VII
IGST Act · Chapter VII
Zero Rated Supply
1 section authoredIGST Act, 2017
s. 16Zero rated supply
Section 16 is what makes exports and SEZ supplies tax-free without breaking the credit chain. Unlike an exempt supply, a zero-rated supply keeps its input tax credit, and the credit — or the IGST paid on the supply — is refunded.
- Under section 16(1) of the IGST Act, 2017 a zero-rated supply is an export of goods or services, or a supply to an SEZ developer or SEZ unit for authorised operations.
- Input tax credit may be taken for making zero-rated supplies even though they may be exempt (section 16(2)), subject to the blocked credits in section 17(5) of the CGST Act.
- From 01.10.2023, zero-rated supplies are made under bond or LUT without IGST with refund of unutilised credit (section 16(3)); exporting on payment of IGST and claiming refund of that IGST is available only to notified persons or for notified goods or services (section 16(4)).
- From 01.11.2024, no refund of credit or of IGST is allowed on zero-rated supplies of goods that are subject to export duty (section 16(5)).
- An exporter of goods who received a refund under LUT must repay it with interest if the sale proceeds are not realised within the FEMA time limit (proviso to section 16(3)).