Taxation - GST Ch 05: Exemptions - Test 1: answer key

Question 1 · 2 marks · Taxation - GST Ch 05: Exemptions · hard

Scenario. Sanjeevani Multispeciality Hospital Pvt. Ltd. (SMHPL) is a clinical establishment in Pune, registered under GST. During October 2026, it provided the following services: (i) In-patient treatment to Mr. Ramesh, including a non-ICU private room charged at ₹6,500 per day for 4 days. The total hospital bill was ₹1,85,000, which included doctor consultation fees of ₹40,000 and medicines of ₹25,000. (ii) In-patient treatment to Ms. Kavita in the ICU for 3 days, with room charges of ₹8,000 per day. The total bill was ₹1,20,000. (iii) An ambulance service was provided to transport a critical patient from his residence to the hospital, charging ₹2,500. (iv) A health check-up package was offered to Mr. Anil for ₹7,000. (v) The hospital canteen, run by an external contractor, supplied food to in-patients as advised by doctors, billing ₹15,000. The contractor also sold food to visitors, earning ₹5,000. (vi) SMHPL rented out its auditorium to a pharmaceutical company for a product launch, receiving ₹50,000. (vii) It also provided cosmetic surgery services to a patient for ₹80,000, which was not for restoring anatomy or functions affected due to congenital defects, developmental abnormalities, injury or trauma. All amounts are exclusive of GST, wherever applicable.

What is the GST liability on the in-patient treatment provided to Mr. Ramesh, considering the room charges?

1. Nil, as the entire amount is exempt health care services.
2. GST is payable on the entire bill amount of ₹1,85,000.
3. GST is payable only on the room rent of ₹26,000 (₹6,500 x 4 days) at the applicable rate. (correct answer)
4. GST is payable on the room rent exceeding ₹5,000 per day, i.e., ₹6,000 (₹1,500 x 4 days).

Answer: C — GST is payable only on the room rent of ₹26,000 (₹6,500 x 4 days) at the applicable rate.

Explanation. As per Entry 74 of Notification No. 12/2017-CT(R), health care services by a clinical establishment are exempt. However, the proviso excludes services by way of providing room (other than ICU/CCU/ICCU/NICU) having room charges exceeding ₹5,000 per day per patient. For Mr. Ramesh, the room rent is ₹6,500 per day, which exceeds the ₹5,000 threshold. Therefore, the entire room rent of ₹26,000 (₹6,500 x 4) becomes taxable. The other components (doctor fees, medicines, etc.) remain exempt as part of health care services. The correct option is (c).

Where it goes wrong. Students often mistakenly calculate GST only on the excess over ₹5,000 per day. The proviso taxes the entire room rent if the daily charge exceeds ₹5,000.

Authority. Entry 74 of Notification No. 12/2017-Central Tax (Rate); Section 11 of the CGST Act, 2017

Question 2 · 2 marks · Taxation - GST Ch 05: Exemptions · medium

What is the correct GST treatment for the in-patient treatment provided to Ms. Kavita in the ICU?

1. GST is payable on the entire bill as the room charges exceed ₹5,000 per day.
2. GST is payable on the room rent of ₹24,000 as it exceeds ₹5,000 per day.
3. The entire bill of ₹1,20,000 is exempt as it is ICU service. (correct answer)
4. GST is payable only on the doctor's consultation fees.

Answer: C — The entire bill of ₹1,20,000 is exempt as it is ICU service.

Explanation. The proviso to Entry 74 specifically excludes ICU/CCU/ICCU/NICU rooms from the room rent cap of ₹5,000 per day. For rooms in these critical care units, the exemption applies irrespective of the room charges. Since Ms. Kavita was in the ICU, the entire health care service, including the room rent of ₹8,000 per day, is exempt. Therefore, the entire bill of ₹1,20,000 is exempt from GST. The correct option is (a).

Where it goes wrong. Students may apply the ₹5,000 room rent limit to ICU rooms, leading to an incorrect tax liability. The exclusion for ICU/CCU/ICCU/NICU is a crucial exception.

Authority. Entry 74 of Notification No. 12/2017-Central Tax (Rate)

Question 3 · 2 marks · Taxation - GST Ch 05: Exemptions · medium

What is the GST implication on the ambulance service and the health check-up package provided by SMHPL?

