We have come too far from the date of applicability of GST law. Inspite of this there are lot of issues/ matters which are unanswered. One of these are the differences between Exempt and Nil rated Supplies and Non GST and Non Taxable Supplies due to missing the definitions of certain supplies in the Law. Through this article I have tried to find out the meaning and differences the terms used above.
We are required to understand the meaning and difference because there is reporting requirement of these supplies in GSTR-1, 2, 3 & 3B. Further aggregate turnover consider Exempt Supply for the purpose of calculating threshold limit for registration but does not consider Non –GST Supply and after this we are also required to reverse input tax credit on inward supply which are used for exempt outward supply as per Rule 42 of CGST Rule, 2017. So it is very important to understand the basic differences between these supplies precisely.
Non taxable Vs Non GST Supplies-
Section 2(78) of the Act has defined the term Non Taxable Supply as hereunder-
“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 & Services Tax Act.
So there should be a supply first for an activity or transaction. If an activity or transaction falls outside the scope of supply then it cannot be said as a non taxable supply. The definition of supply has been given in section 7 of the Act and it is an inclusive definition which covers almost every transaction of goods and services unless specially excluded under schedule III. So the activities and transactions specified in Schedule III are not supply. As it is not supply so it cannot be said as non taxable supply but can be said as Non-GST Supply (discussed in later para).
Non Taxable Supply is supply under section 7 of the act which is not chargeable to tax due to excluded by charging section i.e by section 9 of the Act. Hence supply of alcoholic liquor for human consumption, petroleum crude, high speed diesel, motor spirit, natural gases and aviation turbine fuel is a non taxable supply.
The term Non-GST supply is nowhere defined in the Act and activities and transaction specified in schedule III is not a non taxable supply as discussed above so we can report it as Non GST supply. So we can conclude NON GST supply as activity and transition which are not supply in GST and there is only schedule III or activity or transactions undertaken by Government and local authority as public authorities which are not supply.
Exempt vs. Nil rated supply-
Exempt supply is defined under section 2(47) of the CGST Act, 2017 (hereinafter referred as “The Act”) as reproduced below-
Exempt Supply means supply of any goods or services or both which attracts nil rated of tax or which may be wholly exempt under section 11, or under section 6 of the Integrated Goods and Services Tax Act, and includes Non- Taxable supply.
Notification No. 02/2017- Central Tax (Rate) for goods and Notification No. 12/2017- Central Tax (Rate) for services have been issued by using power given under section 11 of CGST ACT. So goods and services mentioned in these two notifications are exempted goods as per definition of exempt supply.
Nil rated supply is nowhere defined in GST Law. The basic difference between nil rated and exempt supply is that the tariff is higher than 0% in case of exempt supply. But there is no tax payable due to exemption notification. Whereas in case of NIL rated supply, the tariff is at NIL rate so there is no tax without the exemption notification.
The rates of goods are notified under section 9(1) vide Notification No. 01/2017- Central Tax (Rate) which contains six schedules specifying tax rates at 2.5%, 6%, 9%, 14%, 1.5% and 0.125%. There is no schedule levying tax at 0% i.e. NIL rated.
In case of services, there is only one service which is notified as Nil rated in Notification No. 11/2017- Central Tax (Rate) at S.No. 24 i.e Support services to agriculture, forestry, fishing and animal husbandry.
(Author can be reached at akgupta487@gmail.com)
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sir
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