Simplified Explanation of Notification No. 4/2022-Central Tax (Rate)

Amendments to Exemptions and Nil-Rated Services under GST

Overview:

Notification No. 4/2022-Central Tax (Rate) revises the list of services exempt from GST or subject to nil rate under the Central Goods and Services Tax (CGST) Act. These changes impact which services are exempt from CGST and how exemptions are applied.

Key Changes:

1. Removal of Specific Services from Exemption:
   • Speed Post, Express Parcel Post, Life Insurance, and Agency Services:
     • The exemption for these services provided to entities other than Central, State, or Union territory governments has been removed. This means these services are no longer automatically exempt from GST.

2. Modification to Residential Renting Exemption:
   • Residential Renting:
     • The exemption now specifically excludes situations where the residential dwelling is rented to a registered person. In such cases, GST may be applicable.

3. Service by Department of Posts:
   • Postal Services:
     • The exemption for services such as postcards, inland letters, book posts, and ordinary post (weighing less than 10 grams) is now explicitly stated.

4. Changes to Specific Exemptions:
   • Air Travel:
     • Revised Exemption: Air travel in economy class to/from certain northeastern states and Bagdogra is specified.
   • Tour Operator Services:
     • New Rule: Exemption for tour operator services to foreign tourists is now calculated based on the proportion of the tour performed outside India. For instance:
       • 3 days in India, 2 days in Nepal: If the total tour cost is Rs. 1,00,000, the exemption would be Rs. 40,000 (2/5 of Rs. 1,00,000) or 50% of Rs. 1,00,000, whichever is less.
       • 2 days in India, 3 days in Nepal: The exemption would be Rs. 50,000 (50% of Rs. 1,00,000) or the proportionate amount, whichever is less.

5. Other Specific Exemptions Removed or Updated:
   • Various Entries: Several entries related to specific services have been removed, including those for clinical establishments, training/coaching, and some sports events.
6. Added Provisions:
   • Training and Coaching: Exemptions for training in recreational arts/culture and sports by charitable entities are clarified.
   • Clinical Establishments: Exemptions do not apply to room charges exceeding Rs. 5000 per day for certain healthcare services.

Examples:

• Example 1: Postal Services:

• • Before Amendment: Speed post services to entities other than government bodies were exempt from GST.
  • After Amendment: Speed post services are no longer exempt and will be subject to GST.

• Example 2: Residential Rent:

• • Before Amendment: Rent for residential properties was generally exempt from GST.
  • After Amendment: Renting a residential property to a registered person is not exempt and may attract GST.

• Example 3: Tour Operator Services:

• • Tour Itinerary: If a tour operator provides a service for a tour including 3 days in India and 2 days in Nepal for a foreign tourist with a total consideration of Rs. 1,00,000:
    • Exemption Calculation: The exemption would be Rs. 40,000 (2/5 of Rs. 1,00,000) or Rs. 50,000 (50% of Rs. 1,00,000), whichever is less. Therefore, Rs. 40,000 is the exempt amount.

Purpose:

• Clarify Exemptions: The notification updates which services are exempt from CGST or subject to nil rate, ensuring clarity and compliance with GST regulations.
• Adjust Exemptions: Reflects changes in public interest and the need for specific GST rules for certain services.