Taxation - GST Ch 05: Exemptions - Test 2: answer key

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

Scenario. AgriTech Services LLP is a partnership firm based in Ludhiana, Punjab, providing various support services to farmers and local businesses. The firm is registered under GST and has maintained proper records for the month of October 2026. The LLP furnished the following details regarding its transactions: (i) Rented out a tractor and a harvester to a farmer for use in his agricultural fields, charging a total of ₹40,000 for the season. (ii) Provided warehousing services for storing raw potatoes harvested by local farmers for ₹30,000. (iii) Provided warehousing services for storing potato chips manufactured by a food processing company for ₹20,000. (iv) Undertook the milling of paddy into rice on a job-work basis for a local farmer, charging ₹15,000 for the processing. (v) Provided artificial insemination services for cows (₹10,000) and horses (₹12,000) owned by different farmers in the village. (vi) Provided loading and unloading services for wheat at a local mandi, charging ₹8,000. (vii) Provided agricultural extension services to a group of farmers to educate them on new crop techniques, charging ₹5,000. All amounts are exclusive of GST, wherever applicable. The aggregate turnover of the firm for the preceding financial year was ₹85 lakhs. All services were provided within the state of Punjab.

What is the GST implication on the renting of the tractor and harvester, and the loading and unloading of wheat?

1. Both services are exempt under the agriculture exemptions. (correct answer)
2. Tractor rental is taxable, while loading and unloading is exempt.
3. Tractor rental is exempt, while loading and unloading is taxable.
4. Both services are taxable as they are commercial activities.

Answer: A — Both services are exempt under the agriculture exemptions.

Explanation. Entry 54(d) exempts renting or leasing of agro machinery or vacant land with or without a structure incidental to its use. Hence, the tractor and harvester rental of ₹40,000 is exempt. Entry 54(e) exempts loading, unloading, packing, storage or warehousing of agricultural produce. Wheat is an agricultural produce, so the loading and unloading of ₹8,000 is also exempt. Therefore, the total GST liability on these two services is nil.

Where it goes wrong. Students might apply GST to the tractor rental thinking it is a commercial transaction, or fail to identify wheat as a qualifying agricultural produce.

Authority. Entry 54(d) of Notification No. 12/2017-Central Tax (Rate); Entry 54(e) of Notification No. 12/2017-Central Tax (Rate)

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

What is the GST treatment for the warehousing services provided for raw potatoes and potato chips?

1. Both are exempt as they are related to food items.
2. Both are taxable as warehousing is a commercial service.
3. Warehousing of raw potatoes is exempt; warehousing of potato chips is taxable. (correct answer)
4. Warehousing of raw potatoes is taxable; warehousing of potato chips is exempt.

Answer: C — Warehousing of raw potatoes is exempt; warehousing of potato chips is taxable.

Explanation. Warehousing of agricultural produce is exempt under Entry 54(e). Raw potatoes are unprocessed agricultural produce, so their warehousing is exempt. However, potato chips are a processed product where the essential characteristics of the potato have been altered. Therefore, potato chips do not qualify as 'agricultural produce' and their warehousing is taxable. The exemption does not extend to processed foods.

Where it goes wrong. Assuming all warehousing services related to food items are exempt. The distinction between raw agricultural produce and processed goods is the critical pitfall here.

Authority. Entry 54(e) of Notification No. 12/2017-Central Tax (Rate); Entry 24B of Notification No. 12/2017-Central Tax (Rate)

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

Is the milling of paddy into rice on a job-work basis exempt from GST?

1. Yes, as it is job work directly related to agriculture.
2. No, as the process alters the essential characteristics of the agricultural produce. (correct answer)
3. Yes, as paddy is an agricultural produce and milling is incidental.
4. No, unless the job worker is registered under GST.

Answer: B — No, as the process alters the essential characteristics of the agricultural produce.

Explanation. Milling of paddy into rice is not considered an intermediate production process in relation to the cultivation of plants. It is a process carried out after cultivation is over and it alters the essential characteristics of paddy. The activity is usually performed by rice millers, not farmers. It is specifically clarified that milling of paddy into rice is not eligible for exemption under Entry 55 and is therefore taxable.

Where it goes wrong. Students often assume that all job work related to agricultural produce is exempt. Processing that changes the essential characteristics is specifically excluded.

