(1) Where the Central Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by notification, exempt generally, either absolutely or subject to such conditions as may…
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UTGST Act · Section 8
Power to grant exemption from tax
Chapter III — Levy and Collection of Tax
Section 8 — Power to grant exemption from tax
(1) Where the Central Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by notification, exempt generally, either absolutely or subject to such conditions as may be specified therein, goods or services or both of any specified description from the whole or any part of the tax leviable thereon with effect from such date as may be specified in such notification.
(2) Where the Central Government is satisfied that it is necessary in the public interest so to do, it may, on the recommendations of the Council, by special order in each case, under circumstances of an exceptional nature to be stated in such order, exempt from payment of tax any goods or services or both on which tax is leviable.
(3) The Central Government may, if it considers necessary or expedient so to do for the purpose of clarifying the scope or applicability of any notification issued under sub-section (1) or order issued under sub-section (2), insert an Explanation in such notification or order, as the case may be, by notification at any time within one year of issue of the notification under sub-section (1) or order under sub-section (2), and every such Explanation shall have effect as if it had always been the part of the first such notification or order, as the case may be.
Explanation — For the purposes of this section, where an exemption in respect of any goods or services or both from the whole or part of the tax leviable thereon has been granted absolutely, the registered person supplying such goods or services or both shall not collect the tax, in excess of the effective rate, on such supply of goods or services or both.
BLOCK 2 — PARALLEL PROVISIONS
PARALLEL
NOTE
CGST Act s. 11
Parallel CGST exemption power.
IGST Act s. 6
Parallel IGST exemption power.
SGST Acts s. 11
Parallel SGST exemption power.
Notification 2/2017-UT(T)(R)
Exempt UT-tax goods schedule.
Notification 12/2017-UT(T)(R)
Exempt UT-tax services schedule.
Dilip Kumar (2018) 9 SCC 1
Strict-then-liberal exemption construction doctrine.
Notification 18/2017-UT(T)(R)
SEZ supplies exemption (UT component).
Council recommendations
Pre-condition for exemption.
BLOCK 3 — COMMENTARY
1. Statutory Architecture
ELEMENT
PARAMETER
Section
s. 8 UTGST — Exemption power
Sub-sections
Three + Explanation — (1) general exemption by notification (absolute / conditional); (2) special exemption by order in exceptional cases; (3) Explanation insertion within one year
Operative trigger
Public interest + Council recommendation + notification or order
Parties affected
Suppliers and recipients of exempt UT-tax supplies
Time-anchor
Effective 01.07.2017
ITC interaction
Exempt supplies trigger ITC reversal under s. 17(2) CGST via s. 21
Refund route
Exemption excludes refund route (apart from zero-rated under s. 16 IGST)
Cross-statute interplay
CGST s. 11 + SGST s. 11 + IGST s. 6 typically operate in tandem
2. Historical Context
Section 8 UTGST mirrors CGST s. 11 and IGST s. 6. Exemption notifications are typically issued in parallel across CGST + UTGST + SGST regimes to maintain rate consistency. Operative notifications: Notif 2/2017-UT(T)(R) for exempt goods, Notif 12/2017-UT(T)(R) for exempt services, Notif 18/2017-UT(T)(R) for SEZ supplies.
Dilip Kumar (2018) 9 SCC 1 doctrine — exemption notifications strict-then-liberal — applies. Threshold construction strict (whether case falls within exemption category); scope construction liberal (extent of exemption).
3. Judicial Evolution
Union of India v Mohit Minerals Pvt Ltd — (2022) 10 SCC 700 [Supreme Court — 3-Judge Bench (Constitution Bench questions)]
Brief Facts: Importers of coal on CIF basis were held liable under Notification Nos. 8/2017-Integrated Tax (Rate) and 10/2017-Integrated Tax (Rate) to pay IGST on ocean freight component under reverse charge under s. 5(3)/(4) of the IGST Act. Importers challenged the levy as ultra vires the charging section and contended that IGST had already been paid on CIF value (which included freight) at the time of import under s. 3(7) of the Customs Tariff Act.
Issue: Whether IGST could be levied separately on the ocean freight component of CIF imports when the entire CIF value (inclusive of freight) had suffered IGST under s. 3(7) of the Customs Tariff Act; and whether GST Council recommendations are binding on the Union and States.
HELD: Levy struck down. The Court held that the impugned notification offended the principle of 'composite supply' under s. 8 of the CGST Act because ocean freight in CIF imports is part of the composite supply of imported goods and cannot be artificially severed. Further, the GST Council's recommendations are recommendatory, not binding, on the Union and States — both Parliament and State legislatures have simultaneous legislative power under Article 246A.
"The recommendations of the GST Council are not binding on the Union and the States. The recommendations only have a persuasive value. To regard them as binding would disrupt fiscal federalism, where both the Union and the States are conferred equal power to legislate on GST."
Relevance: Foundational authority on the IGST charging section, the limits of reverse-charge notifications under s. 5(3)/(4), and the constitutional architecture of the GST Council. Repeatedly cited in RCM, place-of-supply, and composite-supply disputes.
Commissioner of Income Tax v Vatika Township Pvt Ltd — (2015) 1 SCC 1 [Supreme Court — 5-Judge Constitution Bench]
Brief Facts: The Income-tax Act's surcharge provisions had been amended mid-year. Question was whether the amendment applied retrospectively to assessment years already commenced. Constitution Bench was constituted to settle conflicting two-Judge Bench rulings on the presumption of prospectivity for fiscal statutes.
Issue: Whether a fiscal statute that imposes or enhances a burden operates prospectively unless expressly or by necessary implication retrospective; and what is the standard of clarity required for retrospective imposition.
HELD: Strong presumption of prospectivity for any provision that imposes or enhances a burden. Retrospective imposition requires either an express statutory direction or a necessary implication so unmistakable that no reasonable construction can avoid it. Beneficial provisions may be construed retrospectively; burden-imposing provisions cannot.
"If a legislation confers a benefit on some persons but without inflicting a corresponding detriment on another, it could be construed to be retrospective. The same is not true of a provision imposing a tax or otherwise creating a fresh burden — there, the presumption of prospectivity is at its strongest."
Relevance: Constitutional anchor for prospective operation of GST amendments. Decisive in every dispute over the effective date of a notification, amendment, or rule change under IGST.
Mafatlal Industries Ltd v Union of India — (1997) 5 SCC 536 [Supreme Court — 9-Judge Constitution Bench]
Brief Facts: Multiple manufacturers had paid central excise duty under protest, succeeded in challenges, and sought refund. The question arose whether the doctrine of unjust enrichment applies to indirect-tax refunds, whether refund can be denied if the burden has been passed on, and whether common-law refund claims survive the statutory refund regime.
Issue: Constitutional and doctrinal scope of refund of indirect taxes — whether unjust enrichment bars refund where burden has been passed on; whether the statutory refund mechanism is exclusive.
HELD: Constitution Bench held (i) the statutory refund mechanism under the Central Excise Act is exclusive — common-law refund claims are excluded; (ii) the doctrine of unjust enrichment applies — refund will not be granted where the assessee has passed on the burden to the ultimate consumer; (iii) the burden of proof on incidence-passing is on the claimant.
"Where the duty has been passed on to the buyer, the manufacturer is not entitled to refund. To do otherwise would be to enrich the manufacturer at the expense of the consumer — a course no principle of justice can support."
Relevance: Foundational unjust-enrichment authority that animates s. 54(8)(e) and the Consumer Welfare Fund mechanism. Decisive in every IGST refund claim including zero-rated/inverted-duty/excess-balance refunds.
Maneka Gandhi v Union of India — (1978) 1 SCC 248 [Supreme Court — 7-Judge Constitution Bench]
Brief Facts: Petitioner's passport was impounded under s. 10(3)(c) of the Passport Act without a hearing. She challenged the action as violating Articles 14, 19, and 21 — particularly the right to audi alteram partem before adverse action.
Issue: Whether procedural fairness — particularly the right to be heard — is implicit in Article 21; and whether administrative action affecting a right must be preceded by a fair hearing.
HELD: Procedural fairness is implicit in Article 21. Any procedure that affects life, liberty or a valuable right must be 'right, just and fair' — not arbitrary, oppressive or fanciful. Audi alteram partem is a constitutional requirement, not merely an administrative-law refinement.
"The procedure contemplated by Article 21 must be right, just and fair, and not arbitrary, fanciful or oppressive; otherwise it would be no procedure at all and the requirement of Article 21 would not be satisfied."
Relevance: Foundational due-process authority. Cited in every GST refund / show-cause / cancellation / blocking-of-ITC case where the assessee was not heard before adverse action.
All India Federation of Tax Practitioners v Union of India — (2007) 7 SCC 527 [Supreme Court — 3-Judge Bench]
Brief Facts: The constitutional validity of the service-tax levy on chartered accountants, cost accountants, and architects was challenged on the ground that these professions had been historically regulated by State legislation and were therefore outside Union legislative competence.
Issue: Constitutional foundation of the service-tax levy — whether 'service' can be taxed by the Union under the residuary entry (Entry 97 List I) and what is the doctrinal nature of a service-tax levy.
HELD: Service-tax upheld. The Court held that service-tax is a value-added tax on the value of services rendered, traceable to Entry 97 of List I until Entry 92C was inserted by the Constitution (88th Amendment). The economic concept of value addition through services is the doctrinal basis on which service-tax — and now GST on services — rests.
