Nil-rated supplies under GST are goods or services taxed at a 0% rate, typically covering essential items like grains, salt, and jaggery. Unlike zero-rated supplies, suppliers of nil-rated goods cannot claim Input Tax Credit (ITC) on inputs used. They must be reported in GSTR-1, but no tax is collected.
Some items which are nil rated include grains, salt, jaggery, etc. This supply includes items which are used for everyday purposes. Since they are basic essentials, they do not attract any GST at all.
As discussed above, a NIL Rated supply of goods or services means the supply of the same is leviable to #GST but the tax payable shall be NIL. Such a supply is covered under 'exempt supply' and no 'input tax credit' can be availed by a supplier of 'NIL Rated' supply.
The following goods and services are zero-rated:
Zero-rated supplies are subject to a GST rate of 0%. A person who makes zero-rated supplies is always in a favourable GST position. They charge 0% GST on supplies but can obtain a refund for GST paid on relevant inputs. This is different from GST exempt suppliers who cannot charge GST or claim an input deduction.
The GST/HST break includes certain qualifying goods, such as:
Exempt supplies under GST include nil-rated supplies, supplies wholly or partially exempted by government notification, and non-taxable supplies like alcoholic liquor for human consumption. Exempt goods and services do not attract GST, and input tax credit (ITC) for such supplies cannot be claimed or utilized.
There are only minimal items which are not reportable for GST purposes. These include bank transfers between accounts, stamp duty, depreciation and salary/wages. These are purchases/sales that have a 0% GST rate.
GST on pencils, sharpeners, crayons, exercise books, graph books, maps, and charts has been reduced from 12% to Nil. GST on erasers has been reduced from 5% to Nil. This reduction will make basic learning tools cheaper, especially for government schools, children and youth in rural areas.
The taxation of exempt goods and services are similar to zero-rated goods and service in that they are not taxed. The difference between the two is that input tax credits are not allowed for expenditures incurred to make or provide the goods and/or services.
It is mandatory for every registered taxpayer to file nil GST return even when he has no transaction for that particular period. Further, non-filing of returns will attract penalty for the taxpayer.
To file a nil Form GSTR-1, perform the following steps:
Personal consumption: Dairy products used for personal use are not eligible for Input Tax Credit. Exempt supplies: No ITC can be claimed on goods like fresh milk, which are classified as exempt or non-taxable under GST.
GST-Free Items:
Common examples of nil rated supplies include essential commodities like grains, salt, and jaggery. When reporting nil rated supplies in GST returns, businesses must include them in their GSTR-1 under the appropriate section but without any tax liability.
supply of goods or services or both which is not leviable to tax under the CGST or IGST Act. Examples could be transactions in money, supply of liquor or narcotic substances, specified 5 petroleum products: crude petroleum, petrol, diesel, aviation turbine fuel, and natural gas.
By zero rating it is meant that the entire value chain of the supply is exempt from tax. This means that in case of zero rating, not only is the output exempt from payment of tax, there is no bar on taking/availing credit of taxes paid on the input side for making/providing the output supply.
Fresh fruits, fresh milk, curd, bread, etc. Exports and supplies made to SEZ units or SEZ developers, of both goods and services. Grains, salt, jaggery, etc. Alcohol used for human consumption, natural gas, petrol and its products, etc.
Common examples of zero-rated sales include basic groceries, prescription drugs, and certain medical devices. Understanding zero-rated sales is essential for both consumers and businesses, as it affects pricing and tax obligations.
Supplies that have a declared rate of 0% GST. Example: Salt, grains, jaggery etc. Supplies are taxable but do not attract GST, for which ITC cannot be claimed. Example: Fresh milk, Fresh fruits, Curd, Bread etc.