|Difference between, Exempted, Nil Rated, Zero Rated and Non-GST supplies|
Since the launch of GST on 1st July 2017, the confusion between Exempted and Non-taxable supply are far from over, to add on to the confusion GST act provides for Nil rated and Zero rates supplies as well. It is important to understand these terms as their treatment is different under GST. Their disclosure requirements are also different in the Act. To get a better understanding, Let us first go through the definition of each of these supplies given under the act.
Exempt supply is defined in section 2(47) of GST Act.
“Exempt supply” means the supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11of the CGST act, or under section 6 of the IGST Act, and includes non-taxable supply.
It can be construed that an Exempted supply includes three types of supply
- Exempt Under Schedule III: The Government under section 7(2)(b) of the CGST Act and under Schedule III has defines the transactions or activities which are neither considered as a supply of goods nor supply of service.
- Supply attracting Nil Tax rate: These are the supplies which are taxable under GST but at a NIL Rate.
- Wholly Exempt under Section 11 of the CGST Act or section 6 of the IGST act : The Government has power under section 11 upon recommendation from GST council to specify by notification products which are exempt either absolutely or subject to conditions the goods or services from the whole or part of tax leviable thereon.
Ω Input tax credit is not available in case you have an Exempt outward Supply.
Examples: Bread, fresh fruits, fresh milk and curd etc.
Non-Taxable Supplies is defined under section 2(78) of the CGST Act
“Non Taxable Supply” means a supply of goods or services or both which is not leviable to tax under GST ;
This basically includes the supply of goods and services that do not come under the purview of GST while other taxes may be applicable and recovered.
Ω Input tax credit is not available in case of a Non Taxable Supply.
Example: Petrol, alcohol for human consumption.
Zero Rated Supply is defined in Section 16 IGST Act
Sub Section (1) “zero-rated supply” means any of the following taxable supply of goods and/or services, namely –
(a) export of goods and/or services; or
(b) supply of goods and/or services to SEZ developer or SEZ unit.
Sub Section (2) Subject to provisions of sub-section (3) of section 17 of the CGST Act, 2016, the credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply;
Having read both the section it can be interpreted that the Zero rated supply is not actually a supply with nil rate, but since the entire amount paid as tax can be claimed as Input tax it makes the supply zero-rated. Had the same supply were made in India rather than export, it would have been taxable.
Ω Input tax credit is available in case of a Zero Rated Supply.
Examples: Sale of goods from a supplier in India to a person in Germany.
Nil Rate Supplies:
Nil rated supplies are the Goods or services on which 0% GST rate is applicable (listed in Schedule 1 in the GST rate schedule). Supply of any of these goods or services is a nil rated supply under GST Act.
Ω Input tax credit is not available in case of a Nil Rated Supply.
Example: Grains, salt, jaggery etc.
Hope the information will assist you in your Business & Professional Endeavors. In case of any query/ information, please do not hesitate to write back to us.
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Tax Team, Get Set Business Solutions
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