Question

Q. Which of the following is incorrect with reference to the Zero-rated supplies under GST?

• A. Goods and Services which are exported are part of it.
• B. Zero-rated supplies are eligible for the input tax credit.
• C. They fall under the category of Exempt supplies which are exempt from GST
• D. None of the above

Answer 1

The correct option is C They fall under the category of Exempt supplies which are exempt from GST

Explanation:

• By zero-rating it is meant that the entire value chain of the supply is exempt from tax. As per the GST law, Zero-rated supply means any of the following supplies of goods or services or both, namely: –– a) export of goods or services or both; or b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.
• The concept of zero-rating of supplies requires the supplies as well as the inputs or input services used in supplying the supplies to be free of GST. Hence, Input Tax Credit is allowed on zero-rated supplies.
• However, the exempt supplies and Zero-rated supplies are not the same. Exempt supply means a supply of any goods or services or both which attracts a nil rate of tax or which may be wholly exempt from tax. There is No ITC on the exempted supplies I.e the input supplies used for making exempt supplies can be taxed.