Under GST Regime, there is a lot of confusion about the difference between nil rated and zero rated supplies, as well as the difference between non-taxable and exempt supplies. While the end result of all these supplies is the same, i.e. GST is not charged on the supply, it is important to know the real difference between these supplies. This is also important from a reporting perspective, because in GST returns, a clear bifurcation of the value of each of these supplies is required to be furnished.
Let us understand the difference between these supplies which is given below:
A) Meaning :
1) Nil Rate Supplies: Goods or services on which GST rate of 0% is applicable (listed in Schedule 1 in the GST rate schedule) are called nil rated goods or services. Supply of any of these goods or services is a nil rated supply under GST.
2) Non Taxable Supplies: Goods or services on which GST is not leviable (as these goods or services are kept out of the purview of GST) are called non-taxable goods or services. Supply of any of these goods or services is a non-taxable supply under GST.
3) Exempt Supplies: By definition, exempt supply under GST is a broad term which includes nil rate supplies, non-taxable supplies and specific supplies which are notified as exempt from tax. Hence, in the GST Law and rules, reference to exempt supplies includes nil rate supplies, non-taxable supplies and the specific supplies declared as exempt by notification.
4) Zero Rate Supplies: There is a common understanding that supplies liable to 0% tax rate are the zero rated supplies which is wrong. In GST, Zero rated supplies are the ones which are executed under Section 16 of the IGST Act. It includes :
Note that here, tax is not charged owing to the nature of supply, regardless of the goods or services supplied.
For persons making a zero rated supply under GST, 2 options have been given:
B. Availability of input tax credit :
1) Nil Rate Supplies: No Input Tax Credit is available in case Nil Rate Supplies.
2) Non Taxable Supplies: No Input Tax Credit is available in case Non Taxable Supplies.
3) Exempt Supplies: No Input Tax Credit is available in case Exempt Supplies.
4) Zero Rate Supplies: Input Tax Credit is available in case Zero Rate Supplies.
C. Example :
1) Nil Rate Supplies: Supply of jaggery, handloom, cereals, accommodation in hotel with tariff below Rs. 1,000 per day
2) Non Taxable Supplies: Supply of alcohol for human consumption, petroleum products, electricity.
3) Exempt Supplies: Transport services provided by a GTA, where the gross amount charged is less than Rs. 1,500 for a consignment in a single carriage or Rs 750 for a single consignee, inward supplies from unregistered dealers where the aggregate value does not exceed Rs. 5,000 in a day.
4) Zero Rate Supplies: Export of apparel to Germany, consultancy services provided to Company in USA.
Disclaimer: The contents of this article are solely for information and knowledge and does not constitute any professional advice or recommendation. Author does not accept any liability for any loss or damage of any kind arising out of this information set out in the article and any action taken based thereon.