1. Both ambulance service and health check-up are exempt.
2. Both ambulance service and health check-up are taxable.
3. Ambulance service is taxable, but health check-up is exempt.
4. Ambulance service is exempt, but health check-up is taxable. (correct answer)

Answer: D — Ambulance service is exempt, but health check-up is taxable.

Explanation. Entry 74 exempts health care services, which includes services by way of transportation of the patient to and from a clinical establishment. Therefore, the ambulance service of ₹2,500 is exempt. However, a health check-up package is a diagnostic service and does not qualify as 'health care services' for the treatment of illness, injury, deformity, etc. It is a preventive check-up, which is not covered under Entry 74 and is therefore taxable. The correct option is (b).

Where it goes wrong. Students might assume all services provided by a hospital are exempt. Diagnostic or preventive health check-ups are distinct from treatment-oriented health care services.

Authority. Entry 74 of Notification No. 12/2017-Central Tax (Rate)

Question 4 · 2 marks · Taxation - GST Ch 05: Exemptions · hard

What is the GST treatment for the food supplied by the hospital canteen to in-patients and visitors, and the cosmetic surgery?

1. All three are taxable.
2. Food to in-patients and visitors is exempt; cosmetic surgery is exempt.
3. Food to in-patients is taxable; food to visitors is exempt; cosmetic surgery is taxable.
4. Food to in-patients is exempt, food to visitors is taxable, and cosmetic surgery is taxable. (correct answer)

Answer: D — Food to in-patients is exempt, food to visitors is taxable, and cosmetic surgery is taxable.

Explanation. Food supplied to in-patients as advised by doctors/nutritionists is part of the composite supply of healthcare and is exempt. Food supplied to visitors/attendants is not part of healthcare and is taxable. Cosmetic surgery is specifically excluded from the definition of health care services unless undertaken to restore anatomy/functions due to congenital defects, injury, etc. Since the cosmetic surgery here is not for such restoration, it is taxable. The correct option is (a).

Where it goes wrong. Students may overlook the distinction between food for in-patients and food for visitors, or may incorrectly assume all surgeries in a hospital are exempt.

Authority. Entry 74 of Notification No. 12/2017-Central Tax (Rate); Circular No. 32/06/2018 GST dated 12.02.2018

Question 5 · 2 marks · Taxation - GST Ch 05: Exemptions · medium

Scenario. Vidyanjali Educational Trust (VET) runs a pre-school and a higher secondary school (affiliated to CBSE) in Bengaluru. It is registered under Section 12AB of the Income-tax Act, 1961. During November 2026, the trust undertook the following transactions: (i) Collected tuition fees of ₹12,00,000 from students. (ii) Charged ₹50,000 as entrance examination fees for admission to various classes. (iii) Paid ₹80,000 to a security agency for providing security services within the school premises. (iv) Paid ₹1,20,000 to a catering contractor for providing mid-day meals to students (the scheme is sponsored by the State Government). (v) Received ₹30,000 from a publishing company for allowing it to display advertisements on the school premises. (vi) Collected ₹40,000 from a prospective employer for allowing campus recruitment. (vii) Paid ₹60,000 to a transport operator for transportation of students to and from school. (viii) The trust also runs a separate coaching centre for IIT-JEE preparation, which is not an approved vocational course. It earned ₹2,00,000 from coaching fees. (ix) Received ₹1,00,000 as affiliation fees from a school seeking affiliation to the trust's board. All amounts are exclusive of GST, wherever applicable.

What is the GST liability on the tuition fees, entrance examination fees, and affiliation fees received by VET?

1. Tuition fees and entrance fees are exempt; affiliation fees are taxable. (correct answer)
2. Tuition fees are exempt; entrance fees and affiliation fees are taxable.
3. All three are exempt.
4. All three are taxable.

Answer: A — Tuition fees and entrance fees are exempt; affiliation fees are taxable.

Explanation. Services provided by an educational institution to its students (tuition fees) are exempt under Entry 66(a). Services by way of conduct of entrance examination against entrance fee are exempt under Entry 66(aa). However, affiliation services provided by universities/boards to schools are not related to admission or conduct of examination by such institutions and are taxable (Circular No. 234/28/2024 GST). The correct option is (a).

Where it goes wrong. Students may assume all fees received by an educational institution are exempt. Affiliation fees are specifically clarified as taxable.

Authority. Entry 66 of Notification No. 12/2017-Central Tax (Rate); Circular No. 234/28/2024 GST dated 11.10.2024

Question 6 · 2 marks · Taxation - GST Ch 05: Exemptions · hard

What is the GST implication on the security services, catering services, and transportation services paid by VET?

