Exports to be zero-rated

(1) A sale specified under section 5 of the Central Act, by a dealer or an export oriented unit, shall be zero-rated and there shall be no tax payable on the turnover of such sale and the person exporting the goods shall be entitled in the manner prescribed to a credit of input tax paid (a) on the purchase of the goods sold in the course of export, or (b) on the purchase of inputs and capital goods which have been used for the manufacture of goods sold in the course of export: Provided that the input tax credit on account of capital goods shall be allowed only to the extent and in the manner prescribed. Explanation - For the purpose of this section, all sale of inputs made to the dealers in a Special Economic Zone as notified by the Central Government under section 5 of the Foreign Trade Regulation Act, 1992 shall also be zero rated (2) Notwithstanding anything contained in sub-section (1), sale of goods made to foreign diplomats or missions shall not be exempt: Provided that the tax paid by such foreign diplomats or missions on their purchases will be refunded in full in the manner prescribed.