What is Zero Rated Supply
In any country, the export of goods and services plays a major role in maintaining a country’s economic growth. Therefore, in order to boost the same, the government provides such businesses with certain reliefs and perks. One such relief provided in the Indian Taxation system, GST is Zero-Rated Supplies.
When is a Zero Rated Supply applicable
In India, GST is not applicable to any exports, which makes all the exports in India, Zero Rated Supplies. As per Section 16 of the IGST Act, zero-rated supply is applicable in case of following supplies of goods and services:
- Export of goods or services or both;
- Supply of goods or services or both to a Special Economic Zone (SEZ) developer
- Supply of goods or services or both to a Special Economic Zone (SEZ) unit.
Difference Between Exempted, Zero Rated, Nil Rated and Non-GST.
The Difference between exempted supplies, Zero-Rated Supplies, Nil Rated Supplies and Non-GST supplies are as follows:
- Exempted
Applicable for Good and services that come under basic essentials for living and are exempted under GST to attract any tax on their supplies in India. - Zero-Rated
Applicable on the supply of goods and services overseas and to Special Economic Zones and attract a GST of 0%. A registered exporter under GST can claim ITC available on such supply of goods and services - Nil Rated
Applicable on goods and services supplied within Indian boundaries and attract a GST of 0%. Input tax credit can be claimed on such supplies. - Non-GST
Supplies which don’t come under the scope of the GST are termed as Non-GST supplies. However, other tax can still be applicable to supply of such goods and services as per the jurisdiction of the state or the country.
GST Refund for Zero Rated Supply
The goods and services used by the supplier to produce zero-rated supply may not be exempted from any tax. Thus, the supplier shall be eligible to claim input tax credit in respect of such goods or services used for the supplies.
Under GST, a taxpayer can claim refund on account of ‘zero-rated’ supplies by going ahead with any of the following 2 options
- Export the goods or services without making payment of IGST under a bond/LUT and claim a refund of the accumulated ITC.
- Export the goods and services by paying IGST and claim a refund of the same.
Refund procedures for Export of goods
Under GST, the refund procedure for Zero-Rated Supplies does not require a filing of any refund application (GST RFD-01) separately. The registered supplier can use the shipping bill as a refund claim in itself.
As per the GST law, the shipping bill under consideration as a refund claim is required to fulfill the following two conditions:
- A person carrying the export goods should file an export manifest;
- Applicant should have filed his GSTR-3B returns appropriately.
Once the above two conditions are met, the refund process can be initiated by the department.
Refund procedures for Export of Services and Supplies to SEZ
The exporter can pay IGST and claim the refund under GST. In this case, the refund claim has to be filed in Form GST RFD-01. While filing for his/her refund claim, the exporter is also required to file the followings:
- A Statement containing Number and Date of Invoices;
- Bank Realisation Certificates / Foreign Inward Remittance Certificates
In case of SEZ supply, the exporter is required to file the following along with the refund claim:
- A Statement containing Number and Date of Invoices; and
- Proof of Receipt of goods or services which is authorised by the specified officer of SEZ
- Details of payment made
- The declaration that the SEZ or developer of SEZ has not claimed the input tax credit of the taxes paid by the supplier
- Provisional Refund
The exporters and suppliers of SEZ are entitled to a 90% refund on a provisional basis. The applicant shall be granted his/her provisional refund within 7 days of the refund claim and the same shall be credited directly to the applicant’s bank account. However, the exporter cannot avail his/her provisional refund if he/she has been prosecuted for any offence under the GST law or earlier law in the last 5 years.
Quick Notes
GSTN has plans to implement an automated process to get GST Refunds for zero-rated supplies, once these are implemented the revenue department gets
- Smarter – with faceless transaction process.
- Quicker – with reduced refund time.
- Safer – with the elimination of fake refunds.
How IRIS GST Software can help?
If you have filed your GST Returns properly and there are no errors in reconciliation, your GST Refunds are most likely to be processed smoothly.
IRIS GST Software can help you at every step of the way from invoice generation to GST return filing, have a seamless GST reconciliation, and claim maximum Input Tax Credit!
By leveraging IRIS GST Software and IRIS IRP, businesses can simplify data integration, save time, and enhance the accuracy of their returns plus maximize their ITC claim.
Embracing this smooth invoice data flow not only ensures compliance but also facilitates effective financial management and fosters a more transparent and streamlined tax environment.
For any queries or to book a demo, visit our website or write us a mail at support@irisgst.com.
