Zero rated supply
Meaning [section 16]:
“zero rated supply” means any of the following supplies of goods or services or both, namely:––
- Export of goods or services or both; or
- Supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.
Whether registration is required for making zero rated supply
As per section 23 following persons are not liable to obtain registration:
- Any person engaged exclusively in the business of supplying goods or services or both that are:
- not liable to tax or
- wholly exempt from tax under CGST / SGST;
- An agriculturist, to the extent of supply of produce out of cultivation of land.
Since, in the above definition zero rated suppliers are not specifically included and hence such suppliers are required to take registration.
Since GST is destination based consumption tax hence tax is payable at the state where goods and / or services are actually consumed. Applying this logic on the above supplies, tax shall be attributable outside India.
Input tax credit:
- ITC is specifically allowed: credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply.
- General disallowance of ITC: input tax credit shall not be available for the items mentioned under section 17(5)
Manner of claiming refund of accumulated ITC:
- Zero rated without payment of tax: He may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or
- Zero rated with payment of tax: He may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made there under.
Apportionment of credit and blocked credits
Where the goods or services or both are used by the registered person partly for effecting taxable supplies including zero-rated supplies under this Act or under the Integrated Goods and Services Tax Act and partly for effecting exempt supplies under the said Acts, the amount of credit shall be restricted to so much of the input tax as is attributable to the said taxable supplies including zero-rated supplies.
Cases where refund of ITC claimed will not be credited to fund but paid to registered claimant:
Refund of ITC claimed to be refunded shall be allowed in the following cases:
- zero rated supplies made without payment of tax;
- where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council: