the GST 2.0 changes of 22 September 2025. However, flavoured milk, condensed milk and processed dairy products such as cheese and butter follow their own HSN rates and are taxable.
What is the difference between branded and unbranded goods for GST exemption?
Many staples (cereals, pulses, flour) are exempt only when they are neither branded nor pre-packaged and labelled for retail sale. Once the same item is packaged, sealed and labelled for retail, it typically attracts 5% GST. The distinction turns on whether the pack is a "pre-packaged and labelled" commodity under the Legal Metrology Act, not merely on the presence of a brand name.
Exempt Services
Are hospital and healthcare services exempt from GST?
Yes. Healthcare services by a clinical establishment (hospital, nursing home), an authorised medical practitioner or paramedics are exempt — including inpatient treatment, OPD consultations, diagnostic tests done by the establishment, ambulance services and medicines dispensed as part of treatment. Purely cosmetic or aesthetic procedures that are not medically necessary are taxable at 18%, and standalone retail pharmacy sales follow the applicable medicine rate.
Is life and health insurance exempt from GST now?
Yes. Under GST 2.0, effective 22 September 2025, individual life and health insurance premiums are fully exempt — this covers term plans, ULIPs, endowment policies, family floater health cover and senior-citizen policies. Previously these attracted 18% GST. Note that group/corporate policies and general (non-life, non-health) insurance are treated separately and can still be taxable.
Is education exempt from GST?
Education provided by a recognised institution up to higher-secondary level — tuition fees, board-approved services and printed textbooks — is exempt. Related services supplied to such institutions (transport, catering, security for school students) are also exempt. Private coaching centres, competitive-exam tutorials and skill classes that are not recognised institutions are taxable at 18%.
Is rent on residential property exempt from GST?
Residential property let to an individual for personal residence is exempt, regardless of the rent amount. However, when a GST-registered business rents a residential dwelling (for example for employee accommodation), the business must pay 18% GST under Reverse Charge (RCM) — a rule in force since 18 July 2022. Commercial rent is always taxable at 18% once the landlord crosses the registration threshold.
Is public transport exempt from GST?
Metered autos and taxis (non-app), stage-carriage state buses, metro rail, local trains and ferries for public transport are exempt. App-based cab aggregators charge 5% under the ECO rules, and air travel is taxable (economy at a lower rate, premium classes higher). Goods transport by a GTA follows its own forward/reverse-charge rate rules.
Categories & Law
What is the difference between nil rated and exempt supplies?
Both carry 0% GST but the legal basis differs. Nil-rated supplies have a 0% rate set directly in the GST tariff schedule (for example salt, fresh vegetables). Exempt supplies are relieved by a notification under Section 11 of the CGST Act (for example healthcare, education, insurance). In both cases ITC on related inputs must be reversed and a bill of supply is issued instead of a tax invoice.
What is the difference between exempt and zero-rated supplies?
Exempt supplies carry 0% GST but ITC on inputs is blocked and must be reversed. Zero-rated supplies — exports and supplies to SEZ units — also carry 0% on the output but full ITC is preserved and any unutilised credit is refundable. That is the key advantage of zero-rating: you recover input GST, whereas with an exemption you absorb it.
Did GST 2.0 change the exemption list?
Yes. GST 2.0, effective 22 September 2025, moved to a two-slab structure (5% and 18%, with 40% on demerit goods) and expanded exemptions — UHT milk, paneer, all Indian breads, individual life and health insurance, several life-saving drugs and education stationery became nil-rated. Most 12% and 28% slabs were removed and reassigned to 5% or 18%.
ITC & Compliance
Can I claim ITC on exempt supplies?
No. Input Tax Credit cannot be claimed on inputs or input services used exclusively for exempt supplies. If you make both taxable and exempt supplies, you must reverse a proportionate share of common ITC under Rule 42 (inputs and input services) and Rule 43 (capital goods), calculated as exempt turnover divided by total turnover, each month in GSTR-3B and trued up in GSTR-9.
How is ITC reversal on exempt supplies calculated?
Common ITC is apportioned using the ratio of exempt turnover to total turnover for the period. For example, if common input GST is ₹1,00,000, exempt turnover is ₹8,00,000 and total turnover is ₹40,00,000, you reverse ₹1,00,000 × 8/40 = ₹20,000. ITC used exclusively for taxable supplies is fully claimable; ITC used exclusively for exempt supplies is fully reversed.
Do I need GST registration if I only sell exempt goods?
A person supplying exclusively exempt or nil-rated goods or services is not required to register for GST, whatever the turnover. Registration is triggered when you make taxable supplies above the threshold — ₹40 lakh for goods or ₹20 lakh for services in most states (₹20 lakh/₹10 lakh in special-category states). If you make any taxable supply, the exempt turnover still counts towards aggregate turnover.
What invoice do I issue for exempt supplies?
For exempt or nil-rated supplies you issue a bill of supply, not a tax invoice, because no GST is charged. A registered person making both taxable and exempt supplies can issue an invoice-cum-bill-of-supply where permitted. Exempt outward supplies are still reported in the nil/exempt table of GSTR-1 and summarised in GSTR-3B.
Done-for-you
Related TaxClue Services
GST RegistrationRegister correctly and classify exempt vs taxable supplies from day one.Explore →GST Return FilingGSTR-1 & 3B with correct exempt reporting and ITC reversal.Explore →ITC & ReconciliationApply Rule 42/43 reversal and avoid blocked-credit errors.Explore →Composition SchemeCheck if a flat-rate scheme fits a mostly-exempt or small business.Explore →
Continue reading
Next in this GST cluster
TaxClue for GST classification
Exempt, Nil or Taxable — Get It Right
Misclassifying an exempt supply or forgetting the Rule 42 ITC reversal is the fastest way into a GST scrutiny notice. TaxClue's CA-led team handles classification, exempt reporting, ITC reversal and returns — 100% online, across India.
Need GST help?Talk to TaxClue →