"Service-tax is a value-added tax on the commercial activity of providing services. The taxable event is the rendition of service and the levy attaches to the value addition at the point of service delivery."
Relevance: Constitutional anchor for taxation of services under GST — pre-101st-Amendment doctrinal framework that informs the place-of-supply concept under s. 12 and s. 13 of the IGST Act.
4. Circulars and Notifications
Notification 2/2017-Union Territory Tax (Rate) dated 28.06.2017 — Exempt goods schedule for UT tax
Mirror of Notif 2/2017-CT(R) for UT tax component.
Notification 12/2017-Union Territory Tax (Rate) dated 28.06.2017 — Exempt services schedule for UT tax
Mirror of Notif 12/2017-CT(R).
Notification 18/2017-Union Territory Tax (Rate) dated 05.07.2017 — SEZ supplies exemption (UT component)
Mirror of Notif 18/2017-IT(R) for UT tax.
Various sector-specific exemption notifications dated Various — Sector-specific exemptions
Healthcare, education, religious, agricultural, government services exemptions typically issued parallel CGST + UTGST + SGST.
Council recommendations on exemptions dated Various meetings — Pre-condition for exemption notifications
Council recommendations precede every exemption notification.
5. Worked Examples
Example 1 — Exempt agricultural produce in A&N
Facts: Fresh banana sold in A&N Islands.
Computation / Steps:
Step 1. Notif 2/2017-UT(T)(R) — fresh fruits exempt.
Step 2. No CGST + UTGST charge.
Step 3. Explanation to s. 8 — supplier shall not collect tax above effective rate (NIL).
Result: Absolute exemption; no tax collection allowed.
Example 2 — Healthcare exemption in Chandigarh hospital
Facts: Hospital provides healthcare services in Chandigarh.
Computation / Steps:
Step 1. Notif 12/2017-UT(T)(R) — healthcare exempt.
Step 2. ITC reversal under Rule 42/43 for common inputs.
Step 3. Pharmacy supplies separately analysed.
Result: Exemption + ITC reversal framework.
Example 3 — SEZ supply within UT (Chandigarh SEZ)
Facts: Supplier to Chandigarh SEZ unit.
Computation / Steps:
Step 1. s. 7(5)(b) IGST + Notif 18/2017 framework.
Step 2. Zero-rated under s. 16 IGST.
Step 3. Choice of LUT / IGST-paid / Notif 18 exemption.
Result: SEZ framework applies regardless of UT context.
Example 4 — Explanation insertion within one year
Facts: Government inserts Explanation in exemption notification clarifying scope.
Computation / Steps:
Step 1. s. 8(3) — within one year of original notification.
Step 2. Retrospective effect 'as if always part of original'.
Step 3. Subject to Vatika Township for adverse retrospectivity.
Result: Beneficial Explanation retrospective; adverse subject to scrutiny.
Example 5 — Conditional exemption — failure of condition
Facts: Conditional exemption + condition not met.
Computation / Steps:
Step 1. Dilip Kumar strict construction at threshold.
Step 2. Failure of condition disqualifies exemption.
Step 3. Standard tax + interest applies.
Result: Condition compliance critical for exemption preservation.
6. Practitioner Planning
7. Litigation Defence
8. Procedural Map
Step 1. Identify operative exemption notification
Notif 2/2017-UT(T)(R), 12/2017-UT(T)(R), etc.
Step 2. Verify Council recommendation
Pre-condition.
Step 3. For conditional, document conditions
Per notification text.
Step 4. For absolute, apply no-collection rule
Per Explanation to s. 8.
Step 5. Issue invoice with NIL / exempt marking
Standard practice.
Step 6. Report in GSTR-1 Table 8 / GSTR-3B Table 3.1(c)
Exempt-supply reporting.
Step 7. Apply ITC reversal under Rule 42/43
For exempt outward supplies.
Step 8. For SEZ, apply zero-rated framework instead
s. 16 IGST.
Step 9. For Explanation insertion, monitor one-year window
Beneficial retrospective.
Step 10. Periodic CBIC notification review
Ongoing compliance.
UTGST Section 8 — Exemption checklist (12 items)
□ Identified operative exemption notification
□ Verified Council recommendation
□ For conditional, documented conditions
□ For absolute, applied no-collection rule
□ Issued invoice with NIL marking
□ Reported in GSTR-1 / GSTR-3B exempt-supply tables
□ Applied ITC reversal under Rule 42/43
□ For SEZ, applied zero-rated framework
□ For Explanation insertion, monitored one-year window
□ For Dilip Kumar disputes, built strict-then-liberal defence
□ Maintained master exemption notification log
□ Periodic CBIC notification review
CROSS-REFERENCES