No, zero-rated and VAT exempt are not the same. While both mean the customer pays no VAT, the key difference is that zero-rated goods are still taxable (at 0%), allowing businesses to reclaim VAT on related purchases, whereas VAT-exempt goods are completely outside the VAT system, preventing input VAT recovery.
Zero-rated goods are not taxed during sale, but producers can claim a credit for the value-added tax paid on inputs. On the other hand, exempt goods are not taxed either, but producers cannot get a credit for the VAT paid on inputs.
For a “zero-rated good,” the government doesn't tax its sale but allows credits for the value-added tax paid on inputs. If a good or business is “exempt,” the government doesn't tax the sale of the good, but producers cannot claim a credit for the VAT they pay on inputs to produce it.
Zero-Rated Supplies: These goods and services are subject to a 0% GST/HST rate, meaning that businesses involved in providing these goods or services can still claim input tax credits (ITCs) on the GST/HST they paid related to those supplies. Exempt Supplies: These goods and services are not subject to GST/HST at all.
Some sales of goods and services are exempt from VAT . That means if you sell these goods and services you won't charge your customers any VAT, and if you buy them there will be no VAT to reclaim. If you make some exempt sales, you can't reclaim VAT on any costs you incur while making those sales.
To get the product VAT free your disability has to qualify. For VAT purposes, you're disabled or have a long-term illness if: you have a physical or mental impairment that affects your ability to carry out everyday activities, for example blindness. you have a condition that's treated as chronic sickness, like diabetes.
Zero-rated sales refer to transactions where goods are sold without any sales tax applied, effectively taxed at a rate of 0%. This means that while the items are technically taxable, the tax rate is zero. Common examples of zero-rated sales include basic groceries, prescription drugs, and certain medical devices.
Under Australian GST law some sales are GST-free. This term is generally the same as: zero rated (in other countries with VAT/GST systems) exempt (in countries with sales tax systems).
Zero-rated supplies are supplies that are not subject to GST in certain situations. A rate of 0% applies to these supplies. For example, a New Zealand architect designs a building to be constructed on an overseas property for an overseas client.
VAT (Value Added Tax) and GST (Goods and Services Tax) are both consumption taxes levied on the purchase of goods and services, typically at each stage of the supply chain. While they function similarly, their terminology varies depending on the country implementing them.
Zero rating makes the supplies cheaper as no tax is chargeable while input tax can be claimed. Registered taxpayers who sell zero-rated supplies are entitled to a refund of input tax paid. This helps in furtherance of business. Exempt supplies are not taxable and any related input tax is therefore not deductible.
Common Types of VAT Exempted Supplies
Value Added Tax (VAT) is a general consumption-based tax (also referred to as a “goods and services tax” or “consumption tax”) charged by a foreign country that is levied on purchases of goods or services within that foreign country. VAT exemption is a customer's ability to complete purchases without paying VAT.
How to apply
Common exempt items are insurance, Royal Mail postage services, rent (assuming no option to tax), education and vocational training supplied by recognised bodies, bank charges and interest, membership subscriptions to professional bodies.
Exempt items are different from zero-rated supplies. In both cases VAT is not added to the selling price, but zero-rated goods or services are taxable for VAT — at 0%.
See this list of the most common goods and services that are exempt from GST/HST. Zero-rated GST is a little different in that you do not collect GST on the supply of goods and services, but you can claim the GST paid on expenses in the business.
Under GST, supplies are categorized as zero-rated, nil-rated, or exempt-rated. Zero-rated supplies, like exports, are taxed at 0% with Input Tax Credit eligibility. Nil-rated supplies also have a 0% tax rate but no ITC, while exempt supplies are fully GST-free with no ITC.
VAT (Value Added Tax) and GST (Goods and Services Tax) are fundamentally the same type of consumption tax, levied on goods and services at each stage of the supply chain, but the terms are used in different countries and can have structural differences, with GST often being a unified, simpler system replacing multiple taxes (like VAT, sales tax, excise duty) into one, as seen in India and Canada. Both ensure the final consumer pays the tax, while businesses get credits for tax paid on inputs, but specific implementation, rates, and administration vary by country (e.g., EU uses VAT, India uses GST).
There is no VAT in the British Virgin Islands. There is no VAT in Brunei. The standard VAT rate is 20%. There is no VAT in the Cayman Islands.
GST Treatment: 'No GST' transactions are exempt from GST, while 'Zero-rated GST' transactions have GST applied at 0%. GST Returns: Zero-rated transactions must be included in your GST returns, while exempt transactions do not appear.
VAT distinguishes between zero-rated supplies (taxable supplies with a 0% VAT rate) and exempt supplies (not subject to VAT). Zero-rated supplies are still considered taxable supplies, allowing vendors to claim input tax deductions on related expenses and register as vendors, potentially resulting in VAT refunds.
VAT or Value Added Tax is a type of tax that is charged by the Central Government on the sale of services and goods to the consumers. VAT is paid by the producers of services and goods, but it is finally imposed on the consumers who purchase the services and goods when they pay for it.
Books and Booklets are zero-rated when it comes to VAT. However, if they are designed and printed to be written on then they are applicable for VAT. These include examples such as diaries, record books and calendars. More information on VAT can be found through the official HMRC website, here.