1. All three are exempt as they are provided to an educational institution. (correct answer)
2. Security and catering are exempt; transportation is taxable.
3. Security, catering, and transportation are all taxable.
4. Security, catering, and transportation are exempt, provided they are within the school premises.

Answer: A — All three are exempt as they are provided to an educational institution.

Explanation. Entry 66(b) exempts services provided TO an educational institution providing pre-school to higher secondary education, by way of (i) transportation of students, faculty and staff; (ii) catering (including mid-day meals); (iii) security or cleaning or house-keeping services performed in such educational institution. Since VET runs a pre-school and higher secondary school, all three services are exempt. The correct option is (a).

Where it goes wrong. Students may wrongly apply the restriction that services must be performed within the premises. The exemption for security/cleaning is for services performed in the institution, but transportation and catering are exempt without such a restriction (except catering outside premises for pre-school/HSC is also exempt per Circular).

Authority. Entry 66(b) of Notification No. 12/2017-Central Tax (Rate)

Question 7 · 2 marks · Taxation - GST Ch 05: Exemptions · medium

What is the GST treatment for the advertisement income, campus recruitment fees, and coaching fees earned by VET?

1. All three are taxable. (correct answer)
2. Advertisement and coaching are taxable; campus recruitment is exempt.
3. Advertisement is taxable; campus recruitment and coaching are exempt.
4. All three are exempt.

Answer: A — All three are taxable.

Explanation. The exemption under Entry 66 is specific to services provided by an educational institution to its students, faculty and staff, and certain input services. Income from displaying advertisements is a separate commercial activity and is taxable. Fees charged from prospective employers for campus recruitment are also taxable (as clarified by CBIC). The coaching centre for IIT-JEE is not an approved vocational course or a qualification recognized by law, so it does not qualify as an educational institution for this purpose, making the coaching fees taxable. The correct option is (a).

Where it goes wrong. Students may broadly interpret the education exemption to cover all activities of the trust, including commercial activities like advertising and non-qualifying coaching.

Authority. Entry 66 of Notification No. 12/2017-Central Tax (Rate)

Question 8 · 2 marks · Taxation - GST Ch 05: Exemptions · hard

If VET had provided the security services at its annual day function held in an external auditorium, how would the GST treatment change?

1. The security services would remain exempt as they are for the educational institution.
2. The security services would be taxable only if the annual day function is commercial in nature.
3. The security services would be exempt only if the auditorium is owned by the government.
4. The security services would become taxable as they are not performed within the premises of the school. (correct answer)

Answer: D — The security services would become taxable as they are not performed within the premises of the school.

Explanation. Entry 66(b)(iii) exempts security or cleaning or house-keeping services performed in such educational institution. The exemption is conditional on the service being performed within the premises of the institution. If the annual day function is held outside the school campus (e.g., in an external auditorium), the security services are not 'performed in such educational institution' and thus become taxable. The correct option is (b).

Where it goes wrong. Students may ignore the location qualifier in the exemption entry. The phrase 'performed in such educational institution' is a strict condition.

Authority. Entry 66(b)(iii) of Notification No. 12/2017-Central Tax (Rate); CBIC FAQ

Question 9 · 2 marks · Taxation - GST Ch 05: Exemptions · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Dr. Meera, an authorized medical practitioner, provides the following services in November 2026: (i) Consultation to patients at her clinic for ₹50,000. (ii) A hair transplant procedure for ₹1,00,000. (iii) A plastic surgery to restore the anatomy of a patient's face after a severe accident for ₹1,50,000. What is the GST implication?

1. All services are exempt.
2. All services are taxable.
3. Consultation is exempt; hair transplant and reconstructive surgery are taxable.
4. Consultation and reconstructive surgery are exempt; hair transplant is taxable. (correct answer)

Answer: D — Consultation and reconstructive surgery are exempt; hair transplant is taxable.

Explanation. Health care services by an authorized medical practitioner are exempt. Hair transplant is explicitly excluded from the definition of health care services and is therefore taxable. Plastic surgery is also excluded unless undertaken to restore or reconstruct anatomy or functions of the body affected due to congenital defects, developmental abnormalities, injury, or trauma. Since the plastic surgery here is to restore anatomy after an accident, it is exempt. The correct option is (b).

Where it goes wrong. Students may not recall that hair transplant is a specific exclusion, or may wrongly assume all plastic surgeries are taxable.

