There are different types of supplies like zero-rated supply, nil-rated supply, exempted supply, and Non-GST supply. The main purpose of this topic is to determine the difference between nil-rated and exempted.
Along with this in the article, we are discussing two types nil-rated supply and exempted supply and their differences. That’s why there are questions that arise that what actually is nil rated or exempted? So without further delay let’s start our topic.
Describe nil-rated or exempted
To identify the differences between both of them first we have to know that what is nil rated or exempted.
What is nil-rated?
Supply of wares or services or both on which 0% GST rate is applicable is called as nil-rated or also known as nil-rated supply. his means that these shipments have 0% GST.
Cereals, milk, jaggery, fresh fruits, vegetables, etc.
If any supply attracts a nil rate of tax via the exercise of powers of government by issuing an exception in the notification of section 11 CGST Act or section 6 of CGST Act, it will immerse for “exempt supply” but if it attracts nil rate without such an exempted notification, it will submerge for “nil-rated supply”. There are no tax breaks for inputs or services used to secure a nominal zero supply. if any GST is paid for services or wares or as we say both are used to deliver without a rated rate, that GST credit is not present for the registered agent. And a most interesting fact about nil-rated is that you can claim an (ITC) or input test credit.
Nil-rated supply under GST:
GST doesn’t define “nil-rated supply” but defines “exempt supply”.
Under Section 11 of CGST Act 2017:
Exempt supply is defined as:
Its means that wares and services are not related to tax associated with them and they are not taxed by ITC.
Live fish, curd, bread, unpacked food grains, etc.
Section 2(47) under IGST:
This section defines the vision of a tax-exempt delivery. Exempt supply is the lay on of any wares or services that have nil tax rate or full exempted tax under section 11 or 6 of the desegregated wares or services tax act IGST. Also includes an uncompressed power supply.
Types of GST exemptions:
There is a total of three types of exempt supply which are given below:
- Non-taxable supply.
- Benefits with zero tax rates.
- Exempted supplies under section 11 preclude IGST and in section 6 of the IGST Act.
Under section 7(2)(b) of the CGST Act, the transaction which is not in the consideration of a supply of goods or services are not liable under GST.
The following transactions are covered under the range of non-taxable supply:
- Petroleum crude
- Alcoholic liquor
- High-speed diesel
- Motor spirit
- Natural gas
- Benefits with zero tax rates.
The wares and services are payable or taxable but have a zero-tax rate. This means they don’t have to pay the taxes because they have 0%GST via notification of government under section 11 CGST Act or in section 6 of IGST Act.
Exempting supplies under section 11 precludes CGST and section 6 of the IGST Act:
This section includes non-taxable supply and exempted supply according to section 11 Tax-free offers are goods that are not payable under section 9 of the Goods and Services Tax Act. The government identifies goods or services that are wholly or partially excluded from the tax notice. This is true for all states, but they can fix it if they provide a reason along with it.
What is exempted?
Exempted supply means the supply of any goods or services which can attract the nil rates of a tax or may be completely excluded from tax.
An important aspect of exempted
The following points are very important for exempted supply:
- Tax on the goods and services for external suppliers is not levied.
- There is no charge or tax credit for input costs used to provide tax-exempt supplies, i.e., input tax is not withheld on exempt shipments• Individuals registered to provide tax-exempt wares or services, or both must issue a “delivery invoice” instead of an invoice tax.
According to section 18, the following supplies are specified for the purpose of exempted supply.
- A supply of financial services
- A dispense of kerosine oil
- A contribution of liquid propane gas
- A grant of liquid butane gas
- An impart of gasoline and diesel.
- international services availability.
- The provision of goods or assistance by a state or local authority that considers the goods or services to be nominal or not, in order to reimburse the value of said goods or services.
- Sources of all budget agency products listed in the Financial Management and Accountability Law Appendix, cap. 73:02 and government agencies performing regulatory functions.
- Provision of services in the country
- Storage of gold or rough diamonds in a country.
Differences between nil rated or exempted
The differences between nil rated or exempted are given below:
Supply that attracts 0% GST is known as nil-rated supply or the supply which enchant the nil-rate of taxable or exempt from paying special wares and services tax as required by government notice and includes tax-free supplies.
In nil-rated supply, GST is not applicable, and also GST is not present in exempted supply.
Availability of an input tax credit:
The input tax credit is not present on nil-rated neither on exempted supply.
Cover under GST Ambit:
Yes, nil-rated supply is undercover GST ambit but in exempted yes (for nil-rated and exempt supply) and NO (for non-taxable supply).
Types of supply:
In nil-rated supply, our daily basis items are included but exempted our basis essentials are included.
Eligibility for ITC:
They are both nil-rated and exempted are not entitled to ITC.
Examples of nil rates are grains, salt, brown sugar, etc. But supplies are provided on the condition that bread, fresh fruit, cottage cheese, etc.
So basically, we have discussed the difference between nil-rated or exempt, and also, we understand that what are these methods. So, I hope you can easily understand the article because this is a little tricky and sometimes people think they all are the same but that’s not true.