Core rule: Schedule 1 identifies VAT-exempt supplies. Schedule 2 identifies qualifying zero-rated supplies. Zero rating remains within the taxable system, whereas input VAT directly attributable to exempt supplies is generally not creditable.
Example: assume NPR 13,000 input VAT relates entirely to qualifying zero-rated exports and all credit conditions are met. Credit may be available even though output VAT is zero. The same amount spent solely to make exempt supplies does not automatically qualify.
Mixed businesses must allocate inputs rather than claim everything. For exports, retain the prescribed export and payment evidence; an overseas customer alone does not establish zero rating.
Check the current schedule and the exact goods or service classification. Do not describe an exempt supply as a 0% taxable sale just because both produce no VAT charge on the invoice.