Authority. Entry 55 of Notification No. 12/2017-Central Tax (Rate); CBIC Circular

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

What is the total value of taxable supplies for AgriTech Services LLP from the artificial insemination and agricultural extension services?

1. ₹22,000, covering both services.
2. ₹10,000 for the cows only.
3. ₹5,000 for the extension services only.
4. ₹12,000 for the horses only. (correct answer)

Answer: D — ₹12,000 for the horses only.

Explanation. Entry 55A exempts services by way of artificial insemination of livestock (other than horses). Thus, the service for cows is exempt, but the service for horses is taxable (₹12,000). Entry 54(f) exempts agricultural extension services, making the ₹5,000 exempt. Therefore, the only taxable supply is the artificial insemination of horses, valued at ₹12,000.

Where it goes wrong. Students may miss the specific exclusion of horses in Entry 55A and assume all livestock insemination is exempt.

Authority. Entry 55A of Notification No. 12/2017-Central Tax (Rate); Entry 54(f) of Notification No. 12/2017-Central Tax (Rate)

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

Scenario. RapidRoute Logistics Pvt. Ltd. (RRL) is a Goods Transport Agency (GTA) registered in Delhi. It also operates passenger transport services in the National Capital Region. During November 2026, RRL provided the following services to its clients: (i) Transported household goods by road for Mr. Suresh, an unregistered individual consumer, shifting to his new residence for ₹18,000. (ii) Transported industrial machinery for M/s Sharma & Sons, an unregistered partnership firm, charging ₹35,000. (iii) Transported milk and salt from Haryana to Maharashtra by rail, charging ₹60,000 for the freight. (iv) Acted as a transporter (not a GTA) and transported relief materials meant for flood victims from Delhi to Assam by road, charging ₹25,000. (v) Operated a non-air-conditioned stage carriage for local commuters within Delhi, collecting ₹45,000. (vi) Operated an air-conditioned stage carriage for office employees, collecting ₹55,000. (vii) Provided GTA services to a Gram Panchayat, which is registered under GST only for the purpose of deducting TDS, charging ₹10,000. All amounts are exclusive of GST, wherever applicable. RRL issues consignment notes for all its GTA services. The company has a fleet of 15 trucks and 2 buses.

What is the GST treatment for the GTA services provided to Mr. Suresh and M/s Sharma & Sons?

1. Both are exempt as the recipients are unregistered.
2. Services to Mr. Suresh are exempt; services to M/s Sharma & Sons are taxable. (correct answer)
3. Services to Mr. Suresh are taxable; services to M/s Sharma & Sons are exempt.
4. Both are taxable as GTA services are always subject to GST.

Answer: B — Services to Mr. Suresh are exempt; services to M/s Sharma & Sons are taxable.

Explanation. GTA services provided to an unregistered person are generally exempt under Entry 21A. However, this exemption does not apply if the recipient is a specified person. A partnership firm, whether registered or not, is a specified recipient. Mr. Suresh is an unregistered individual, so his transport is exempt. M/s Sharma & Sons is an unregistered partnership firm, making the service taxable under reverse charge.

Where it goes wrong. Students may broadly apply the exemption to all unregistered persons and overlook the specific list of recipients (including unregistered partnership firms) that do not qualify.

Authority. Entry 21A of Notification No. 12/2017-Central Tax (Rate)

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

What is the GST implication on the transportation of milk and salt by rail?

1. Exempt under the specified goods list for rail transport. (correct answer)
2. Taxable as the transport is inter-state.
3. Exempt only if the value of goods per consignment is below ₹50,000.
4. Taxable as rail transport for these goods is not exempt.

Answer: A — Exempt under the specified goods list for rail transport.

Explanation. Entry 20 exempts services by way of transportation by rail or a vessel from one place in India to another of specified goods. Milk and salt are explicitly listed in clause (f) of Entry 20 as exempt goods for rail/vessel transport. Therefore, the freight charge of ₹60,000 is exempt from GST.

Where it goes wrong. Students might assume only road transport has exemptions for food items, or wrongly apply a consignment value threshold that doesn't exist for this entry.

Authority. Entry 20 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 transportation of relief materials by road to Assam?

1. Taxable as GTA services are involved in the transport.
2. Exempt only if transported by rail or vessel.
3. Exempt under the general exemption for road transport. (correct answer)
4. Taxable as the transport is inter-state.

Answer: C — Exempt under the general exemption for road transport.

