Nil-rated, zero-rated, and non-GST supplies differ primarily in their GST rate application, Input Tax Credit (ITC) eligibility, and tax jurisdiction. Zero-rated supplies (exports) have 0% GST and allow full ITC. Nil-rated supplies (e.g., grains) attract 0% GST but no ITC. Non-GST supplies are outside the GST law (e.g., alcohol).
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.
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.
Non-GST Supply means supply of goods or services or both which is not leviable to tax under GST. Therefore these will be shown by you as your inward Non GST supply if you are availing theses supplies. No input tax credit is available in case of non-GST supplies.
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).
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.
Sales that do not include GST in their price are known as GST-free sales. In contrast, sales that have GST included in their price are known as 'taxable sales'. Examples of items that are GST-free include: basic food, such as fruits, vegetables, meat, fish and eggs.
Types of Supplies
The GST/HST break includes certain qualifying goods, such as:
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.
Thus users of zero-rated services might benefit from its introduction, while non-users may find that their prices rise or download limits fall. The introduction of zero rating may also involve upselling as the ISP could limit zero- rated offers to more expensive plans.
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.
Exempt supplies are goods and services which are not subject to GST. You do not include these supplies in your GST return.
For GST tax purposes, a trust will be either a GST exempt trust (meaning the trust has an inclusion ratio of zero), a GST non-exempt trust (meaning the trust has an inclusion ratio of one), or a mixed inclusion ratio trust (meaning the trust has an inclusion ratio greater than zero and less than one).
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.
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.
The GST Council, a constitutional body, oversees the GST regime. They make key decisions on tax rates, exemptions, and policies. Furthermore, the CGST Act and IGST Act provide the legal foundation for GST implementation.
GST-Free Items:
Types of GST in India
CGST (Central Goods and Services Tax) SGST (State Goods and Services. IGST (Integrated Goods and Services Tax) UTGST (Union Territory Goods and Services Tax)
Key items exempted from GST:
Prepared foods and snacks: Vegetable trays, pre-made meals, salads, sandwiches, chips, candy, granola bars, etc. Dining: Restaurant meals (dine-in, takeout, or delivery). Beverages: Beer, wine, cider, and sake.
To summarise, zero-rated supply is a type of GST supply where the GST rate applicable is 0%, but the supplier can still claim the input tax credit. Nil-rated supply is a type of GST supply where the GST rate is also 0%, but the supplier cannot claim the input tax credit.