Authority. Entry 74 of Notification No. 12/2017-Central Tax (Rate)

Question 10 · 2 marks · Taxation - GST Ch 05: Exemptions · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Sunrise Multispeciality Hospital charges ₹4,800 per day for a non-ICU room and ₹5,200 per day for another non-ICU room. Patient A stays in the ₹4,800 room for 5 days, and Patient B stays in the ₹5,200 room for 3 days. What is the GST treatment of the room rent?

1. Both are exempt as the charges are close to ₹5,000.
2. Patient A's room rent is exempt; Patient B's room rent is taxable. (correct answer)
3. Both are taxable as the average room rent may exceed ₹5,000.
4. Patient A's room rent is taxable; Patient B's room rent is exempt.

Answer: B — Patient A's room rent is exempt; Patient B's room rent is taxable.

Explanation. The proviso to Entry 74 states that the exemption does not apply to services by way of providing a room (other than ICU/CCU/ICCU/NICU) having room charges exceeding ₹5,000 per day. For Patient A, the charge is ₹4,800, which does not exceed ₹5,000, so it is exempt. For Patient B, the charge is ₹5,200, which exceeds ₹5,000, so the room rent is taxable. The threshold is applied per day per patient. The correct option is (b).

Where it goes wrong. Students might try to average the room rent or misapply the threshold. The test is strictly whether the daily charge exceeds ₹5,000.

Authority. Entry 74 of Notification No. 12/2017-Central Tax (Rate)

Question 11 · 2 marks · Taxation - GST Ch 05: Exemptions · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Aditya avails a health insurance policy from Star Health Insurance Co. Ltd. covering himself, his spouse, and two children. The premium paid is ₹25,000. Separately, his employer, TechNova Solutions Pvt. Ltd., takes a group health insurance policy for all its employees, paying a premium of ₹5,00,000. What is the GST implication on these insurance premiums?

1. Both individual and group health insurance premiums are exempt.
2. Individual health insurance premium is exempt; group health insurance premium is taxable. (correct answer)
3. Individual health insurance premium is taxable; group health insurance premium is exempt.
4. Both are taxable.

Answer: B — Individual health insurance premium is exempt; group health insurance premium is taxable.

Explanation. Entry 36D exempts services of health insurance business provided by an insurer to the insured, where the insured is not a group. The Explanation clarifies that this applies to a contract of insurance where the insured is an individual or an individual and family. The policy taken by Mr. Aditya for himself and his family is an individual policy (family floater) and is exempt. The policy taken by TechNova for its employees is a group policy (employer-employee group) and is therefore not exempt under Entry 36D; it is taxable. The correct option is (b).

Where it goes wrong. Students may not be aware of the distinction between individual/family floater policies and group policies for the purpose of the health insurance exemption.

Authority. Entry 36D of Notification No. 12/2017-Central Tax (Rate)

Question 12 · 2 marks · Taxation - GST Ch 05: Exemptions · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Vidya Coaching Centre, a private coaching institute, provides coaching for the CA Foundation examination. It also runs a special batch for students who have dropped out of school. Which of the following statements is correct regarding GST exemption?

1. Coaching for CA Foundation is exempt as it leads to a recognized qualification.
2. Coaching for school dropouts is exempt as it is for a charitable purpose.
3. Both coaching services are taxable as the institute is not an 'educational institution'. (correct answer)
4. Coaching for CA Foundation is taxable, but coaching for school dropouts is exempt.

Answer: C — Both coaching services are taxable as the institute is not an 'educational institution'.

Explanation. The term 'educational institution' is defined to include institutions providing pre-school to higher secondary education, education as part of a curriculum for a qualification recognized by law, or approved vocational education courses. Private coaching institutes, even if they prepare students for recognized qualifications like CA, do not themselves confer such qualifications and are not 'educational institutions' under GST. Therefore, their services are taxable. The correct option is (c).

Where it goes wrong. Students may think that because CA is a recognized qualification, coaching for it is exempt. The exemption is for the institution that delivers the recognized curriculum, not for parallel coaching centres.

Authority. Entry 66 of Notification No. 12/2017-Central Tax (Rate)

Question 13 · 2 marks · Taxation - GST Ch 05: Exemptions · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A hospital provides the following services: (i) Room rent of ₹6,000 per day in a non-ICU room. (ii) Food supplied to an in-patient as advised by a doctor. (iii) Food supplied to the patient's attendant. Which of the following is correct?

