Re‐export is sending back goods imported for specific purposes like jobbing, execution of a contract, servicing/repairing of machineries, display in fair/exhibition etc. It also happens when indigenously manufactured goods were returned back after export and re‐imported for repairing/reprocessing etc. due to reasons such as defective, not meeting buyer’s requirement etc.
Re-Export of Goods may also happen when goods are Imported into India from a Country and then after Exported to another Country. For example, Machines are Imported from Germany into India and Exported to Nepal. Goods can be kept in customs bonded warehouse and then re-exported without payment of customs duty. Export of Warehoused Goods is subject to some Conditions as per Section 69 of Custom Act, 1962.
Let’s discuss here Re-Export of Warehoused Goods to Nepal & Bhutan.
Section 69 of Custom Act, 1962 read with Notification No. 46‐Cus dated 01.02.1963 allows goods imported and warehoused but not cleared for home consumption allows re‐export without payment of Customs Duty if—
(a) a shipping bill or a bill of export has been presented in respect of such goods in the prescribed form;
(b) the export duty, penalties, rent, interest and other charges payable in respect of such goods have been paid; and
(c) an order for clearance of such goods for exportation has been made by the proper officer.
The Section further provides that if the Central Government is of opinion that warehoused goods of any specified description are likely to be smuggled back into India, it may, by notification in the Official Gazette, direct that such goods shall not be exported to any place outside India without payment of duty or may be allowed to be so exported subject to such restrictions and conditions as may be specified in the notification.
Accordingly, the Government has directed vide Notification No.45-Cus. dated 1.2.1963 (as amended) that warehoused goods shall not be exported without payment of import duty to any place in Bhutan or Nepal. Similar restrictions are placed in the case of warehoused goods to be exported by land to any place in Myanmar, Sikang, Tibet or Sinkiang.
However, the warehoused goods can be exported to Nepal without payment of import duty in the following circumstances:
(a) If goods are exported against an irrevocable letter of credit in freely convertible currency;
(b) If goods are exported for supplies to projects financed by any UN Agency or IBRD Association or ADB or any other multilateral agency of the like nature and for which payments are received in freely convertible currency; and
(c) If the specified capital goods are supplied against a global tender invited by HMG of Nepal for which payment is received in Indian Rupees. These goods can be exported only from Jogbani or Raxaul LCS on production of bank certifies of receipt of the payment in freely convertible currency or Indian Rupees, as the case may be.
Main requirement under Section 69 of the Customs Act is to establish that the goods being exported are warehoused goods. This may require examination and verification of various parameters, including but not limited to physical properties, weight, marks and numbers, test reports, if any, documentary evidences vis-à-vis import documents etc. for identification of the goods.
Now, let’s discuss whether Warehoused Good can be Exported to Nepal & Bhutan against payment in Indian rupees?
“There is no restriction on invoicing of export contracts in Indian Rupees in terms of the Rules, Regulations, Notifications and Directions framed under the Foreign Exchange Management Act, 1999”.
Further, in terms of Para 2.52 of the Foreign Trade Policy (2015-2020), all export contracts and invoices shall be denominated either in freely convertible currency or Indian rupees but export proceeds shall be realized in freely convertible currency. However, export proceeds against specific exports may also be realized in rupees, provided it is through a freely convertible Vostro account of a non-resident bank situated in any country other than a member country of Asian Clearing Union (ACU) or Nepal or Bhutan”
As per Section 2 (5) of IGST Act, 2017 Exports means “Taking Goods out of India to a place outside India”. Here no further Conditions are attached regarding currency of Export Receipts.
CBEC Circular no. 88/07/2-019-GST dated February 1, 2019, clarifies that the acceptance of LUT for supplies of goods or services to countries outside India will be permissible irrespective of whether the payments are made in Indian currency or convertible foreign exchange, as long as they are in accordance with the applicable RBI guidelines.
However, as discussed above please note that warehoused goods shall not be exported without payment of import duty to any place in Bhutan or Nepal in case the payment is received in Indian Currency.
Let’s Clarify Next Question Whether Export can made either on under bond or Letter of Understanding (LUT) without payment of IGST or on payment of IGST?
Export of goods to Nepal or Bhutan fulfils the condition of GST Law regarding taking goods out of India. Hence, export of goods to Nepal or Bhutan will be treated as zero rated and consequently will also qualify for all the benefits available to zero rated supplies under the GST regime.
The Warehoused Goods can be exported either under bond or Letter of Understanding (LUT) without payment of IGST, where the exporter can claim refund of accumulated ITC on account of exports or with payment of IGST which can be claimed as refund after the goods have been exported.
Warehoused goods shall not be exported without payment of import duty to any place in Bhutan or Nepal in case the payment is received in Indian Currency.
However, Warehoused goods can be Exported to Bhutan or Nepal
1. With Payment of Customs Duty.
2. Without Payment of Customs Duty if
a) goods are exported against an irrevocable letter of credit in freely convertible currency
b) goods are exported for supplies to projects financed by any UN Agency etc and for which payments are received in freely convertible currency.
c) the specified capital goods are supplied against a global tender invited by HMG of Nepal for which payment is received in Indian Rupees
Disclaimer : The views and opinions; thoughts and assumptions; analysis and conclusions expressed in this article are those of the authors and do not necessarily reflect any legal standing.
Author : SN Panigrahi, GST & Foreign Trade Consultant, Practitioner, Corporate Trainer & Author.
Available for Corporate Trainings & Consultancy and Can be reached @ firstname.lastname@example.org