Difference Between Nil Rated and Zero Rated, Non-taxable and Exempt Supplies

Under GST, 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 from the table below:

Nil rate supplies

Non-taxable supplies

Exempt supplies

Zero 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.

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.

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, the Department requires a bifurcation between nil rate, non-taxable and exempt supplies. Here, exempt supplies refer to supplies declared as exempt from tax by issue of a notification.

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
Note that here, tax is not charged owing to the nature of supply, 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

No ITC

No ITC

No ITC

ITC can be claimed.

Examples

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

Supply of alcohol for human consumption, petroleum products, electricity

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

Export of apparel to Sri Lanka, consultancy services provided to firm in Malaysia

Hence, whether it is the difference between nil rated and zero rated supplies, or the difference between nil rated and exempted goods, or the difference between zero rated and exempt – we can be reasonably clear that all these are supplies where GST is not charged on the supply. However, the reason why GST is not charged in each of these cases is different. 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.