1. All three are exempt as they are part of a composite healthcare supply.
2. Room rent is taxable; food to in-patient and attendant is exempt.
3. Room rent is taxable; food to in-patient is exempt; food to attendant is taxable. (correct answer)
4. Room rent and food to attendant are taxable; food to in-patient is exempt.

Answer: C — Room rent is taxable; food to in-patient is exempt; food to attendant is taxable.

Explanation. The room rent of ₹6,000 per day (non-ICU) exceeds the ₹5,000 threshold, so it is taxable. Food supplied to an in-patient as advised by a doctor is part of the composite supply of healthcare and is exempt. Food supplied to an attendant is not part of the healthcare service and is taxable. The correct option is (c).

Where it goes wrong. Students may bundle all services provided during hospitalization as exempt. The room rent proviso and the treatment of food for attendants are common pitfalls.

Authority. Entry 74 of Notification No. 12/2017-Central Tax (Rate); Circular No. 32/06/2018 GST

Question 14 · 2 marks · Taxation - GST Ch 05: Exemptions · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

An educational institution providing higher secondary education pays ₹50,000 to a security agency for services performed within the school premises. It also pays ₹30,000 for cleaning services at a sports event organized by the school in a nearby stadium. What is the GST treatment?

1. Both are exempt.
2. Security services are exempt; cleaning services at the stadium are taxable. (correct answer)
3. Security services are taxable; cleaning services at the stadium are exempt.
4. Both are taxable.

Answer: B — Security services are exempt; cleaning services at the stadium are taxable.

Explanation. Entry 66(b)(iii) exempts security or cleaning or house-keeping services performed in such educational institution. The security services are performed within the school premises and are exempt. The cleaning services for a sports event held in a nearby stadium are not performed within the educational institution and hence do not qualify for the exemption. They are taxable. The correct option is (b).

Where it goes wrong. Students may miss the location condition 'performed in such educational institution' and assume all security/cleaning services for the school are exempt.

Authority. Entry 66(b)(iii) of Notification No. 12/2017-Central Tax (Rate)

Question 15 · 2 marks · Taxation - GST Ch 05: Exemptions · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Mr. Rajan avails in-patient treatment at a hospital. The hospital bill includes: (i) Room charges for a non-ICU room at ₹6,000 per day for 3 days; (ii) Doctor's fees of ₹50,000; (iii) Medicines of ₹20,000; (iv) Food as advised by the doctor of ₹5,000. What is the total value of the taxable supply?

1. ₹18,000 (Room rent only) (correct answer)
2. ₹23,000 (Room rent + Food)
3. ₹93,000 (Room rent + Doctor fees + Food)
4. ₹1,13,000 (Entire bill)

Answer: A — ₹18,000 (Room rent only)

Explanation. The room rent of ₹6,000 per day (non-ICU) exceeds the ₹5,000 threshold, so the entire room rent of ₹18,000 (₹6,000 x 3) is taxable. Doctor's fees, medicines, and food advised by the doctor are all part of the exempt health care services. Therefore, the total value of the taxable supply is ₹18,000. The correct option is (a).

Where it goes wrong. Students may either tax the entire bill or incorrectly compute tax only on the excess over ₹5,000 per day. The proviso taxes the full room rent when the threshold is crossed.

Authority. Entry 74 of Notification No. 12/2017-Central Tax (Rate)

Question 16 · 2 marks · Taxation - GST Ch 05: Exemptions · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Which of the following services provided by an educational institution is NOT exempt under Notification No. 12/2017-CT(R)?

1. Conduct of entrance examination for admission to the institution.
2. Transportation of students to and from the institution.
3. Catering services provided to students within the campus.
4. Fees charged from prospective employers for campus recruitment. (correct answer)

Answer: D — Fees charged from prospective employers for campus recruitment.

Explanation. Entry 66 exempts services by an educational institution to its students, faculty, and staff; conduct of entrance examinations; and certain input services like transportation and catering. However, fees charged from prospective employers for campus recruitment are a commercial activity and are not covered under the education exemption. They are taxable. The correct option is (d).

Where it goes wrong. Students may assume all activities related to the educational institution are exempt. Commercial activities like campus recruitment fees are explicitly taxable.