Explanation. Entry 18 exempts services by way of transportation of goods by road, except the services of a GTA and a courier agency. Since RRL acted as a transporter (not a GTA) for this specific consignment, the general exemption applies. Furthermore, the goods are relief materials, which are also exempt under Entry 20 if sent by rail/vessel. The road transport is exempt.

Where it goes wrong. Students might confuse GTA rules with general transporter rules. The exemption under Entry 18 is broad and covers non-GTA road transport.

Authority. Entry 18 of Notification No. 12/2017-Central Tax (Rate)

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

What is the GST treatment for the non-air-conditioned and air-conditioned stage carriage services operated by RRL?

1. Both are exempt as they are public transport.
2. Both are taxable as they are commercial operations.
3. Non-AC is taxable; AC is exempt.
4. Non-AC is exempt; AC is taxable. (correct answer)

Answer: D — Non-AC is exempt; AC is taxable.

Explanation. Entry 17 exempts passenger transportation services by a stage carriage other than an air-conditioned stage carriage. Therefore, the collection of ₹45,000 from the non-air-conditioned stage carriage is exempt. The collection of ₹55,000 from the air-conditioned stage carriage is not covered by the exemption and is liable to GST.

Where it goes wrong. Students may assume all public stage carriage transport is exempt. The specific exclusion of air-conditioned stage carriages is the pitfall.

Authority. Entry 17 of Notification No. 12/2017-Central Tax (Rate)

Question 9 · 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. Rohan provides a tractor with a driver to a farmer. The tractor is at the disposal of the farmer for a fixed duration, and the farmer decides the schedule and route for using it. Is this service exempt under the agriculture exemptions?

1. Yes, as it is renting of agro-machinery for agricultural use.
2. No, as it is treated as rental of a transport vehicle with operator. (correct answer)
3. Yes, as long as the tractor is used only in the farm.
4. No, unless the driver is an employee of the farmer.

Answer: B — No, as it is treated as rental of a transport vehicle with operator.

Explanation. Entry 54(d) exempts renting of agro machinery for agricultural operations. However, when a vehicle is given on rent with a driver for a specific duration and the recipient determines the schedule, route, and operational considerations, it is a service of 'renting of transport vehicles with operator', not 'renting of agro machinery'. It does not qualify for the exemption and is taxable.

Where it goes wrong. Students might see 'tractor' and 'farmer' and immediately apply the agro-machinery exemption, ignoring the operational control aspect of the contract.

Authority. Entry 54(d) of Notification No. 12/2017-Central Tax (Rate); CBIC Clarification

Question 10 · 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. Karan is engaged in the business of rearing horses for racing purposes. He provides services related to the breeding and rearing of these horses. Is he eligible for the agriculture-related exemptions?

1. No, because the rearing of horses is specifically excluded from the definition. (correct answer)
2. Yes, because all life forms of animals are covered under the exemption.
3. Yes, if the horses are used for agricultural purposes.
4. No, only if the horses are not used for racing.

Answer: A — No, because the rearing of horses is specifically excluded from the definition.

Explanation. Entry 54 exempts services relating to cultivation of plants and rearing of all life forms of animals, except the rearing of horses. The phrase 'except the rearing of horses' explicitly excludes services related to horses from the ambit of the agriculture exemption. Therefore, the services provided by Mr. Karan for rearing horses are taxable.

Where it goes wrong. Students may read 'rearing of all life forms of animals' and overlook the specific exclusion of horses at the end of the clause.

Authority. Entry 54 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.

M/s SteelForge Pvt. Ltd., a factory registered under the Factories Act, is not registered under GST. It hires a GTA for transporting raw materials to its factory. The GTA charges ₹50,000 for the service. What is the GST implication?

1. Exempt, as M/s SteelForge is unregistered under GST.
2. Exempt, as the value is below the registration threshold.
3. Taxable, but the GST is payable by the GTA.
4. Taxable under reverse charge, as a factory is a specified recipient. (correct answer)

Answer: D — Taxable under reverse charge, as a factory is a specified recipient.

Explanation. GTA services provided to an unregistered person are exempt under Entry 21A, but this exemption does not apply if the recipient is a specified person. A factory registered under the Factories Act is a specified recipient, regardless of whether it is registered under GST. Therefore, the service is taxable under reverse charge, and the liability falls on M/s SteelForge.

Where it goes wrong. Students often equate 'unregistered' with 'exempt' for GTA services, forgetting the specific list of recipients that are excluded from the exemption.

