Guide to Zero-rated Goods and Services

Updated on July 19, 2022

1. What “zero-rated” means………………………………………………………………………………………………… 2
2. Consequences of zero-rating …………………………………………………………………………………………… 3
3. Zero-rated goods and services………………………………………………………………………………………… 4
Essential goods listed in Schedule 1 of the GST Act……………………………………………………….. 4
Goods and services exported from the Maldives……………………………………………………………. 5
Transfer of business as a going concern ………………………………………………………………………….. 9
4. Zero-rated good supplied as part of a “mixed supply” ………………………………………………….11
5. Packaging of a zero-rated item………………………………………………………………………………………..12
6. GST on agency commission related to a zero-rated supply ………………………………………….13
7. Relevant laws, regulations, and tax rulings………………………………………………………………………14

March 9, 2022, was a date in the future.
MIRA’s interpretation of tax laws and regulations that affect you can be found in this handbook.

Please contact us at 1415 or [email protected] if you have any questions or issues regarding the information contained in this guide.

1. What “zero-rated” means

“Zero-rated” goods and services are those that are subject to GST, but the rate of GST that applies to them is zero percent..
It is mandatory for suppliers to keep track of all zero-rated transactions and include them in their GST returns.

2. Consequences of zero-rating

Zero-rating a product or service signifies that the seller is exempt from collecting any GST from the end user.
Input tax paid to other GST registered people by the supplier might be claimed.
Example 1: claiming input tax on supplies that are not taxed.
Fish from the Maldives is exported by Fresh Fish Pvt. Ltd. Fish is zero-rated, so when the corporation buys it from fisherman, it won’t be subject to GST. It is possible, however, that GST was paid on the packaging, transportation, and other services mentioned earlier in this paragraph.
In order for Fresh Fish Pvt. Ltd. to be exempt from GST, exports must be zero-rated. It can, however, deduct the input tax it has paid to the packaging firm, the transportation service provider, and other parties in connection with the exported goods..
Discover more.
Check out our Input Tax Guide (MIRA G820) at for additional information on claiming input tax on the provision of zero-rated goods and services.
Even though zero-rated products and services are exempt from GST, they are included in the supplier’s “taxable supply” nonetheless. Zero-rating therefore means, in addition to the foregoing, that:
A tax invoice must be sent whenever a zero-rated product or service is sold to a GST-registered customer by the supplier.
For example, when computing the thresholds for GST registration, taxable period, and deregistration, the value of zero-rated goods and services delivered must be considered.
In this case, the supplier must zero-rate any service charges he applies to a zero-rated service.
Products and services that are not taxed or subsidized

3. Zero-rated goods and services

Section 22 of the GST Act lists the goods and services that are exempt from taxation.

Schedule 1 of the GST Act lists them as: Goods and services exported from the Maldives that are essential
Transfer of a business that continues to operate as normal.

Essential goods listed in Schedule 1 of the GST Act

No tax is levied on “essential products,” as specified in Schedule 1. In addition to food, the following list explains the items on this list (1 through 14).
Rice, sugar, and flour make up the bulk of the recipe.
2. A third of a cup of milk containing sodium chloride
Cooking oil is a necessary ingredient.
the infusion of the tea
Sea life such as rihaakuru, coral reef, and deep-sea fish are abundant in the Maldives.
potatoes with onions
The following are some of the things you’ll need to prepare curry paste:
Some other veggies that could be included in this list are:. The 12th item on the list is fruit.
Bread, buns, and rusk are the twelfth item on the list.
Food for young children
Cloth diapers, as well as other types of infant and adult diapers, have an environmental effect rating of 0.
Zero-rated fuels include cooking gas, diesel, and gasoline. However, kerosene and jet fuel are exempt from the zero-rated status. Lubricating oils are also subject to the usual GST rate.
A variety of feminine hygiene products fall under this umbrella.

Discover more.

