Definition of Nil Rated, Exempted, Zero rated and Non-GST Supply under GST with Examples and Analysis

Goods and Services have been classified into : Taxable supply, Nil-rated supply, Exempted supply, Zero-rated supply and Non-gst supply. It is very important to understand the differences between these supplies especially for the purpose of charging tax and claiming ITC.

1. Nil-Rated Supply : Supply of goods or services on which GST rate of 0% (zero percent) is applicable are called NiL rated supply. Nil rated today may become charged at a higher tax rate in the future.

For example : cereals, fresh fruits, and vegetables, salt, natural honey, milk, human blood etc.

ITC used in providing supplies attracting Nil rate is not available i.e. no input tax credit on Nil rated supplies.

[ वैसी Goods/Services जिनपे GST का Tax-rate 0% ( जीरो परसेंट ) है , उनको Nil Rated Supply बोला जाता है I Nil Rated items के rates को भविष्य में बढाया भी जा सकता है ]

2. Exempt Supply : Goods and services which are wholly exempt from GST (say free from GST) are termed as Exempt supplies. It aslo includes Nil-rated supply. [No GST is charged on exempted supplies].

For example : Live Fish, Fresh Milk & fruits, unpacked food grains, fresh vegetables, Curd, Bread etc.

ITC used in providing exempted supply is not available i.e. no input tax credit on exempted supplies.

A registered person supplying only exempted goods or services shall issue ‘bill of supply’ instead of tax invoice.

[ वैसी Goods/Services जिनपे GST Act लागू होता है लेकिन इनको GST में Tax से Exempt किया गया है ( क्योंकि ये Essential items होते है), उनको Exempt supply बोला जाता है ]

3. Zero-rated supply : 

     (a) Export of goods and services (Supply outside india).

     (b) Supplies made to SEZ (Special Economic Zone) units or SEZ developers (Supply within india).

ITC used in providing zero-rated supply is available and it would be refunded if supplies are made without payment of taxes (i.e. un-utilised ITC would be refunded).

Taxes paid on the supplies which are zero rated are refunded.

[ अगर आप अपने देश से बाहर Goods/Services supply कर रहे है मतलब की निर्यात कर रहे है या

अपने देश के अन्दर किसी SEZ unit या SEZ Developer को supply कर रहे है, तो उसे Zero-rated supply बोला जाता है ]

4. Non-gst Supply : Supply of goods or services or both which are outside the purview of GST Act. In other words, they are not taxable under the GST Act and may be chargeable to tax under any local sales tax law or any other act.

For example : Electricity, Diesel, Petrol and Alcohol for human consumption.

[ वैसी Goods/Services जिनपे GST Act लागू ही नहीं होता है, इन Goods/Services पर अभी भी VAT या अन्य Stat-Laws लागू होते है उन्हें NON-Gst supply बोला जाता है ]

For your understanding :

A special economic zone (SEZ) is a dedicated zone wherein businesses enjoy simpler tax and easier legal compliances. SEZs are located within a country’s national borders. However, they are treated as a foreign territory for tax purposes. This is why the supply from and to special economic zones have a little different treatment than the regular supplies. 

Based of this it can be clearly said that under GST, any supply to or by a Special Economic Zone developer or Special Economic Zone unit is considered to be an Inter-state supply and Integrated Goods and Service tax (IGST) will be applicable .

[ SEZ सरकार द्वारा अधिसूचित (Notified) एक क्षेत्र (Area) होता है और उस क्षेत्र में अगर कोई अपना Business start करता है तो उसको विभिन्न प्रकार की सुविधायें दी जाती है, जैसे – बहुत कम टैक्स लिया जाता है, नियम-कानून में बहुत सी छूट दी जाती है, आसान शर्ते होती है, इत्यादीI

ये SEZ हमारे देश के अन्दर से होते है लेकिन देश के क्षेत्र से बाहर माना जाता है ताकि इनको Tax की छूट दी जा सके (जैसे की Export के case में हमारे Tax का Refund आ जाता है) I SEZ से ली गई या SEZ को दी गयी Supply को Inter-State supply मन जाता है और इन पर IGST लगाया जाता है ]