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GlossaryGSTWhat is Zero Rated Supply?
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What is Zero Rated Supply?

A zero-rated supply is an export or supply to an SEZ on which GST is effectively nil and the related input tax credit is refundable.

Bare Law Reference: Section 16, IGST Act 2017.

Detailed Explanation

How it works

Under Section 16 of the IGST Act, exporters can supply under a LUT without paying IGST and claim a refund of ITC, or pay IGST and claim it back. It is different from an exempt supply, where ITC is not available.

Frequently asked questions

What is the difference between zero-rated and exempt?

Zero-rated supplies allow a refund of input tax credit; exempt supplies do not allow ITC at all.

How do exporters claim the benefit?

Either export under LUT without IGST and claim an ITC refund, or pay IGST and claim a refund of the tax.

This content is for general guidance only and does not constitute professional advice. Tax law changes frequently — verify the current position and consult a qualified Chartered Accountant before acting. Last reviewed: June 2026.

Key Takeaways

  • Exports and SEZ supplies are zero-rated.
  • ITC is refundable, unlike exempt supplies.
  • Use LUT or the pay-IGST-and-refund route.
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