The GST Food Guide (MIRA G821), available at, contains more information on the zero-rated foods listed above.
The Maldives exports goods and services.
Products and services exported by an export licensee or re-export licensee are known as “exported goods and services.”
Products procured at duty-free establishments
In the case of a GST-registered exporter,
An export license or re-export license holder’s goods that have been exported
GST registered exporters who hold an “Export License” granted by the Ministry of Economic Development are exempt from paying tax on goods exported from Canada.
Export-licensed goods are an example of this.
A firm situated in India, Prasanth Ltd., purchases sea cucumbers from Adil, who is registered for GST and has an Export License from the Ministry of Economic Development.
Adil is required to charge Prasanth Ltd. zero percent GST on all of his supplies.
Duty-free shop merchandise
Duty-free businesses licensed by the Ministry of Economic Development are exempt from charging any taxes on the items they sell. Airport food establishments, on the other hand, are subject to the usual rate of GST.
Example 3: Duty-free retail supplies
While passing through Ibrahim Nasir International Airport on his route to Kuala Lumpur, Ahmed picks up a bottle of perfume from the airport’s duty free shop. The duty-free retailer is required to impose a GST of 0% on this supply.
Example 4: Provisions provided by airport snack concessions
Jameel stopped for lunch at Ibrahim Nasir International Airport’s departure terminal on his way to Kuala Lumpur. GST will be charged at the usual rate in this instance.
Products and Services that are not taxed Per GST-registered business, six services are exported.

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Services exported by a GST registered person

Providing a service outside the Maldives and consuming the service outside the Maldives constitutes an export from a Maldives GST registered person.
For GST purposes, a person’s location is identified as follows:
An individual is considered to be in the Maldives if the individual’s permanent residence is in the Maldives, or if the individual is present in the Maldives or intends to be present in the Maldives for an aggregate of 183 days or more in any 12-month period beginning or ending in Gregorian calendar year. ”
A firm or other legal entity is considered to be located in the Maldives if it was formed there, has its headquarters there, or has its management and control there.
An unincorporated body that is either established or constituted in the Maldives or has its administration and control in the Maldives is considered to be located in the Maldives.
A person based in the Maldives is deemed to have supplied goods and services in the Maldives if any of the following conditions are met: 1) the goods are sold in the Maldives, or 2) the services are physically performed by or through a person based in the Maldives at the time of the services.
It is not sufficient that the person who contracts for the services (from someone in the Maldives) is outside the Maldives at the time the services are rendered for the services to qualify as export. Even if this is the case, the service must be provided to a non-resident (as defined under section 79(II) of the Income Tax Act) and the person who contracts for the service must not be in the Maldives at the time the service is performed because GST is a consumption tax in the Maldives. In other words, if a non-resident is in the Maldives at the time the services are delivered, he will be paid GST if the services are consumed in the Maldives, i.e., he is a resident of the Maldives.

An other example is delivering supplies to residents who happen to be elsewhere when they need them.
As a Maldivian, Zuhoor contends that because he was in Colombo during the time his house was being painted, he is not liable for the cost of the painting because he consumed the service outside of the Maldives. However, because he lives in the Maldives, his house painting services cannot be deducted from his tax bill on its whole.
Non-residents in the Maldives at the time of delivery, for example.
A Maldivian owes a Malaysian lender, Razak, money. Razak is not a Maldivian citizen. He’s in Male’ because he wants to hire Ikram, a debt collector, to go after the money. Ikram pays Razak what he owes while Razak is in the Maldives for two weeks.
Razak is a non-resident of the Maldives at the time of Ikram’s debt collection services, and so, he must pay 6 percent GST on the fee/commission he receives from Ikram. The Maldives might have avoided paying Ikram’s fee/commission if Razak had worked with Ikram to collect and settle the Malaysian debt while Ikram was working in the Maldives.
Example 7: A Maldives-based non-resident corporation.
Resort lodging is provided to a non-resident corporation that awards its best-performing personnel with a vacation at the resort. Here, the supply is made by a Maldivian resident to a non-resident Maldivian (the overseas company). However, in the Maldives, the firm is recognized as a person because the outstanding employees are in the Maldives in connection with the services provided by the resort (i.e., they are receiving the services). Consequently, the services are not eligible for zero-rating in the Maldives.
Maldivian service providers are permitted to supply non-residents with services if those services are for the advantage of a Maldivian customer. In practice, however, the services are provided to a person who is physically present in the Maldives and who uses them, rather than a non-resident who is out of the country. In that instance, there is no zero-rating.