Authority. Entry 21A of Notification No. 12/2017-Central Tax (Rate); Notification No. 13/2017 CT (R)

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.

Mr. Mohan avails a luxury cruise service from Mumbai to Goa for a vacation. The cruise is operated by a private company and is used predominantly for tourism purposes. Is the passenger transport service exempt from GST?

1. Yes, as it is public transport by vessel between places in India.
2. Yes, as it is intra-state transport.
3. No, as public transport by vessel predominantly for tourism is excluded. (correct answer)
4. No, unless the cruise operator is registered under GST.

Answer: C — No, as public transport by vessel predominantly for tourism is excluded.

Explanation. Entry 17(d) exempts public transport, other than predominantly for tourism purpose, in a vessel between places located in India. The words 'other than predominantly for tourism purpose' exclude leisure or cruise vessels from the exemption. Since the cruise is used for tourism, the transport service is taxable.

Where it goes wrong. Students might apply the general exemption for water transport without checking the specific exclusion for tourism purposes.

Authority. Entry 17(d) 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 farmer engages a job worker to process sugarcane into jaggery. The job worker charges a processing fee. Is this service exempt from GST as it is related to an agricultural produce?

1. Yes, as sugarcane is an agricultural produce.
2. No, as processing changes the essential characteristics of the produce. (correct answer)
3. Yes, as the job work is for an agricultural product.
4. No, unless the job worker is unregistered.

Answer: B — No, as processing changes the essential characteristics of the produce.

Explanation. The definition of agricultural produce requires that any processing should not alter the essential characteristics of the produce. Processing sugarcane into jaggery changes its essential characteristics, so jaggery is not an agricultural produce. Therefore, the processing service is not an intermediate production process related to agricultural produce and is taxable.

Where it goes wrong. Students may see the origin of the product (sugarcane) and assume the exemption applies, missing the 'alteration of essential characteristics' rule.

Authority. Entry 54 of Notification No. 12/2017-Central Tax (Rate); CBIC Clarification

Question 14 · 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. Ajay operates a local courier agency that provides door-to-door transportation of time-sensitive documents within the city. He charges ₹100 per document. Is this service exempt from GST?

1. No, as courier agency services are specifically excluded from the road transport exemption. (correct answer)
2. Yes, as the value per consignment is below the threshold.
3. Yes, as intra-city transport is always exempt.
4. No, only if the documents are related to business.

Answer: A — No, as courier agency services are specifically excluded from the road transport exemption.

Explanation. Entry 18 exempts services by way of transportation of goods by road, except the services of a goods transportation agency (GTA) and a courier agency. The term 'courier agency' includes door-to-door transportation of time-sensitive documents. Since courier agencies are specifically excluded from the exemption, the service is taxable.

Where it goes wrong. Students may apply the general road transport exemption to all small-value transports, ignoring the specific exclusion of courier agencies.

Authority. Entry 18 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.

A GTA provides transport services to Mr. Rahul, an unregistered casual taxable person, for transporting his personal effects. The GTA issues a consignment note for the service. Is this service exempt from GST?

1. No, as a casual taxable person is not eligible for the exemption.
2. No, as GTA services are always taxable.
3. Yes, as unregistered casual taxable persons are covered under the GTA exemption. (correct answer)
4. Yes, but only if the goods are household items.

Answer: C — Yes, as unregistered casual taxable persons are covered under the GTA exemption.

Explanation. Entry 21A exempts GTA services provided to an unregistered person, including an unregistered casual taxable person. The exemption is broad for this category of recipients, provided they are not a specified person (like a factory, society, firm, etc.). Mr. Rahul is an unregistered casual taxable person, so the service is exempt.

Where it goes wrong. Students may think that 'casual taxable person' status automatically creates a tax liability, but the exemption specifically includes unregistered casual taxable persons.

Authority. Entry 21A 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.

M/s Riverways Ltd. transports bulk cargo, such as iron ore, using inland waterways from Kolkata to Varanasi. The company charges ₹5,00,000 for the transport. Is this service exempt from GST?

1. No, as iron ore is not an exempted good.
2. No, as inland waterways transport is only exempt for specific goods.
3. Yes, if the vessel is registered in India.
4. Yes, as transportation of goods by inland waterways is generally exempt. (correct answer)

Answer: D — Yes, as transportation of goods by inland waterways is generally exempt.

