Nil-Rated vs Exempt vs Zero-Rated vs Non-GST Supply
Definition
Nil-rated supplies carry a 0% GST rate; exempt supplies are wholly exempted from GST; zero-rated supplies are exports and supplies to SEZs, where ITC is still allowed; non-GST supplies are items outside GST altogether, such as petrol and alcohol for human consumption.
| Term | Nil-rated, exempt, zero-rated and non-GST supply |
|---|---|
| In Hindi | शून्य दर, छूट, शून्य-रेटेड और गैर-GST आपूर्ति |
| Area | GST & tax |
| Search phrase | nil rated exempt and non-GST supply |
| Try it | Bill of supply |
शून्य दर, छूट, शून्य-रेटेड और गैर-GST आपूर्ति — हिंदी में अर्थ
शून्य दर वाली आपूर्ति पर GST दर 0% है; छूट वाली आपूर्ति GST से पूरी तरह मुक्त है; शून्य-रेटेड आपूर्ति निर्यात और SEZ को आपूर्ति है जिसमें ITC मिलता है; गैर-GST आपूर्ति GST के दायरे से बाहर है, जैसे पेट्रोल और मानव उपभोग की शराब।
Effect on input tax credit
Nil-rated and exempt supplies both count as 'exempt supply' under the CGST Act, and ITC on inputs used for them is not allowed — common credits must be reversed proportionately under Rules 42 and 43. Non-GST supplies are also treated as exempt for this purpose.
Zero-rated supplies are different: exports and supplies to SEZ units or developers keep full ITC. The supplier either exports under LUT without paying IGST and claims a refund of accumulated ITC, or pays IGST and claims a refund of that IGST.
Where to report them
GSTR-1: nil-rated, exempt and non-GST outward supplies go in Table 8; exports and SEZ supplies in Table 6. GSTR-3B: zero-rated in 3.1(b), nil-rated and exempt in 3.1(c), non-GST in 3.1(e). Inward supplies from composition, exempt, nil-rated and non-GST suppliers go in Table 5 of GSTR-3B.
Example
A Rajkot pump maker sells pumps in India at 18% (taxable), exports a ₹25 lakh shipment under LUT (zero-rated, ITC refundable) and buys diesel for its generator (non-GST — no GST charged, so no ITC).
Related tools and guides
Frequently asked questions
What is the difference between nil-rated and exempt supply?
Nil-rated goods carry a 0% rate in the rate schedule; exempt goods are exempted by notification. In effect both charge no tax and allow no ITC.
What is a zero-rated supply?
Exports and supplies to SEZs. No tax is effectively borne, and ITC on inputs is allowed or refunded.
Which goods are non-GST supplies?
Alcoholic liquor for human consumption and five petroleum products: crude, petrol, high-speed diesel, natural gas and aviation turbine fuel.
Is an invoice needed for exempt supplies?
A bill of supply is issued instead of a tax invoice.
Related terms
- Bill of supplyA bill of supply is the GST document issued instead of a tax invoice when no tax can be charged — by a composition taxpayer, or by a registered person supplying exempt goods or services. It shows no GST amount.
- Blocked credit under GST (Section 17(5))Blocked credit is GST paid on purchases that cannot be claimed as input tax credit even when used in business, because section 17(5) of the CGST Act specifically disallows it — such as food, most passenger cars and construction of buildings.
- Composition scheme (GST)The composition scheme is an optional, simpler GST scheme for small taxpayers: they pay tax at a low fixed percentage of turnover, file quarterly, but cannot charge GST on their invoices or claim input tax credit.
- GST registration limitA business must register under GST once its aggregate turnover in a financial year crosses ₹40 lakh if it supplies only goods, or ₹20 lakh if it supplies services — with lower limits in some special-category states — or earlier if it falls in a compulsory registration category.
- GSTR-1 vs GSTR-3BGSTR-1 is the return of outward supplies — invoice-wise details of sales. GSTR-3B is the summary return in which tax is actually paid and input tax credit claimed. Both are filed by regular GST taxpayers.
- ITC reversal under GSTITC reversal means paying back input tax credit already claimed, or not claiming it, when the conditions for credit are not met — for example the supplier is not paid within 180 days, or inputs are used for exempt supplies.