IGST Section 6 — Power to grant exemption from tax

Section 6 of the IGST Act, 2017 empowers the government to grant exemptions from Integrated Goods and Services Tax (IGST). This provision allows the government to either fully or partially waive IGST on specific goods or services, either generally or in exceptional cases.

This section applies to all businesses and individuals involved in the inter-state supply of goods and services, as IGST is levied on such transactions. The power to grant exemptions is exercised by the Central Government based on the recommendations of the GST Council. These exemptions directly affect the IGST liability of businesses involved in inter-state trade.

The Act lays down conditions and procedures for granting these exemptions:

• Public Interest: The primary condition for granting an exemption is that it must be "necessary in the public interest." This implies that the exemption should benefit the broader community or specific sectors of the economy. The government needs to show a valid reason for granting an exemption, not just for the benefit of a single company.
• Council Recommendations: The government is bound to seek recommendations from the GST Council before granting any exemption. This ensures that all states and the center are in agreement regarding the exemption, promoting uniformity in the GST regime.
• Notification or Special Order: Exemptions can be granted either through a general notification applicable to all eligible goods or services, or through a special order issued for exceptional circumstances. Notifications are broader and cover specific categories of goods or services, while special orders are case-specific.
• Conditions: The government can specify conditions that must be met for an exemption to apply. These conditions could include specific usage of the goods, adherence to certain procedures, or fulfillment of reporting requirements. Non-compliance with these conditions could result in the withdrawal of the exemption.
• Explanation Provision: To clarify the scope or applicability of any notification or special order, the government can insert an explanation within one year of the notification or order being issued. This explanation has retrospective effect, meaning it applies as if it were part of the original notification or order. This provision helps address any ambiguities or disputes that may arise regarding the interpretation of the exemption.
• Effective Rate: If an exemption is granted absolutely, the registered person supplying such goods or services cannot collect tax exceeding the effective rate. The effective rate is the actual tax payable after considering all applicable exemptions and deductions.

Let's consider some practical examples:

1. Exemption on goods used for disaster relief: If the government believes it's in the public interest to support disaster relief efforts, it could issue a notification exempting goods like medicines, food supplies, and clothing from IGST when supplied to organizations providing aid in disaster-affected areas. This would lower the cost of relief efforts.
2. Exemption for exporters: The government might grant an exemption or refund (through mechanisms like LUT - Letter of Undertaking) for goods exported from India. This encourages exports and helps Indian businesses compete in the international market.
3. Special order for a unique project: Suppose there is a large infrastructure project of national importance. If imposing IGST would significantly increase the project cost, the government might issue a special order exempting certain goods and services used in the project from IGST, citing the exceptional nature of the project and its importance to the public.

The key takeaway for businesses is to stay updated on notifications issued by the government regarding IGST exemptions. Regularly check the official GST portal and reliable sources like TaxIntelHub.com for any changes. Understanding the conditions attached to any exemption is vital to ensure compliance and avoid potential penalties. Failure to comply with the conditions of an exemption could lead to its denial and a demand for payment of IGST.

As of the latest information, there are no major amendments to Section 6 of the IGST Act, 2017. However, it's important to always refer to the most recent version of the Act and associated notifications as tax laws are subject to change. Keep in mind that changes often occur through notifications clarifying the scope of exemptions, rather than direct amendments to the section itself.