Provisions under Section 16 of the Integrated Goods and Services Tax (IGST) Act, 2017 relating to “Zero Rated Supply”, are as under:
Section 16 of IGST Act 2017: Zero Rated Supply (CHAPTER VII – ZERO RATED SUPPLY)
(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 for authorised operations to a Special Economic Zone developer or a Special Economic Zone unit. [Refer Note 1(a)]
(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.
(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. [Refer Note 1(b)]
(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, 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;
(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. [Refer Note 1(b)]
| Note: CBEC notifies 01/07/2017 as the commencement date in respect of Sections 4 to 13, 16 to 19, 21 and 23 to 25 of the IGST Act, 2017, vide Notification 3/2017. |
Amendments History:
1. Amendments made by Section 123 of the Finance Act 2021: GOI Notification dt. 28/03/2021, followed with Central Tax Notification 27/2023 on commencement date of 01/10/2023:
(a) in sub-section (1), in clause (b), the text “for authorised operations” inserted after the text “supply of goods or services or both”;
(b) sub-section (3) substituted and sub-section (4) inserted;
Commentary on Section 16 of the IGST Act
Section 16 of the Integrated Goods and Services Tax (IGST) Act, 2017 focuses on “Zero Rated Supply.” The commentary on this section is as follows:
Definition of Zero Rated Supply: Section 16(1) of the IGST Act
Zero-rated supply refers to:
a) Export of goods or services or both.
b) Supply of goods or services or both for authorized operations to a Special Economic Zone (SEZ) developer or an SEZ unit.
Input Tax Credit on Zero Rated Supplies: Section 16(2) of the IGST Act
Despite being an exempt supply, input tax credit can be claimed for making zero-rated supplies, subject to the provisions of section 17(5) of the Central Goods and Services Tax (CGST) Act.
Refund of Unutilized Input Tax Credit: Section 16(3) of the IGST Act
A registered person making zero-rated supply is eligible to claim a refund of unutilized input tax credit on supply of goods or services or both. This can be done without payment of integrated tax, under bond or Letter of Undertaking, in line with the provisions of section 54 of the CGST Act or the rules made thereunder. Certain conditions, safeguards and procedures may be prescribed.
However, if the registered person making zero-rated supply of goods doesn’t realize the sale proceeds, they will be liable to deposit the refund received under this sub-section, along with the applicable interest under section 50 of the CGST Act, within 30 days after the expiry of the time limit prescribed under the Foreign Exchange Management Act, 1999 for receipt of foreign exchange remittances, in a prescribed manner.
Specified Class of Persons, Goods, and Services: Section 16(1) of the IGST Act
The Government may, on the recommendation of the Council and subject to certain conditions, safeguards and procedures, specify by notification:
i) A class of persons who may make zero-rated supply on payment of integrated tax and claim a refund of the tax so paid.
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.
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Note: The IGST Act 2017 has been notified vide GOI Notification dated 12/04/2017, which has subsequently been amended through IGST Extension to J&K Act 2017, IGST (Amendment) Act 2018. Finance Act 2019, Finance Act 2020, Finance Act 2021, Finance Act, 2022 and Finance Act, 2023, including various Notifications issued by the Govt./ CBIC from time to time, relating to the commencement dates of various Sections/ Provisions in the respective IGST/ Amendment Acts, wherever required. Information on this page is a Section-wise compilation of the Amendments made by various Notifications issued by CBIC from time to time, with best possible efforts for accuracy. In any case, E&OE. For official/ updated information, please visit CBIC website.
| CBIC Updates (GST) |
| Index of GST Circulars, Notifications, Press Releases, Orders, etc. issued by CBIC from 2017 and onwards along with Section-wise/ Rule-wise Text of GST Acts/ Rules: |
| CGST: CGST Act/ Definitions, CGST Rules, GST Forms |
| IGST: IGST Act/ Definitions, IGST Rules |
| UTGST: UTGST Act/ Definitions, UTGST Rules |
| GST Circulars (CGST/ IGST/ UTGST): 2023, 2022, 2021, 2020, 2019, 2018, 2017 |
| GST Instructions: 2023, 2022, 2021, 2020, 2019, 2018, 2017 |
| CGST Notifications: 2023, 2022, 2021, 2020, 2019, 2018, 2017 |
| CGST Rate Notifications: 2023, 2022, 2021, 2020, 2019, 2018, 2017 |
| IGST Notifications: 2022, 2021, 2020, 2019, 2018, 2017 |
| IGST Rate Notifications: 2023, 2022, 2021, 2020, 2019, 2018, 2017 |
| UT Tax/ UTGST Notifications: 2022, 2021, 2020, 2019, 2018, 2017 |
| UT Tax/ UTGST Rate Notifications: 2023, 2022, 2021, 2020, 2019, 2018, 2017 |
| Compensation Cess Notifications: 2023, 2022, 2021, 2020, 2019, 2018, 2017 |
| Compensation Cess Rate Notifications: 2023, 2022, 2021, 2020, 2019, 2018, 2017 |
| CBIC Orders (CGST/ IGST/ UTGST): 2023, 2022, 2021, 2020, 2019, 2018, 2017 |
| CBIC Press Releases: 2020, 2019, 2018, 2017 |
| Note: For Official/ updated copy, please visit the CBIC website. |
Does the GST exemption for SEZ units applicable for all products which are sold to them or only those which are used by them for manufacturing and exports? To be specific we deal in hot beverages and snacks and we sell such items to SEZ units which are used by their employee’s.
At the time of export of goods, shipping bill filed with 5% IGST and procured the goods locally with CGST 2.5% and 2.5% SGST. At the time of filing GSTR-3B, IGST liability adjusted against the input of local purchases. Whether the input claim tantamounts to payment under section 16 or not? to claim refund from the department.