Third-party beneficiary no. 8

For his brother in the Maldives, who is a Maldivian working and residing in Sri Lanka, his Maldivian lawyer provides and pays for legal guidance and defense. It’s the Maldives’ brother who “consumes” our legal services. Because of this, they are not excused from paying taxes.
There can be no zero-rating for services supplied to a non-resident in relation with Maldives property.
Maldivian property is the ninth example.
Nonresident Maldivian apartment complex owner is having drainage system work done by a plumber at the same time. Because the plumber’s services are directly tied to property in the Maldives at the time of service, they cannot be zero-rated.
For example, painting or repairing properties, guiding a vessel, giving berths for a vessel, or providing parking spots for planes are examples of services that are directly tied to the property and are supplied to the property owner or operator. It is because of this that services that are not immediately related to the property (such as painting and repairs) are not directly delivered by the property owner or operator of the property, but rather by a third-party contractor.
Examples of this type of service include Maldives property management.
While docking at Male’ a Maldivian engineer inspects the ship’s power supply system for any malfunctions.. Even though the non-resident customer is out of the Maldives when the service is supplied, the zero-rating rule does not apply since the service was provided in connection with property (the boat) that was located in the Maldives at the time of inspection.
Non-residents who merely need information or assistance can receive free services. No “direct” link exists between what you’re reading and your Maldivian vacation property even if it’s related to that property.

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Another example is the distribution of information.

One of the Maldives’ economists gives historical figures from the Maldives Customs Service and the Maldives Ports Limited to a non-resident shipping business considering opening a cargo transportation service between Perth and Male.
Economist knowledge relating to Maldives property can be zero-rated because the service of supplying it is not given “on” that data.
Giving a recommendation is an excellent example of this.
In the Maldives, a financial advisor gives a report to a Bahraini investor who wants to put money into a Maldives vacation resort. It may be zero-rated even when the advice is offered in connection to a Maldivian property (the resort), despite the fact that the property is not directly related.
Telecommunications services can be exported for free.

Exporting telecommunications services is an example of a business that is GST-registered.
The Colombo-based Kumar phones his Eydhafushi-based friend, Manisha, from Colombo. Kumar relies on Lanka Bell’s services in Sri Lanka. Dhiraagu is your telecom provider in the Maldives, therefore you can make and receive calls through them. Manisha can only be reached if Kumar’s call is routed through Dhiraagu’s network in the Maldives.
Manisha does not have to pay anything to get the phone call.
The GST on her answer to Kumar’s phone call is therefore zero. Dhiraagu, on the other hand, provides Lanka Bell with a telecommunications service. Dhiraagu is required under Lanka Bell’s GST registration to charge Lanka Bell GST for Lanka Bell’s connection service, which Dhiraagu can zero-rate because the service is delivered to a non-Maldivian.
Learn more about this topic.
Visit to see our Guide to GST on Telecommunication and Courier Services (MIRA G813) The GST taxation of telecommunications services.
Taking over a company when it is still running normally
In most cases, the applicable GST rate is applied when an individual who has registered for GST sells his or her assets The transfer of Guide to Zero-rated Goods and Services 10 as a going concern will be zero-rated if the following conditions are met:
The assets of a company must be sold in order to continue as a going concern.
A similar business will be conducted by the buyer with the assets that were purchased from the seller (but not necessarily identical).
There can be no more than a partial sale of the company, and that component must be self-sufficient.
The transfer of a continuing concern business is only zero-rated if the buyer is registered for GST at the time of the transfer.
Transferring a corporation held by one or more persons to a company in which those same individuals own at least 99 percent of the equity is the purpose of the deal.
Under certain conditions, the GST must be paid when a going-concern business is transferred to another party.
Exhibit 14 is an example of a going-concern transfer.
After selling his restaurant to a GST-registered buyer, Naseer also transfers ownership of the building and all of its fixtures and fittings, as well as its inventory. As a result of this transaction, a running business is being sold for cash to the winning bidder. Naseer would have had to sell the equipment and tools but preserve the facility and the supplies in order to be considered a “going concern.”
The following is an example of a scenario: The buyer of a firm is not registered for GST, therefore the transaction fails.
Relax Spa Pvt. Ltd. sells five of its spas to JK Spas Pvt. Ltd., which was not registered for GST at the time of the transfer. This transaction is not eligible for a zero-rating.
Example 16: A company’s assets are transferred to a new firm.
Ismail runs a business in Addu. He transfers his business to the company, which he owns 99.9% of, when he has grown it to the point of formation. There will be no taxes levied on this transaction. If Ismail owned less than 99 percent of the newly formed company, his transfer would not be eligible for zero-rating.

