As per section 16 (1) of Central Goods and Services Act, 2017, the following supplies are considered as ‘Zero rated supply’:
- Export of goods or services or both
- Supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit
Take Input Tax Credit for Zero rated supplies
Input tax credit is available on inputs and input services to make Zero rated supplies subject to the provisions of sub-section (5) of section 17 of CGST Act.
Claim Refund for Zero rated supplies
The registered person making zero rated supply can claim refund under either of the following options, in accordance with the provisions of section 54 of CGST Act:
- Supplies without payment of IGST under Bond/Letter of Undertaking– claim refund of unutilised input tax credit
- Supplies with payment of IGST – claim refund of IGST paid
Eligible Refund of Input Tax credit for Zero rated supplies
As per sub rule (4) of rule 89, refund of input credit tax shall be granted as per the following formula:
Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) x Net ITC ÷ Adjusted Total Turnover
Explanation:
- Refund Amount – the maximum refund admissible
- Net ITC – Input tax credit availed on inputs and input services other than the input tax credit availed for which refund is claimed under sub rules (4A) or (4B) or both
- Turnover of zero-rated supply of goods – value of zero-rated supply of goods made during the relevant period without payment of tax under bond or letter of undertaking, other than the turnover of supplies in respect of which refund is claimed under sub rules (4A) or (4B) or both
- Turnover of zero-rated supply of services – value of zero-rated supply of services made without payment of tax under bond or letter of undertaking, calculated as below:
| Turnover of zero-rated supply of services = | |
| ADD | Payments received during the relevant period for zero-rated supply of services |
| ADD | Payments received in advance in any period prior to the relevant period for which supply has been completed |
| LESS | Payments received in advance for which the supply has not been completed during the relevant period |
- Adjusted total turnover – Turnover as defined under clause (112) of section 2, excluding the value of exempt supply other than zero-rated supplies and the turnover of supplies in respect of which refund is claimed under sub-rules (4A) or (4B) or both, if any
- Relevant Period – The period for which the claim has been filed
- (4A) In the case of supplies received on which the supplier has availed the benefit of notification No. 48/2017-Central Tax dated 18th October, 2017, refund of input tax credit, availed in respect of other inputs or input services used in making zero-rated supply of goods or services or both, shall be granted.
- (4B) In the case of supplies received on which the supplier has availed the benefit of notification No. 40/2017-Central Tax (Rate) dated 23rd October, 2017 or notification No. 41/2017-Integrated Tax (Rate) dated 23rd October, 2017, or both, refund of input tax credit, availed in respect of inputs received under the said notifications for export of goods and the input tax credit availed in respect of other inputs or input services to the extent used in making such export of goods, shall be granted.
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