Difference b/w Nil Rated, Zero Rated, Exempt and Non Taxable Supplies.

Under GST, there is a lot needs to discuss about the difference between nil rated and zero rated supplies, as well as the difference between non-taxable and exempt supplies. Even GST is not charged on all these supply, it is important to know the real difference between these supplies. In GST returns, a full bifurcation of the value of each of these supplies is required to be furnished.


Let us see in detailed...


A) Nil rate supplies

Meaning: 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.

Availability of input tax credit: No ITC

Examples: Supply of handloom, cereals, accommodation in hotel with tariff below Rs. 1,000 per day.


B) Non-taxable supplies Meaning: 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. Availability of input tax credit: No ITC

Examples: Supply of alcohol, petroleum products, electricity

C) Exempt supplies Meaning: By definition, exempt suppy 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.

However, in GST Returns, requires a bifurcation between nil rate, non-taxable and exempt supplies. Hence, exempt supplies refer to supplies declared as exempt from tax by issue of a notification.

Availability of input tax credit: No ITC

Examples: 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.


D) Zero rate supplies Any goods or services supplied in the course of the following is a zero rated supply under GST:

a. Export or

b. Supplies to Special Economic Zones (SEZ) or SEZ developers


Tax is not charged, regardless of the goods or services supplied.


Note: For persons making a zero rated supply under GST, 2 options have been given:

  • Supply goods or services under bond or Letter of Undertaking, without payment of tax and claim refund of unutilised input tax credit, or

  • Supply goods or services with payment of tax and claim input tax credit

Availability of input tax credit: ITC can be claimed

Examples: Export of goods to USA, software consultancy services provided to apple ltd in Canada.

Hence, we can be reasonably clear that all these are supplies where GST is not charged. It is important to know the difference between these types of supplies, especially for the purpose of filing GST Returns and accurate claim of ITC.

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