As per section 10(1)(c) half percentage (total 1%) is payable of the กฎturnover in Stateกฏ.
Explanation 2 to section10 excludes certain turnovers from กฎturnover in stateกฏ. The Explanation 2 reads as under:
กฐExplanation 2.จCจCFor the purposes of determining the tax payable by a person under this section, the expression จDturnover in State or turnover in Union territoryกฌ shall not include the value of following supplies, namely:จCจC
(i) supplies from the first day of April of a financial year up to the date when such person becomes liable for registration under this Act; and
(ii) exempt supply of services provided by way of extending deposits, loans or advances in so far as the consideration is represented by way of interest or discount.กฑ
Exempt sale is not excluded from กฎturnover in the stateกฏ and hence tax is payable on such exempt supply also. The action taken by department is correct.