What do nil rated, exempt, zero rated and non-GST mean?
All four mean the customer pays no GST on that line, but the reason differs, and the reason decides how you bill it, where you report it and whether you keep input tax credit.
| Type | What it means | Shop example | Input tax credit on related purchases |
|---|---|---|---|
| Nil rated | Inside GST, but the rate is 0% | Goods a schedule or notification lists at nil | Not available for that supply |
| Exempt | Inside GST, but exempted under Section 11 by notification | Salt, loose rice, fresh vegetables, printed books | Not available for that supply |
| Zero rated | Taxable, but at 0% because it is an export or a supply to an SEZ unit or developer (IGST Act, Section 16) | Rare for a retail counter | Available; refund possible |
| Non-GST (non-taxable) | Outside GST altogether | Petrol and diesel (until notified), alcoholic liquor for human consumption | Not available for that supply |
Based on CGST Act s.2(47), s.2(78), s.9 and s.17 on taxinformation.cbic.gov.in, read 25 Oct 2026.
Nil-rated and exempt are often used as if they were the same, and for a shop the effect is the same: no GST on the bill and no input tax credit for that sale. The CGST Act's definition of exempt supply in Section 2(47) covers both, and it also includes non-taxable supplies.
Is salt nil rated or exempt under GST?
Salt is exempt. It is entry S. No. 109 of Notification 10/2025-Central Tax (Rate), the exemption notification issued under Section 11, so no GST applies whether it is loose or a branded pack.
Most goods that carry no GST in a kirana shop, such as loose rice and atta, fresh vegetables, salt, milk and printed books, sit in that same exemption notification rather than in a separate 0% rate schedule. That is why the same item can be called "nil rated" by one person and "exempt" by another. Both are exempt supplies under Section 2(47), so the bill and the input tax credit treatment do not change. When you report them in GSTR-1, ask your CA which column of the nil-rated, exempted and non-GST table your firm uses, and use it consistently.
What is a non-GST supply, and does a shop ever make one?
A non-GST supply is one GST does not cover at all. Alcoholic liquor for human consumption is outside GST under Section 9(1), and petrol, diesel, natural gas, crude and aviation turbine fuel stay outside until the Government notifies a date under Section 9(2).
These goods still carry other taxes, such as state VAT and excise, so they are not tax-free. A general retail shop rarely sells them. A petrol pump that also runs a convenience store, or a shop with a liquor licence, does make both GST and non-GST sales and must keep them apart in its books and returns.
How is zero rated different from nil rated?
Zero-rated supplies are taxable supplies taxed at 0%, and the supplier keeps the input tax credit. Nil-rated and exempt supplies lose the credit. That single difference is why exporters claim GST refunds and kirana shops do not.
Under Section 16 of the IGST Act, zero-rated supply means exports of goods or services and supplies to a Special Economic Zone developer or unit. A retail shop selling to walk-in customers almost never makes zero-rated supplies, so if your billing software has a "zero rated" option, do not use it for salt or vegetables.
How should these items appear on a bill?
Show exempt and nil-rated items on the bill with their HSN and a 0% rate, and keep them as separate lines from taxable goods. A bill with only exempt goods is a bill of supply; a bill with both can be one invoice-cum-bill of supply.
| Item | HSN | Value | GST rate | GST |
|---|---|---|---|---|
| Salt, 1 kg pack | 2501 | ₹28 | 0% (exempt) | ₹0 |
| Loose rice, 5 kg | 1006 | ₹300 | 0% (exempt, not pre-packaged) | ₹0 |
| Tomatoes, 1 kg | 0702 | ₹40 | 0% (exempt) | ₹0 |
| Branded atta, 5 kg pack | 1101 | ₹250 | 5% | ₹12.50 |
| Detergent powder, 1 kg | 3402 | ₹120 | 18% | ₹21.60 |
Illustrative prices. Rates as in Notifications 9/2025 and 10/2025-Central Tax (Rate), in force from 22 Sep 2025. GST is shown as the total of CGST + SGST.
Read more on bill of supply vs tax invoice. If you are not registered under GST at all, none of this applies to your bills; see bill without a GST number.
Where do they go in GST returns, and what happens to input tax credit?
Report nil-rated, exempt and non-GST sales in the separate table for them in GSTR-1 and in the matching row of GSTR-3B, not with taxable sales. Common input tax credit has to be split, because the part used for exempt sales is not allowed.
- GSTR-1: nil-rated, exempted and non-GST outward supplies go in their own table, split by type.
- GSTR-3B: nil-rated and exempted sales go in the "other outward supplies (nil rated, exempted)" row, and non-GST sales in the "non-GST outward supplies" row.
- Purchases used only for exempt goods: no input tax credit, for example GST on packing bags bought only for loose rice.
- Common costs: credit on shared expenses such as rent or electricity is split under Rule 42 between taxable and exempt turnover.
- Billing software: keep every item's HSN and rate right so the report splits taxable, exempt and nil lines without manual work.
The ITC split is the part most small shops get wrong, and it is worked out by your CA from your sales split. Clean item rates in your billing software make that split a report instead of a guess. See input tax credit for retail shops.