Glossary
What is a zero-rated supply?
Exports and supplies to SEZs: no GST on the sale, and unlike exempt sales, the credit on your inputs survives.
Updated
In short
A zero-rated supply is an export or a supply to an SEZ, taxed at nil while the supplier keeps its input tax credit. SimpleERP bills overseas customers with no tax and keeps your purchase ITC.
A zero-rated supply under GST is an export of goods or services, or a supply to a Special Economic Zone unit or developer. No tax is finally borne on it, yet the supplier may still claim input tax credit on the purchases used to make it. The supplier either exports under an LUT without paying IGST and claims a refund of unused credit, or pays IGST and claims that refund.
Zero-rated supply: a worked example
In one month Lakshmi Steel Furnitures buys steel worth ₹1,00,000 plus ₹18,000 GST from Tamil Nadu Steels and uses it all for an export under LUT.
| Zero-rated export | Exempt supply | |
|---|---|---|
| GST charged on the sale | Nil | Nil |
| ITC of ₹18,000 on inputs | Kept, refundable | Not allowed, reversed |
| Cost of inputs to the business | ₹1,00,000 | ₹1,18,000 |
FAQ
Questions, answered
What is the difference between zero-rated and exempt?
Both carry no GST on the sale. A zero-rated supply keeps the input tax credit on the purchases behind it, which can be refunded. An exempt supply does not; the credit on its inputs must be reversed, so the tax becomes part of your cost.
Is a supply to an SEZ zero-rated?
A supply to an SEZ unit or developer for authorised operations is zero-rated, as notified, even though the SEZ may be in your own state. Such a supply is billed either under LUT with no tax or with IGST, not CGST and SGST.
How do I get the refund of unused credit?
File a refund application on the GST portal for the period, with the export or SEZ supply details. For goods exported on payment of IGST, the shipping bill itself is treated as the refund claim, as notified. Your accountant usually handles this.
Does SimpleERP handle deemed exports?
SimpleERP has no deemed-export document type. Bill a deemed export as a normal tax invoice at the applicable rate, and keep the supporting documents for the refund claim outside the system.
Related
Keep reading
LUT (Letter of Undertaking)
A declaration filed in Form GST RFD-11 that allows exports and SEZ supplies without payment of IGST.
Read moreExempt supply
A supply that attracts a nil rate, is wholly exempt by notification, or is outside GST, with no input tax credit.
Read moreInput tax credit (ITC)
The GST paid on purchases that a business sets off against the GST it collects on sales.
Read more
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