The primary difference is that zero-rated goods/services are taxable at a 0% rate, allowing businesses to claim Input Tax Credits (ITCs) on related expenses, whereas no GST (exempt) items are outside the scope of GST entirely, meaning no credits can be claimed. Zero-rated supplies are typically exports or essential items, while no-GST items are often financial services or residential rent.
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).
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.
Some supplies are exempt from the GST/HST – that is, no GST/HST applies to them. This means that you do not charge the GST/HST on these supplies of property and services, and you are generally not entitled to claim ITCs on property and services acquired to provide these supplies.
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.
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.
The GST/HST break includes certain qualifying goods, such as:
In India, failing to obtain GST registration when required can lead to severe penalties. According to Section 122 of the CGST Act, any taxable person who fails to register for GST must pay a penalty of ₹10,000 or the amount of tax evaded, whichever is higher.
Small businesses in Australia who turn over less than $75,000 per year don't have to pay GST. If you're a registered not-for-profit, you also don't have to pay GST as long as your turnover is less than $150,000. If you run a taxi service or are an uber driver, for example, you must always pay GST, regardless of income.
What is the difference between VAT-exempt and zero-rated? 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 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).
Non-GST Supply
Examples: Electricity, Diesel, Petrol and Alcohol for human consumption are some examples of Non GST supplies.
The GST exemption essentially allows the earmarking of transfers, made during lifetime or at death, that either skip a generation or are made in trust for multiple generations.
These include bank transfers between accounts, stamp duty, depreciation and salary/wages. These are purchases/sales that have a 0% GST rate. Examples include, purchasing items from overseas (exports); purchasing items from within Australia that are not subject to GST, eg. fresh food, some education.
Cereals, edible fruits and vegetables (not frozen or processed), edible roots and tubers, fish and meat (not packaged or processed), tender coconut, jaggery, tea leaves (not processed), coffee beans (not roasted), seeds, ginger, turmeric, betel leaves, papad, flour, curd, lassi, buttermilk, milk, and aquatic feeds, and ...
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.
Items designated as zero-rated can vary by country but typically include essential goods such as basic foodstuffs, prescription medications, and water services. Zero-rated goods are critical in international trade as they are not subject to VAT in cross-border transactions, lowering costs for importing and exporting.
Key items exempted from GST:
Registration under GST is a legal requirement for businesses. The CGST Act 2017 specifies minimum turnover criteria for registration (Rs 40 lakhs for goods and Rs 20 lakhs for services). Still, certain specific businesses are required to register under the GST, irrespective of their annual turnover.
Office supplies, equipment, rental costs, and professional services are examples of expenses on which input tax can be claimed. Further, input tax cannot be claimed on the following expenses: private use, non-business entertainment, and motor vehicle expenses.
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.
India's GST regime is undergoing a landmark transformation with the 56th GST Council meeting unveiling GST 2.0 - next-generation reforms simplifying tax slabs to 5%, 18%, and 40%. Effective from September 22, 2025, these reforms aim to ease compliance, boost consumption, and fuel economic growth.