Exempt Supply Vs Nil Rate Supply

[Krishna Murthy]

Sir, what is the difference between Nil Rated Supply and Exempt Supply?

By definition u/s 2(47) Exempted Supply includes Nil Rated Supply but what is the exact significance of these two terms under GST.

[KASTURI SETHI]

Nil rated is by virtue of tariff Act and exempted is by virtue of notification or Order of Govt. Any goods or service which is taxable by tariff Act may be exempted by notification. Now if "Exempt supply" includes non-taxable supply I would call it defective definition. Which is already non-taxable supply, what is necessity of defining it exempted. 'Exempted' and 'non-taxable' cannot be correlated simultaneously.

[Ganeshan Kalyani]

I would say that in GST the term exempted prevails as the items are exempted by way of notification and there is no tariff as such. There is no tariff like Central Excise tariff.

[YAGAY andSUN]

In addition to above reply, Regarding Exempted Supply, the Exemption can be conditional or absolute but with Nil Rated supply, no condition or exemption is associated. While supplying goods under Exemption or at Nil rate, Bill of Supply should be used.

[KASTURI SETHI]

For the purpose of GST, Customs Tariff Act, 1975 is followed. This is with reference to the reply Sh.Ganeshan Kalyani, Ji. I also agree with the reply dated 24.5.20 of M/s.Yagay and Sun,Sir.

AI Summary

Exempt supply vs nil rated supply: source and conditionality differ; issue a Bill of Supply for such supplies. Nil rated supply is determined by tariff classification (Customs Tariff Act) where the rate is nil; exempt supply is created by government notification or order and may be conditional or absolute. Treating non taxable items as 'exempt' may be a defective definition. For exempt or nil rated supplies, a Bill of Supply should be issued.