While the Indian Goods and Services Tax (GST) applies broadly across commercial activity, the Central Government—exercising powers under Section 11 of the CGST Act and Section 6 of the IGST Act—statutorily exempts hundreds of essential goods and basic public services from tax in the public interest.
However, dealing in exempt supplies carries severe compliance consequences: under Section 17(2) read with Rule 42 and Rule 43 of the CGST Rules, businesses making exempt supplies cannot claim Input Tax Credit (ITC) on related inward purchases and must perform monthly credit reversals.
In this master directory, we compile the complete, updated list of major exempt goods and services for 2026 and analyze the compliance requirements for exempt dealers.
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1. Master List of Major Exempt Goods (Notification 2/2017-CT(R))
Under GST law, goods are exempt primarily to protect food security, agriculture, healthcare, and handloom traditions.
Agricultural Produce, Live Animals & Fresh Food (Unbranded & Non-Prepackaged):
- Fresh Fruits and Vegetables: Fresh potatoes, tomatoes, onions, garlic, apples, bananas, mangoes, etc. (HSN 0701 - 0810).
- Fresh / Chilled Meat & Fish: Not frozen or processed, without branding (HSN 0201 - 0302).
- Fresh Milk, Curd, Lassi, Buttermilk & Paneer: Sold loose/unlabeled (HSN 0401 - 0406).
- Fresh Eggs & Natural Honey: Sold loose without registered brand labels (HSN 0407 - 0409).
- Cereal Grains (Wheat, Rice, Maize, Barley, Oats): Unpackaged, unbranded grains sold in loose sacks (HSN 1001 - 1008).
- Flours (Atta, Maida, Besan, Suji): Sold loose/unbranded (HSN 1101 - 1106).
- Live Animals & Birds: Cattle, sheep, goats, poultry, bees (excluding racehorses) (HSN 0101 - 0106).
The Pre-Packaged & Labeled Rule:
Since July 2022, if food staples (pulses, curd, flour, rice) are pre-packaged and labeled in quantities up to 25 kg/liters under Legal Metrology Act provisions, they lose their exemption and attract 5% GST. Loose sales remain 100% exempt.
Essential Household, Educational & Cultural Items:
- Salt: Pure iodized and common salt (HSN 2501).
- Printed Books, Maps, Newspapers & Periodicals: Standard printed books and children’s drawing books (HSN 4901, 4902, 4905).
- Bindi, Sindoor, Kumkum, Alta & Bangles: Plastic/glass bangles (HSN 7117, 9608).
- Handlooms & Khadi: Handloom fabrics, khadi yarn sold through KVIC institutions.
- National Flags & Postal Stamps: Indian tricolor and postal envelopes issued by India Post.
- Human Blood, Organs & Semen: For medical transfusion and clinical storage (HSN 3002).
2. Master List of Major Exempt Services (Notification 12/2017-CT(R))
Healthcare & Social Welfare Services:
- Core Clinical Healthcare: Diagnosis, medical consultations, surgical treatments by hospitals, doctors, and clinics (Entry 74).
- Ambulance Services: Patient emergency transport (Entry 74).
- Rehabilitation & Mental Wellness: Services by clinical psychologists and rehabilitation centers.
- Old Age Homes: Accommodation and meals provided to residents aged 60+ up to ₹25,000 per month per member.
Educational Services:
- Recognized Pre-Schools, Schools & Higher Education: Education leading to a recognized degree or qualification (Entry 66).
- Mid-day Meals & School Transportation: Services provided to educational institutions catering to nursery to Class 12 students.
Transportation Services:
- Passenger Rail Transport: Non-AC railway coaches, suburban local trains, and ordinary metro rail.
- Non-AC Public Buses: State road transport non-AC stage carriages.
- Inland Waterways & Ferries: Public passenger water transport.
- Transportation of Agricultural Produce: Freight transport of milk, salt, foodgrains, and organic fertilizers by rail or road.
Financial, Real Estate & Government Services:
- Interest on Loans & Deposits: Bank interest earned on savings accounts, fixed deposits, and loans (Entry 27).
- Residential Renting for Living: Residential dwelling rented to an unregistered individual for personal residence (Entry 12).
- Sovereign Regulatory Functions: Services by RBI, SEBI, IRDAI, and pure municipal governance functions.
The Compliance Burden: Rule 42 & 43 ITC Reversal
Operating a business that sells both taxable and exempt goods (e.g., a supermarket selling branded shampoo at 18% and loose wheat at 0%) requires rigorous mathematical compliance:
How Section 17(2) Works:
- Where goods or services are used partly for effecting taxable supplies and partly for exempt supplies, the amount of credit attributable to exempt supplies must be reversed.
- Rule 42 (Inputs & Input Services): Monthly mathematical apportionment of common ITC (shop rent, electricity, ERP subscriptions) based on the ratio of exempt turnover to total turnover.
- Rule 43 (Capital Goods): Reversal of capital goods ITC (refrigerators, billing counters, forklifts) over a statutory 60-month useful life.
Frequently Asked Questions (FAQs)
What is the difference between Nil-Rated, Exempt, and Non-GST Supplies?
- Exempt Supplies: Goods/services specifically exempted via notification under Section 11 of the CGST Act (e.g., fresh milk, hospital diagnosis).
- Nil-Rated Supplies: Items assigned a 0% tax tariff in the GST rate schedule (e.g., grains, salt).
- Non-GST Supplies: Commodities constitutionally outside the scope of GST (petroleum, high-speed diesel, aviation turbine fuel, natural gas, crude oil, and alcoholic liquor for human consumption).
Do I need to issue a Tax Invoice for exempt goods?
No. Under Section 31(3)(c), a registered person supplying exempt goods or services cannot issue a Tax Invoice. Instead, they must issue a Bill of Supply showing 0% tax.