The Integrated Goods and Services Tax Act, 2017
Chapter-VII Zero Rated Supply
Section 16: Zero rated supply.
16. (1) “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 1[for authorised operations] to a Special Economic Zone developer or a Special Economic Zone unit.
(2) Subject to the provisions of sub-section (5) of section 17 of the Central Goods and Services Tax Act, credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply.
2[(3) A registered person making zero rated supply shall be eligible to claim refund of unutilised input tax credit on supply of goods or services or both, without payment of integrated tax, under bond or Letter of Undertaking, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder, subject to such conditions, safeguards and procedure as may be prescribed:
Provided that the registered person making zero rated supply of goods shall, in case of non-realisation of sale proceeds, be liable to deposit the refund so received under this sub-section along with the applicable interest under section 50 of the Central Goods and Services Tax Act within thirty days after the expiry of the time limit prescribed under the Foreign Exchange Management Act, 1999 for receipt of foreign exchange remittances, in such manner as may be prescribed.
(4) The Government may, on the recommendation of the Council, and subject to such conditions, safeguards and procedures, by notification,n1 specify–
(i) a class of persons who may make zero rated supply on payment of integrated tax and claim refund of the tax so paid 3[in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder];
(ii) a class of goods or services which may be exported on payment of integrated tax and the supplier of such goods or services may claim the refund of tax so paid 3[or both, on zero rated supply of which, the supplier may pay integrated tax and claim the refund of tax so paid, in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder].]
3[(5) Notwithstanding anything contained in sub-sections (3) and (4), no refund of unutilised input tax credit on account of zero rated supply of goods or of integrated tax paid on account of zero rated supply of goods shall be allowed where such zero rated supply of goods are subjected to export duty.]
References
Enforcement:
Enforced w.e.f. July 01, 2017 [Notification No. G.S.R. 662(E) dated 28.06.2017].
Amendments:
1. Inserted by Finance Act, 2021, w.e.f. 01.10.2023 [vide Notification No. 27/2023–Central Tax dated 31.07.2023].
2. Substituted by Finance Act, 2021, w.e.f. 01.10.2023 [vide Notification No. 27/2023–Central Tax dated 31.07.2023], for the sub-section:
“(3) A registered person making zero rated supply shall be eligible to claim refund under either of the following options, namely:–
(a) he may supply goods or services or both under bond or Letter of Undertaking, subject to such conditions, safeguards and procedure as may be prescribed, without payment of integrated tax and claim refund of unutilised input tax credit; or
(b) he may supply goods or services or both, subject to such conditions, safeguards and procedure as may be prescribed, on payment of integrated tax and claim refund of such tax paid on goods or services or both supplied,
in accordance with the provisions of section 54 of the Central Goods and Services Tax Act or the rules made thereunder.”.
3. Inserted by Finance (No. 2) Act, 2024, w.e.f. 01.11.2024 [Notification No. 17/2024–Central Tax dated 27.09.2024].
Notifications:
n1. Refer Notification No. 01/2023 – Integrated Tax dated 31.07.2023.
Circulars:
C1. For Fully electronic refund process through FORM GST RFD-01 and single disbursement, refer Circular No. 125/44/2019-GST dated 18.11.2019.
C2. Whether the benefit of zero rated supply can be allowed to all procurements by a SEZ developer or a SEZ unit such as event management services, hotel and accommodation services, consumables etc? [Circular No. 48/22/2018-GST dated 14.06.2018]
C3. The activity of sending / taking the goods out of India for exhibition or on consignment basis for export promotion, except when such activity satisfy the tests laid down in Schedule I of the CGST Act (specified goods), do not constitute supply as the said activity does not fall within the scope of section 7 of the CGST Act as there is no consideration at that point in time. Since such activity is not a supply, the same cannot be considered as ‘Zero rated supply’ as per the provisions contained in section 16 of the IGST Act. [Circular No. 108/27/2019-GST dated 18.07.2019]
C4. No bar in claiming refund by clubbing different months across successive Financial Years i.e. the restriction on bunching of refund claims across financial years shall not apply. [Circular No. 135/05/2020-GST dated 31.03.2020]