Zero-rated Supplies under GST after Budget 2021

The Union Budget 2021 was proposed by the Finance Minister on 01.02.2021 in the parliament. Also, the Finance Minister applauded the parliament on GST and summarized the measures taken by the Government in the last 4 years of implementation GST to further streamline it. In this article, we will discuss the Zero-rated Supplies under GST after Budget 2021.

Zero-rated Supplies under GST after Budget 2021

The Union Budget 2021 was proposed by the Finance Minister on 01.02.2021 in the parliament. Also, the Finance Bill 2021, formulates 16(3) amendments in GST Laws which comprise 15 amendments to the CGSt Act, 2017 and 1 to the IGST Act. Although quite limited announcements were made with concern to Indirect Taxes including customs.

What is IGST Act 2017?

The Section 16 under Chapter VII of IGST Act, 2017 interprets Zero Rated supply which covers the export of goods or services or both as well as the supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.

Further, until 31.01.2021 Section 16(3) of the Act enabled a registered person making zero rated supply to claim a refund as per the requirements of Section 54 of the CGST Act via two alternatives:

• The supply of goods or services or both is made under bond or Letter of Undertaking, without fee of integrated tax.
• The supply of goods or services or both are made on payment of integrated tax and the refund of such tax paid on such supplies can be alleged.

Union Budget 2021 Clarify

Through Budget 2021, the definition of zero-rated supply under Section 16(1) has been amended to comprise transactions of supply to SEZ only when the said supply is for authorized operations.

The revision puts the onus on the Supplier to ascertain whether the purchase by SEZ Unit is certainly for authorized operations or not, when he may not have any indication or means to ascertain the same.

Section 16(3) of the IGST Act has substituted and a provision has augmented to the subsection which provides that the registered person claiming refund under Section 54 of the CGST Act, for exports made under LUT without payment of tax.

Lastly, the alternative for claiming refund of tax paid on supply of goods or services with payment of IGST originally enclosed under Section16(3)(b), is now being addressed under the recently inserted Section 16(4).

Further, this has been performed in the line of the Government’s drive to curb the difficulty of fake invoices and refund of IGST granted to the exporter on the basis of such fake invoices and illegitimate ITC alleged therewith.

If you want any other guidance related to GST Registration or GST Return Filing, please feel free to talk to our business advisors at 8881-069-069.

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