Zero Rated, NIL, Exempted and Non-GST Supply
What is the difference between Nil Rated, Exempted, Zero Rated and Non-GST supplies?
The goods and services have been divided into Nil Rated, Exempted, Zero Rated, and Non-GST Supplies since the implementation of GST.
Here are the details to help you understand better how they are different from each other:
NIL-rated products and services are those for which the GST rate of 0% is in effect. These items or services are listed in schedule 1 of the GST rate and are subject to a 0% GST charge. Salt, jaggery, grains, and other items are examples of zero-rated supplies.
No input tax credit is available for suppliers with a nil rate for the inputs and/or input services utilised to provide the supply.
Exempted supply includes non-taxable supply and refers to the supply of any products or services, or both, that are subject to a zero per cent tax rate or that may be completely free from taxation under section 11 of the CGST Act or section 6 of the IGST Act.
The following details regarding exempted supplies are essential to understand:
- No goods and services tax (GST) applicable on outward supplies is applicable.
- An input tax credit is not available for exempted supplies, so you can’t claim a credit for the taxes paid on inputs used to produce exempted supplies.
- A registered person must issue a “bill of supply” rather than a tax invoice when supplying exempt items, services, or both.
The zero-rated supply category includes items sent abroad to Special Economic Zones (SEZs) or SEZ Developers. There is zero GST applied to this supply. For such supplies, ITC can be claimed.
Any of the supplies of goods, services, or both described below are considered zero-rated supplies:
- The export of both products and services; or
- Provision of commodities, services, or both to a developer of a special economic zone.
- A section of the Special Economic Zone.
Non-GST supplies are those that are outside of the purview of the GST. However, depending on the laws of the state or the nation, these supplies may be subject to taxes in addition to the GST. Petrol, alcohol, and other such supplies are a few examples.