Authority. Entry 66 of Notification No. 12/2017-Central Tax (Rate)

Question 17 · 2 marks · Taxation - GST Ch 05: Exemptions · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A clinical establishment provides a room in the ICU with charges of ₹9,000 per day. The patient also avails physiotherapy services from an independent paramedic during the stay. What is the GST implication?

1. Room rent is taxable; physiotherapy is exempt.
2. Room rent is exempt; physiotherapy is taxable.
3. Both are exempt. (correct answer)
4. Both are taxable.

Answer: C — Both are exempt.

Explanation. The room rent proviso specifically excludes ICU/CCU/ICCU/NICU rooms from the ₹5,000 cap. Therefore, the ICU room rent of ₹9,000 per day is exempt. Services provided by paramedics are also covered under the definition of health care services and are exempt. The correct option is (c).

Where it goes wrong. Students may apply the ₹5,000 limit to ICU rooms or think paramedic services are taxable. Both are exempt under Entry 74.

Authority. Entry 74 of Notification No. 12/2017-Central Tax (Rate)

Question 18 · 2 marks · Taxation - GST Ch 05: Exemptions · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A higher secondary school runs a hostel for its students. It charges ₹8,000 per month per student for lodging and boarding. Is this service exempt from GST?

1. Yes, as it is provided by an educational institution. (correct answer)
2. No, as hostel fees are not part of education services.
3. Yes, if the charges are below ₹10,000 per month.
4. No, as the school does not qualify as an educational institution for hostel services.

Answer: A — Yes, as it is provided by an educational institution.

Explanation. Output services of lodging/boarding in hostels provided by educational institutions providing pre-school to higher secondary education are fully exempt from GST. The annual subscription/fees charged for hostel accommodation by such institutions do not attract GST. The correct option is (a).

Where it goes wrong. Students might think hostel services are separate from education and therefore taxable. However, for pre-school to higher secondary institutions, hostel services are exempt.

Authority. Entry 66 of Notification No. 12/2017-Central Tax (Rate); CBIC Circular

Question 19 · 2 marks · Taxation - GST Ch 05: Exemptions · medium

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

Dr. Verma performs a cosmetic surgery on a patient to enhance facial features. The patient had no congenital defect or injury. The surgery costs ₹1,20,000. Separately, Dr. Verma provides consultation to patients with common illnesses, earning ₹80,000. What is the GST treatment?

1. Both are exempt as they are health care services.
2. Cosmetic surgery is taxable; consultation is exempt. (correct answer)
3. Cosmetic surgery is exempt; consultation is taxable.
4. Both are taxable.

Answer: B — Cosmetic surgery is taxable; consultation is exempt.

Explanation. Cosmetic surgery is specifically excluded from the definition of health care services unless it is undertaken to restore anatomy/functions affected by congenital defects, developmental abnormalities, injury, or trauma. Since this surgery is purely for enhancement, it is taxable. Consultation for common illnesses is a health care service and is exempt. The correct option is (b).

Where it goes wrong. Students may not realize that cosmetic surgery is a specific exclusion, or may think all services by a doctor are exempt.

Authority. Entry 74 of Notification No. 12/2017-Central Tax (Rate)

Question 20 · 2 marks · Taxation - GST Ch 05: Exemptions · hard

Scenario. During Tax Year 2026-27, a registered taxpayer is evaluating statutory compliance, computation of taxable income, and eligible tax deductions in accordance with the provisions of the Income-tax Act, 2025 and applicable rules for the May 2027 examination.

A pre-school hires an external caterer to provide mid-day meals to its students. The scheme is sponsored by the State Government. The caterer charges ₹1,00,000. Is GST payable by the caterer?

1. Yes, as the caterer is a separate commercial entity.
2. No, as catering services to pre-schools are exempt. (correct answer)
3. Yes, but only if the caterer's turnover exceeds the threshold.
4. No, only if the caterer provides services within the school premises.

Answer: B — No, as catering services to pre-schools are exempt.

Explanation. Entry 66(b)(ii) exempts catering services, including any mid-day meals scheme sponsored by the Central Government, State Government, or Union territory, provided TO an educational institution providing pre-school education or education up to higher secondary school or equivalent. The exemption applies to the service provider (the caterer) and is not conditional on the caterer being part of the institution. The correct option is (b).

Where it goes wrong. Students may think the exemption only applies when the institution itself provides the catering, not when it is outsourced. The entry covers services provided TO the institution by any person.

Authority. Entry 66(b)(ii) of Notification No. 12/2017-Central Tax (Rate)