Difference between Exempt, Nil Rated, Zero Rated & Non GST Outward Supplies

Based on my understanding, I would like to explain the meaning of  Exempt Supply under Goods & Services Tax (GST), Nil Rated Supply under GST, Zero Rated Supply under GST and Non GST Outward Supply with the help of definitions or explanations etc. given under the Central Goods and Services Tax Act, 2017 and Integrated Goods and Services Tax Act, 2017. I do agree that there may be different view as well.

1. Exempt Supply under GST:

According to Section 2(47) of Central Goods and Services Tax 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.

Thus exempt Supply covers three things:

a. Supply which is taxable i.e. leviable to tax under the Act but attracts Nil rate of tax.

b. Supply which is taxable i.e. leviable to tax under the Act but has been made exempt from tax via notification of Government under section 11 of CGST Act or under section 6 of IGST Act.

c. A non-taxable supply:

According to Section 2(78) of the Central Goods and Services Tax Act, 2017, “non-taxable supply” means a supply of goods or services or both which is not leviable to tax under this Act or under the Integrated Goods and Services Tax Act.

A non taxable supply is a supply of goods or services or both as per Section  7 of CGST Act but is not taxable under CGST or IGST Act. The following transactions are covered under the scope of non-taxable supply:

i. Alcoholic liquor for human consumption

ii. Petroleum crude

iii. High speed diesel

iv. Motor spirit (commonly known as petrol)

v. Natural gas

vi. Aviation turbine fuel

2. Nil Rated Supply under GST:

Nil Rated Supply is nowhere defined in the Act. However as per my view, it covers a supply which is taxable i.e. taxable i.e. leviable to tax under the Act but chargeable at Nil Rate.

If any supply attracts Nil rate of tax via exercise of powers of Government by issuing an exemption notification under section 11 of CGST Act or section 6 of IGST Act, then it will be covered under “Exempt Supply” but if it attracts Nil Rate without such an exemption notification, then it will be covered under “Nil Rated Supply”

3. Zero Rated Supply under GST:

According to Section 2(23) of the Integrated Goods and Services Tax Act, 2017, “zero-rated supply” shall have the meaning assigned to it in section 16.

According to Section 16 of the Integrated Goods and Services Tax Act, 2017, “zero rated supply” means any of the following supplies of goods or services or both, namely:–

(a) export of goods or services or both; or

(b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.

Only the above transactions will be covered under the scope of zero rated supply.

4. Non GST Outward Supply:

Non GST outward supply is nowhere defined in the Act. There is a huge confusion about Non GST outward Supplies.

Till now, all the categories covered above i.e. Exempt Supply, Nil Rated Supply and Zero Rated Supply are covered under the scope of supply under section 7 of the CGST Act, whether such supply is taxable or not.

Thus as per my view, Non GST Outward Supplies are the transactions which are either excluded or not falling under the scope of supply under Section 7 of the CGST Act i.e. such transactions are not a supply as per GST law i.e. “No Supply”.

According to Section 7(2) of the Central Goods and Services Tax Act, 2017 the following transactions shall be treated neither as a supply of goods nor a supply of services:

i. activities or transactions specified in Schedule III; or

ii. such activities or transactions undertaken by the Central Government, a State Government or any local authority in which they are engaged as public authorities, as may be notified by the Government on the recommendations of the Council.

Besides the above transactions, “money and securities” are the items which are neither goods nor services as per the definitions of goods and services provided under Section 2(52) and Section 2(102) of the CGST Act respectively.

And the definition of supply under Section 7 of CGST Act along with the definitions of exempt supply, non taxable supply and zero rated supply given under the CGST Act contains the phrase “supply of goods or services or both“.

Thus the transactions in money and securities are also not considered as supply and should be covered under the category of Non GST outward supplies.

This article is based on the personal opinions of the author and the author do not assume and hereby disclaim any liability  to any party for any loss, damage, or disruption caused by relying on this article.

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