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Difference Between Exempt, Non GST, Nil Rated Supplies
Difference Between Exempt, Non GST, Nil Rated Supplies
GST law is prominently based on the concept of supplies. The type of supplies you
made decides your GST liabilities. Thus, it becomes important to classify the correct
supplies. Supply in common sense means anything be it either goods or services
that you offer. There are tons of different goods and services that are being rendered
or offered across the country. Some of them are necessity items or life-saving items
or luxury items or we can say FMCG and so on. So, it does not justify charging the
same rate of tax to each good and service. And that is why the GST act has
classified and differentiate these goods and services into 4 major categories namely
EXEMPT SUPPLIES, NON-GST SUPPLIES, NIL RATED SUPPLIES, ZERO
RATED and the rest are TAXABLE supplies.
Let us discuss the basic difference amongst the above-mentioned different kinds of
classification.
1) Exempt Supplies:
Section 2(47) of CGST act defies exempt supplies as a supply of any goods or
services or both which attracts nil rate of tax or which may be wholly exempt from tax
under section 11, or under section 6 of the Integrated Goods and Services Tax Act,
and includes the non-taxable supply.
The most important aspect of EXEMPT supplies to be kept in mind is that while
counting the total aggregate turnover, a taxpayer must include the value of Exempt
supplies. Say for example: If I am providing various kinds of services out of which few
are fully taxable whereas others are exempt. So, while counting total turnover, I am
supposed to include the value of both the exempt as well as taxable supplies.
When the government thinks it is necessary for the public interest or in trade interest
to do so, they may exempt certain goods or services from paying tax by issuing
notification in an official gazette.
The complete list of goods which are marked as EXEMPT SUPPLIES is here. (Click
on the link)
Another important aspect to be kept in mind is that when you cannot charge GST on
the exempt supplies, you are also not eligible to take ITC on the exempt supplies. If
you supply both exempt as well as dutiable goods/services, then you must
proportionately claim ITC of dutiable goods/services.
Nil-rated supplies have not been defied under the GST act but as common parlance,
we can say that these are those services that have been given a “0” rate of tax under
the GST tariff. For example Salt, all kinds of natural grains, jiggery, etc.
NON-GST supplies have not been defined under the GST Act, but these those
supplies which are neither good nor services. They do not fall under the ambit of
either goods or services. GST act has specified SCHEDULE-III containing such
supplies which are neither good nor services.
2. Services by any court or Tribunal established under any law for the time being in
force.
3.
(b) the duties performed by any person who holds any post in pursuance of
the provisions of the Constitution in that capacity; or
5. Sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of the
building.
Zero-rated supplies are generally EXPORTS or supplies which are made to Special
Economic Zones or SEZ Developers.
The taxpayer exclusively doing exports without payment of tax (under LUT) can get
the refund of ITC on 0 rated supplies. If the taxpayer is engaged in local sales as
well as exports then, in that case, they can get a refund of ITC proportionately.
5) Taxable Supplies
Taxable supplies simply mean the supply of goods or services or both which is
liveable to tax under this Act. GST tax rates are specified for each good or service
under the GST tariff. The taxpayer is required to identify the correct rate for goods or
services they are rendering to discharge their liability appropriately.
Conclusion: