ZERO RATED SUPPLY

WHAT IS ZERO RATED SUPPLY

Zero-Rated Supply means goods and services sold by the companies are free from Goods and Services Tax (GST). No GST will be charged on these goods & services. For company and business, GST paid on the assets, purchases or expenses for their businesses can be claimed as Input Tax Credit.

Refund of Zero Rated Supplies in GST

The suppliers making Zero-rated supplies are entitled to claim refunds. The refunds are for the input tax paid on the goods and services which are used for such Zero-rated supplies (including non-taxable and exempt supplies). For example:- An exporter supplies shoes to Dubai and uses soles in the production of such shoes. The exporter has an option of claiming Input tax credit of GST paid on the purchase of soles. There are two options available with a dealer to claim refunds: I. The dealer can export under Bond or LUT (Letter of Undertaking) and claim a refund of the accumulated Input credit of tax; or II. The dealer can pay IGST while making the supplies and claim refund of the same. Therefore, the dealers are provided with a flexibility to choose between any two options as per their convenience.

Refund procedures for Export of goods

Under GST laws, the process of claiming refund has been made easy for the export dealers. For Zero-Rated Supplies, there is no need to file refund application (GST RFD-01) separately. The shipping bill filed by the exporter is a refund claim in itself. The law specifies that shipping bill is to be considered as a refund claim on satisfying following two conditions: I. A person carrying the export goods should file an export manifest; and II. Applicant should have filed the returns GSTR-3 or GSTR-3B appropriately. Once the above two documents are filed appropriately, the refund is processed by the department.

Refund procedures for Export of Services and Supplies to SEZ

The option to pay IGST and claim a refund is always available. In this case, the refund claim has to be filed in Form GST RFD-01. For exporters of services, the following are also required to be filed along with the refund claim: I. A Statement containing Number and Date of Invoices; and II. Bank Realisation Certificates / Foreign Inward Remittance Certificates The supplier of goods or services to an SEZ are required to file the following along with the refund claim: I. A Statement containing Number and Date of Invoices; and II. Proof of Receipt of goods or services which is authorised by the specified officer of SEZ III. Details of payment made IV. The declaration that the SEZ or developer of SEZ has not claimed the input tax credit of the taxes paid by the supplier

Provisional Refund

The exporters and suppliers of SEZ are entitled to a 90% refund on a provisional basis. Provisional refund is granted within seven (7) days of the refund claim. The amount of provisional refund is credited directly to the claimant’s bank account. There is a condition attached to provisional refunds. The provisional refund is not granted if the applicant has been prosecuted for any offense under the GST law or earlier law within past five (5) years. The amount of tax evaded in such prosecution shall be more than Rupees Two Hundred and Fifty Lakhs (Rs. 2.5 Crores).

WHAT IS NIL RATED SUPPLY

Supply of goods or services or both on which nil or 0% GST rate is applicable are called NIL rated supply. ... In other words, if any GST is paid on the goods or services or both used in providing nil rated supply then such GST credit is not available to the registered dealer.

WHAT IS EXEMPT SUPPLY

Exempt supply refers to goods and services that are not subject to Goods and Services Tax (GST). No GST is levied on such supplies, and businesses dealing in exempt goods or services cannot claim Input Tax Credit (ITC) on the GST paid for their purchases, assets, or expenses. To learn more, visit our detailed guide on Exempt Supplies under GST