Section 11 of Vat Act defines exempt supplies as those supplies that are exempt under paragraph 2 of second schedule as amended. Exempted goods and services consist principally of:

•  Financial
•  Medical
•  Accommodation in a dwelling and 
•  Educational activities. 

An exempt supply is not regarded as a taxable supply. If a person only makes exempt supplies, then he is not carrying on a taxable activity and may not register for VAT if this is his only activity.

Businesses engaged in both taxable and exempt supplies:

If a registered person makes both taxable and exempt supplies, only that part of input tax incurred which relates to making taxable supplies can then be claimed.