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Explaination

Fayaz (Accountant) (45 Points)

15 October 2020

Hi,

what is the difference between zero rated, Nil rated and exempt supplies?

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4 Replies

Krishna Shah (65 Points)
Replied 15 October 2020

Nil Rated means supply attracts a GST of 0%. Input tax credit cannot be claimed on such supplies. Some items which are nil rated include grains, salt, jaggery, etc.

Exempted means items which are used for everyday purposes. Since they are basic essentials, they do not attract any GST at all. You will not be able to claim any ITC on such supplies. Some examples include bread, fresh fruits, milk, curd, etc.

Zero-Rated means Supplies made overseas and to Special Economic Zones (SEZs) or SEZ Developers come under the zero-rated supplies. This supply attracts a GST of 0%. For such supplies, ITC can be claimed.

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Shivam RC (Student) (23683 Points)
Replied 15 October 2020

ZERO RATED SUPPLY : Zero Rated Supply means a Supply which attracts GST but taxable at Zero Rated. The entire value chain of the supply is tax free. As per the Provision of Section 16 of the IGST Act 2017, there are two Zero Rated Supplies :

(a). Exports of Goods or Services or both.
(b). Supply of Goods or Services or both to a Special Economic Zone Developer or Special Economic Zone Unit.

Under Zero Rated Supply you are eligible for the Refund of taxes paid and ITC even if the goods are exempted ( 16(2) of the IGST Act 2017 ).

EXEMPT SUPPLY : As per the Provision of Section 2(47) of the CGST Act 2017, Exempt Supply means supply of any goods or services or both which attracts NIL rate of tax or which may be wholly exempt from tax under Section 11, or under Section 6 of the Integrated Goods and Services Tax Act, and includes non-taxable supply.

Exempt Supply basically includes those supplies which are exempted from GST vide Exemption Notification under Section 11 of the CGST Act 2017. For example, Notification No. 2/2017 - Central Tax ( Rate ), dated 28th June 2017 is exemption notification for "GOODS" whereas Notification No. 12/2017 - Central Tax ( Rate ), dated 28th June 2017 is the Mega Exemption Notification for "SETVICES." Kindly note that as per the definition of exempt supply u/s 2(47), it also includes "NIL RATED SUPPLY."

NIL RATED SUPPLY : Nil Rated Supply means those supply of goods or services or both which attracts NIL Rate of GST. For example Electricity.