Zero-rated refers to goods or services subject to a Value-Added Tax (VAT) or sales tax rate of 0%, meaning no tax is charged to the consumer at the point of sale. Unlike exempt items, businesses selling zero-rated products can still reclaim VAT paid on their own inputs. Common examples include basic food, children's clothing, and books.
Zero-rated VAT means certain goods and services are taxable at 0%, so customers do not have to pay any VAT on these items, but suppliers can still reclaim VAT paid on costs associated with providing them.
Almost all countries apply preferential rates to some goods and services, making them either “zero rated” or “exempt.” For a “zero-rated good,” the government doesn't tax its retail sale but allows credits for the value-added tax (VAT) paid on inputs. This reduces the price of a good.
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.
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.
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.
Currently, there are 21 food items in the zero-rated basket: brown bread, maize meal, rice, maize meal, vegetables, samp, fruit, mealie rice, vegetable oil, dried mealies, milk, dried beans, cultured milk, lentils, brown wheaten meal, pilchards/sardines in tins, eggs, milk powder, edible legumes, dairy powder blend and ...
According to section 16 of the Integrated Goods and Services Tax (IGST) Act, 2017, zero rated supply means any of the following supplies of goods or services or both: Export of goods or services or both; or. Supply of goods or services or both to a special Economic zone (SEZ) developer or an SEZ unit.
Zero-rating would include products that are supplied frozen that are later to be thawed and cooked (e.g. baked Alaska or thawed completely before eating e.g. cream, desserts that can be eaten straight from the freezer or left to thaw (so that this would exclude ice cream), toppings, sauces and syrups for serving on ice ...
For zero rating to be compulsory, the three criteria are… Both parties must be GST registered. The buyer must undertake that they will be using the property in a GST taxable activity. The buyer must undertake that the property will not be their principal place of residence.
Under California's net neutrality law, zero-rating and sponsored data programs violate the new law because certain content cannot be excluded from consumer data caps, or usage-based pricing.
List of exempted goods under GST in India:
Example: A local grocer sells a variety of fresh produce, including spinach, tomatoes, and apples. These items are zero-rated, allowing the grocer to claim input VAT on expenses like seeds and fertilizers, thereby keeping prices lower for consumers.
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.
– A zero-rated sale of service (by a VAT-registered person) is a taxable transaction for VAT purposes, but shall not result in any output tax. However, the input tax on purchases of services related to such zero- rated sale shall be available as tax credit or refund in accordance with these Regulations.
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.
Some common goods and services that are exempt from GST include fresh milk, essential food items, healthcare services, and educational services.
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.
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.
Examples of common zero-rated basic groceries include:
Fresh, frozen, canned, and vacuum-sealed fruits and vegetables. Breakfast cereals. Most milk products. Fresh meat, poultry, and fish.
The South African Poultry Association (SAPA) has submitted a formal request to National Treasury to remove the 15% value-added tax (VAT) from chicken, proposing that chicken be added to the list of zero-rated basic foodstuffs in the 2026 National Budget.
All unprocessed foods for human consumption, including raw meat and fish, fruit and vegetables, cereals, nuts, pulses and culinary herbs are zero rated.