Explanation. Entry 18 exempts services by way of transportation of goods by road and by inland waterways. Unlike the exemption for rail or vessel transport (Entry 20) which is limited to specific goods, the exemption for inland waterways under Entry 18(b) is not restricted to any particular type of goods. Therefore, the transport of iron ore is exempt.

Where it goes wrong. Students may incorrectly assume that the inland waterways exemption is limited to the specific goods listed under Entry 20 for rail/vessel transport.

Authority. Entry 18(b) 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 company provides services of retail packing and labelling of fresh apples for a supermarket chain. The process does not alter the essential characteristics of the apples. Is this service exempt from GST?

1. No, as retail packing is a form of processing.
2. Yes, as it falls under the exemption for specified pre-processing services. (correct answer)
3. No, unless the apples are organic.
4. Yes, but only if the service provider is a farmer.

Answer: B — Yes, as it falls under the exemption for specified pre-processing services.

Explanation. Entry 57 exempts services by way of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labelling of fruits and vegetables which do not change or alter the essential characteristics of the said fruits or vegetables. Since the retail packing and labelling of apples does not alter their essential characteristics, the service is exempt.

Where it goes wrong. Students may think that any retail-level activity is taxable, missing the specific exemption for these preparatory services on fruits and vegetables.

Authority. Entry 57 of Notification No. 12/2017-Central Tax (Rate)

Question 18 · 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. Bhola owns a truck and transports goods for various clients. He does not issue any consignment note for the transport. He charges ₹25,000 for a trip. What is the GST implication?

1. Exempt, as he is not a GTA and the service falls under the general road transport exemption. (correct answer)
2. Taxable, as all goods transport is subject to GST.
3. Exempt, as the value is below the threshold limit.
4. Taxable, as he is a GTA by definition.

Answer: A — Exempt, as he is not a GTA and the service falls under the general road transport exemption.

Explanation. A Goods Transport Agency (GTA) is defined as any person who provides service in relation to transport of goods by road and issues a consignment note. Since Mr. Bhola does not issue a consignment note, he is not a GTA. His services fall under Entry 18, which exempts transportation of goods by road (except by GTA or courier agency). Therefore, his service is exempt.

Where it goes wrong. Students may assume all independent truck operators are GTAs and tax the service, but the issuance of a consignment note is the sine qua non for GTA status.

Authority. Entry 18 of Notification No. 12/2017-Central Tax (Rate); Definition of GTA

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.

The Ministry of Defence transports military equipment from a factory in Pune to a base in Ladakh using a vessel. The transport charges are ₹10,00,000. Is this service exempt from GST?

1. No, as defence equipment is considered sensitive and taxable.
2. No, as the transport is not by road.
3. Yes, as transportation of defence or military equipment is specifically exempt. (correct answer)
4. Yes, but only if the vessel is owned by the Government.

Answer: C — Yes, as transportation of defence or military equipment is specifically exempt.

Explanation. Entry 20 exempts services by way of transportation by rail or a vessel from one place in India to another of specified goods. Clause (b) of Entry 20 specifically lists 'defence or military equipments'. Therefore, the transport of military equipment by vessel is exempt from GST, regardless of the ownership of the vessel.

Where it goes wrong. Students may be unsure if defence-related transport is exempt and might incorrectly choose taxable options.

Authority. Entry 20 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 GTA provides transport services to a Governmental agency. The agency is registered under GST only for the purpose of deducting tax under Section 51 (TDS) and not for making any taxable supply. The GTA charges ₹1,00,000. Is the service exempt?

1. No, as the agency is registered under GST.
2. No, as GTA services to government agencies are always taxable.
3. Yes, but only if the goods transported are for statutory use.
4. Yes, as the exemption applies to such specific governmental agencies. (correct answer)

Answer: D — Yes, as the exemption applies to such specific governmental agencies.

Explanation. Entry 21B exempts GTA services provided to a Department or Establishment of the Central/State Government/UT, a local authority, or Governmental agencies which have taken registration under GST only for the purpose of deducting tax under Section 51 (TDS) and not for making a taxable supply. Since the agency meets this condition, the GTA service is exempt.

Where it goes wrong. Students may simply see 'GST registration' and assume the service is taxable, missing the specific condition regarding registration solely for TDS purposes.

Authority. Entry 21B of Notification No. 12/2017-Central Tax (Rate)