Zero-Rated Supply means goods and services sold by the corporations are free from Goods and Services Tax (GST). No GST is leviable on such goods & services provided during the year.
Any supplies made by a registered person as an export (both goods or services) or supply to an SEZ qualifies for Zero Rated Supplies in GST. The rate of tax is ‘Zero’ or we can say the supplies are tax-free.
The supplies to a SEZ is also covered under Zero-Rated Supplies in GST as no GST is levied on these supplies as well.
For corporation and business, supplying zero rated supply, GST paid on the assets, purchases or expenses for the business purpose can be claimed as Input Tax Credit under GST regime.
Furthermore, the entities running their business under the list of Zero-Rated Supply and do not have annual sales of more than 500,000, they are still entitled to register with Customs Department and claim the GST paid.
As per section 16 (1) of Central Goods and Services Act, 2017, following supplies are considered as Zero rated supply:
Export of goods or services or both;
Supply of goods/services or both to a Special Economic Zone (SEZ) developer or a Special Economic Zone unit.
List of Zero-Rated Supplies
Agricultural products such as paddy, fresh or chilled vegetables, certain conditionally conserved vegetables.
Essential food stuff such as oils, salt, flour, etc.
Livestocks and livestock supplies or poultry such as live animals and unprocessed meat.
Eggs.
Fish such as live, fresh, frozen and dried.
Use of first 200 units of electricity for domestic purporse.
Water for domestic users.
Goods supplied to designated areas from Malaysia such as Labuan, Langkawi & Tioman.
Exported goods.
Exported services like architecture services related with land outside Malaysia.
Services in Malaysia for example, pilotage, salvage or towage services.
Take Input Tax Credit for Zero rated supplies
Input tax credit is available on inputs and input services to make Zero rated supplies subject to the provisions of sub-section (5) of section 17 of CGST Act.
Claim Refund for Zero rated supplies
The registered person making zero rated supply can claim refund under either of the following options, in accordance with the provisions of section 54 of CGST Act:
Supplies without payment of IGST under Bond/Letter of Undertaking such as claim refund of un-utilized input tax credit
Supplies with payment of IGST – claim refund of IGST paid
Refund of Input Credit for Zero rated supplies
According to the sub rule (4) of rule 89, the refund of input credit tax shall be allowed as per the below formula:
Refund Amount = (Turnover of zero-rated supply of goods + Turnover of zero-rated supply of services) ÷ Adjusted Total Turnover x Net ITC
Explanation:
Refund Amount – the maximum refund admissible
Net ITC – Input tax credit availed on inputs for goods and services excluding the input tax credit availed for which refund is claimed under sub rules (4A) or (4B) or both
Turnover of zero-rated supply of goods – Amount of zero-rated supply of goods made during the year without paying any tax under bond or letter of undertaking, excluding the supplies in respect of which refund can be claimed under sub rules (4A) or (4B) or both
Turnover of zero-rated supply of services – Amount of zero-rated supply of services made during the year without paying any tax under bond or letter of undertaking, calculated as below:
Payments received against zero rated supply of services + Payments received in advance in any period prior to the relevant period for which supply has been completed – (Payments received in advance for which the supply has not been completed during the relevant period)
Adjusted total turnover – Turnover will be as defined under clause (112) of section 2, excluding the value of exempt supply other than zero-rated supplies and the turnover of supplies in respect of which refund can be claimed under sub-rules (4A) or (4B) or both, if any
Relevant Period – The period for which the claim has been filed for refund.
At AJSH, we assist our clients in dealing with various GST matters (GST registration, filing of GST returns, claiming refund & GST Audits) by providing them adequate support and guidance from our end. If you have any questions regarding the GST compliances, please contact us.
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