Criteria For Zero Rated Supply

[KASTURI SETHI]

Dear Experts,

Zero rated supply, NIL rated supply, Exempt supply, Non-taxable supply, NON-GST supply are altogether different terms.

NIL rate is also a rate of duty (Supreme Court). Zero rated is also rate of duty/tax.

Although export benefits may be available to exempt supply, non-taxable supply & Non-GST supply in different Acts, yet these supplies cannot be categorized as ZERO rated inasmuch as these are already tax free.

Q.1 What is zero rated supply under GST?

Ans. Under GST, exports and supplies to SEZ are zero-rated as per Section 16 of the IGST Act, 2017. By zero-rating, it is meant that the entire supply chain of a particular supply is tax free, i.e., there is no burden of tax either on the input side or output side.

Views of experts please. Thanks a lot.

AI Summary

Zero-rated supply preserves input tax credit for exports and SEZ supplies, enabling refunds or bond/LUT relief.
Zero-rated supplies under GST are confined to exports and supplies to SEZs and are intended to make the entire value chain tax-free by allowing either refund of unutilised input tax credit when supplies are made under bond/LUT or refund of integrated tax where tax is paid. Exempt, nil-rated, non-taxable and non-GST categories differ because exempt outputs often disallow input tax credit, leaving input taxes as costs. Certain inputs and non-GST levies remain outside credit even for zero-rated suppliers, limiting absolute neutrality.