4. Zero-rated good supplied as part of a “mixed supply”

A “mixed supply” is a supply of an item that is sold as a distinct supply but is made up of other goods that are also supplied independently. Component pieces must remain in their original shape and nature in order to qualify as a mixed supply.
A mixed supply is, for example, the supply of zero-rated and standard-rated food items at a single price.
When a mixed supply is made, the GST treatment of each individual component is determined by the GST treatment of the entire supply.
 The supply will be zero-rated if only zero-rated commodities are in the mix. This includes a fruit basket that simply comprises fruits, for example.
 Only if 98 percent or more of the supply is zero-rated will the supply be zero-rated. If this requirement is not met, the usual rate of GST must be applied. The worth of the supply’s component pieces (had they been sold separately) must be taken into account in order to assess if the 98 percent criteria is met.
It will be deemed mixed supplies if food is provided in reusable storage containers. See page 12 for details on the tax consequences of such purchases.
Instance No. 17: An assortment of materials
Asaree Supermarket is selling a food package filled with fruits, juice packs, chocolates, and cookies. There’s a lot of variety here. The supply will be zero-rated if the value of the fruits exceeds 98% of the total worth of the food items in the hamper (assumed to be sold separately). Otherwise, the usual rate of GST will be applied.

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5. Packaging of a zero-rated item

The same GST rate applies to the packaging as it does to the product when it is sold in standard packaging commonly used in the market for such goods and when no additional charge is made for the packaging.
Rather than being an independent supplier, packaging that exists solely to contain, advertise, and protect the food it contains is treated as an integral element of the whole supply chain and is subject to the same liability as to the food it contains.
As long as the packaging itself may be sold separately and the zero-rated item is put in a packaging that is taxed at ordinary rate, it must be charged GST by the supplier. Those supplies are referred to as “mixed supplies,” and they must be handled as described in the preceding section. Providing zero-rated goods in containers that do more than just keep their contents safe, secure, and presentable means that these containers are supplies in and of themselves, and as such are liable to GST at the ordinary rate.
Ex. 18: No charge for packaging
Choice In the supermarket, you can get free bread storage containers. Despite the fact that bread isn’t often offered in storage containers, the supply will not be zero-rated. When making the supply, the vendor is required to charge GST on the total cost of the shipping container.
Gift-wrapping service is an example of this.
A gift-wrapping service is available at Moments Gift Shop for purchases made there. This service carries a price tag. Due to the fact that the shop charges a price for the gift wrapping service, GST must be applied. Gift-wrapping services are not subject to GST if they are provided free of charge and are covered by section 54 of the GST Regulation (goods and services provided free of charge).

6. GST on agency commission related to a zero-rated supply

When an agent provides agency services to its principal, the commission charged by the agent is subject to GST at the rate applicable to the good or service that the agent is supplying on behalf of the principal, with the exception of the collection of payment for bills issued by the principal. Since the supply is zero rated, the commission charged by the agent is equally so.
Example 20: Commission paid by an agency
An GST registered local farmer provides watermelons to Nadeem, who owns a GST-registered business in Fuvahmullah and sells them. The supplier of the watermelons he sells through his shop costs him a commission. Nadeem’s commission from the farmer is zero-rated because watermelon is a zero-rated fruit.
Discover more.
Check out our Guide to GST and Agency Relationships (MIRA G814) at to learn more about the applicability of GST to agency relationships.

The agent’s remuneration is liable to GST at the rate applicable to the good or service that the agent is providing on behalf of the principal, except for the collection of payment for bills issued by the principle. As a result of the agent’s commission being zerorated, the supply is as well.
Example 20: An agency pays a commission to an employee.
In Fuvahmullah, Nadeem runs a GST-registered business and sells watermelons that he buys from a local farmer. He pays a commission to the vendor of the watermelons he sells in his shop. Because watermelon is a zero-rated fruit, Nadeem’s commission from the farmer is zero-rated.
Learn more about this topic.
To understand more about how GST applies to agency relationships, see our guide, GST and Agency Relationships (MIRA G814), available at

7. Relevant laws, regulations, and tax rulings

This information is based on the following laws, rules, and tax rulings:
Business Profit Tax Act (Law No. 5/2011):
Law Number 10/2011: Goods and Services Tax Act the Goods and Services Tax Regulation (Regulation Number 2011/R-43)
“GST treatment of agency commission”:”Tax Ruling TR-2015/G28″
Legislative Amendment No. 5: (Law Number 10/2018)