ZERO RATED SUPPLY IGST Act

ZERO RATED SUPPLY IGST Act

16. (1) “zero rated supply” means any of the following supplies of goods or services or both, namely:––

1. export of goods or services or both; or
2. supply of goods or services or both to a Special Economic Zone developer (SEZ) or a Special Economic Zone unit (SEZU).

16 (2) Subject to the provisions of section 17 (5) of the CGST Act, credit of input tax (ITC) may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply.

 Note: Section 17 (5) is for blocked credit/in-elegible credit which will not be refundable against zero rated supply

16 (3) A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely:––

(a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or

(Note: LUT can be applied online from GST portal)

(b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder.

CGST Act

54. (1) Any person claiming refund of any tax and interest, if any, paid on such tax or any other amount paid by him, may make an application before the expiry of two years from the relevant date in such form and manner as may be prescribed:

54 (3) Subject to the provisions of sub-section (10), a registered person may claim refund of any unutilised input tax credit at the end of any tax period:

Provided that no refund of unutilised input tax credit shall be allowed in cases other than––

1. zero rated supplies made without payment of tax;
2. where the credit has accumulated on account of rate of tax on inputs being higher than the rate of tax on output supplies (other than nil rated or fully exempt supplies), except supplies of goods or services or both as may be notified by the Government on the recommendations of the Council:

Provided further that no refund of unutilised input tax credit shall be allowed in cases where the goods exported out of India are subjected to export duty:

Provided also that no refund of input tax credit shall be allowed, if the supplier of goods or services or both avails of drawback in respect of central tax or claims refund of the integrated tax paid on such supplies.