Definition
Zero-rated goods and services are taxable at a rate of 0 percent. The shopper pays no sales tax, but the seller stays inside the system and can still claim back tax paid on purchases.
Zero-rated versus exempt
Both mean no tax on the shelf price, but they differ behind the counter.
| Zero-rated | Exempt | |
|---|---|---|
| Tax charged to shopper | 0 percent | None |
| Counts as a taxable supply | Yes, at 0 percent | No |
| Seller can reclaim tax paid on purchases | Yes | Generally no |
A Guyana example
The Guyana Revenue Authority explains in its VAT policy on zero-rated supplies that zero-rated supplies are taxable, but at 0 percent instead of the standard 14 percent. Its examples include rice, sugar, milk and cooking salt. Its list of exempt supplies is separate, and includes fuels such as kerosene, liquid propane gas and gasoline.
Take a VAT-registered Guyanese grocer who sells G$100,000 of rice in a month. VAT charged is G$0. If the grocer paid G$3,000 of VAT on transport and packaging for that rice, the GRA says that tax can be reclaimed. A shop selling only exempt items would not get that credit. The numbers are illustrative, so confirm what applies to your goods.
Common mistakes
- Treating all untaxed items the same. Zero-rated sales stay on your return. Exempt sales sit apart.
- Keeping no proof. The GRA notes sellers must retain documentary proof to apply the zero rate.
- Using an outdated list. The lists change in budgets. Check the current schedule.
Check with your tax authority or an accountant. In Shopkeepa, sales tax is a shop setting with a per-product taxable flag, so you choose which products carry tax. Shopkeepa is not yet available. See also VAT and sales tax.
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