What Are the Latest Notifications About Zero Rated Supplies Under GST in 2025?

The zero rated supplies under GST are nothing short of a game changer for exporters, SEZ suppliers, and Indian businesses dealing in global trade. By keeping export and supplies from Special Economic Zones at zero rates, the tax regime ensures that taxes do not burden businesses competing in the international market.

However, though the law brings Input Tax Credit (ITC) and even refunds on such supplies, the paperwork, delay in claiming refunds, and complexities in the filing of forms hound the small and medium enterprises (SMEs). Understanding the process, step by step can be the solution to saving both time and money. Understanding the process, step by step, can save both time and money. In this blog, we will break down how Indian exporters and SEZ traders can claim ITC without any challenge. 

What Are Zero Rated Supplies?

Two major categories under GST fall under the category of Zero-Rated Supplies:

• Exports of goods and services: Indian exporters selling garments to the US or Indian IT providing services abroad.

• Supplies to SEZ units or developers: Say, a Gujarat-based trader supplying electronics to a Bengaluru SEZ.

Zero-rated means the output supply is taxed at 0% but businesses can still avail ITC in inputs used to make the supplies. This keeps taxes out of the export price and makes Indian goods competitive in the world. You can also check this with our online invoice software as well. 

Eligibility and Process of Claiming Input Tax Credit

Every registered taxpayer who is engaged in making zero rated supplies is eligible to avail ITC provided:

• The supplier has a valid GST registration.

• Purchases and expenses have GST-compliant invoices.

• The taxpayer files returns like GSTR 3B on the due date.

The ITC can be used in two ways:

• By exporting, the IGST claims a refund of the tax paid.

• To export with a Letter of Undertaking (LUT) or a bond without paying IGST and then claim a refund of the accumulated ITC.

For example, a textile exporter in Surat can opt for the LUT route to avoid blocking of working capital, while a diamond exporter in Mumbai can opt for the LUT route. The GST route to avail quick refunds.

Documentation and Forms Needed

Proper documentation is important to make an ITC claim. Businesses must keep:

• GST Invoices in respect of all purchases.

• Packaging of shipping or other bills of lading/export documentation.

• LUT or Bond copies in case of exports without tax.

• Bank realization certificates on services exports.

In addition, forms like RFD-01 of refund applications have to be filed properly. Using GST billing software ensures accuracy in filing and reduces the chances of errors. Any discrepancy between invoices that have been sent up by suppliers and those that have been received by recipients can delay refunds.

Refund Process: IGST Route vs. LUT or Bond

Exporters and SEZ suppliers have the following two refund options:

1. IGST Route

• Exports are made after including IGST.

• The exporter claims an ex-GST refund from the customs or GSTN integration later.

• Refunds are generally quicker since it’s an automated process.

2. LUT/Bond Route

• Exporters submit an LUT or Bond, and Goods or services are supplied by exporters without incurring IGST charges.

• Refund of accumulated ITC is claimed by RFD-01.

• This allows businesses not to pay IGST at the outset, but in return, there is a chance of receiving it with a delay.

A Chennai-based IT services company, for instance, will often lean towards the LUT option as services exports don’t require physical customs-clearance, while a pharmaceutical exporter exporting bulk medicines might find the IGST route more practical.

GST Rate Applicability

While domestic supplies attract a different amount of GST Rate, depending upon the product or service, zero-rated exports and SEZ supplies are taxed at 0%. This is to ensure that ITC on inputs such as raw material, packaging, and logistics can be claimed back i.e., they do not suffer from double taxation.

Compliance Challenges for SMEs

Despite all the benefits, SMEs often encounter problems:

• Delays in refunds because of mismatched invoices.

• Less clarity when deciding on IGST and LUT routes.

• Trouble in keeping proper documentation.

• Manual errors in form-filing.

For instance, a small leather exporter in Kanpur may find the refund delay is straining cash flow, and an SEZ supplier in Hyderabad may be facing notices repeatedly due to clerical errors.

Role of Digital Tools in Simplifying Compliance

Digital platforms are GST-compliant. A GST billing software ensures that invoices are auto-matched, input tax credit tracked, and filing is made easier.

Here’s how MargBooks helps:

• Export houses can use MargBooks to file returns without falling behind on deadlines.

• Garment exporters can monitor Input Tax Credit with MargBooks and minimise mismatches.

• SEZ traders can make GST refund claims easily using MargBooks automation.

• SMEs can depend on MargBooks for end-to-end compliance with the GST law and avoid the risks of penalties.

Key Steps to Claim ITC on Zero Rated Supplies

To summarise, here’s what the key steps are:

• Register under GST and get LUT/Bond if required

• Keep the purchase and export invoices GST-compliant.

• File GSTR 3B and other returns on a timely basis.

• Keep shipping bills, banking certificates, and LUT documents on hand.

• Choose between the IGST route or the LUT/Bond route as per working capital needs

• File the refund application in RFD-01 accurately.

Conclusion

Claiming Input Tax Credit on zero rated supplies under GST is crucial for the exporter, the supplier in style Sender, and the enterprise in India in a position to be competitive in the foreign trade with other organizations. By ensuring timely filing, accurate documentation and choosing the right route for refunds, SMEs can unlock the benefits of cash flows and avoid compliance headaches. It should seem overwhelming in the absence of the right systems in place, however.

That’s where MargBooks software comes in, where it becomes easy to file returns, file ITC, and be GST-compliant. For businesses, getting to grips with Zero Rated Supplies Under GST is not merely about compliance, it’s about financial efficiency and growth.