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What is Exempt, Nil Rated and Non GST Supply

What is Exempt, Nil Rated and Non GST Supply?

Learning what is exempt, nil rated and non GST supply is mandatory to regulate your professional finances. It can be difficult to comprehend the nuances of tax laws, particularly when attempting to differentiate these terms.

These terminologies are crucial in the context of the Goods and Services Tax (GST). Therefore, understanding what is exempt, nil rated and non GST supply will help your firm efficiently handle the tax obligations.

Get in touch with our residential property tax services.

Exempt Supply

Exempt supply refers to goods and services that are not liable to GST. Thus, the sale of these goods is exempt from GST. For example:

  • Healthcare
  • Education
  • Specific agricultural goods

Suppliers of exempt products and services are not required to charge GST to their clients. However, they are also not eligible to get input tax credits for the commodities they buy.

Doing so makes these goods and services more reasonably priced for the ultimate customer because the final cost does not include GST.

Characteristics of Exempt Supplies

  • No GST is applied to the supply.
  • Credits for input taxes cannot be claimed.
  • It comprises necessary services such as healthcare and education.

Nil Rated Supply

Supplies designated as nil-rated have a 0% GST levy applied to them. This sounds a lot like exempt supplies. However, there is one crucial distinction.

Nil-rated supplies are excluded from GST and not eligible for input tax credits. However, firms can claim input tax credits on their purchases to provide these goods.

This can be especially advantageous if your company deals with zero-rated products or services, such as exporters.

Characteristics of Nil-Rated Supplies

  • There is no GST applied.
  • Credits for input taxes can be claimed.
  • Nil-rated supplies are standard in the export industry, and the government registers some suppliers.

Non-GST Supply

Non-GST supply comprises transactions that are beyond the scope of the GST statute. It indicates that they are entirely exempt from GST. This group usually consists of goods like:

  • Electricity
  • Gasoline
  • Diesel
  • Alcohol

These goods are not subject to GST as they fall under other tax laws.

Characteristics of Non-GST Supplies

  • The products are not subject to GST regulations.
  • It includes products like alcohol and gasoline.
  • Different tax structures control it.

What is Exempt Nil Rated and Non GST Supply?

Let’s differentiate these terminologies one by one:

Exempt Supply vs. Nil Rated Supply

  • Exempt supply is not eligible for input tax credit. However, zero-rated suppliers are.
  • Government-notified products and exports are examples of nil-rated supplies. For instance, vital goods and services.

Exempt/Nil Rated Supply vs. Non-GST Supply

  • Non-GST supplies are not subject to the GST system. Exempt and zero-rated supplies fall within the framework.
  • Input tax credits are only applicable to supplies that are rated zero under the GST.

The Bottom Line

As a business owner, you must comprehend what is exempt, nil rated and non GST supply to manage GST compliance effectively. Ensure proper classification to optimize eligible credits. This assures the right tax treatment and keeps financial processes running smoothly. To guarantee that your firm complies with current legislation and efficiently maximizes its tax status, you should seek advice from our business property tax services.

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