Introduction:
Exports are good for any economy due to various reasons including the most popular reason of foreign currency being received by exporters. In GST exemption is a bad thing because it breaks the input tax credit chain and results in distortion of tax system. In this article an attempt has been made to analyze various provisions related to export of goods and services.
Section 7 and 16 of IGST Act, 2017:
While section 7 speaks about interstate taxable supply in terms of sub-section 5, a transaction is called as an in inter-state transaction where supplier is located in India and place of supply is outside India. It means exports are clearly interstate taxable supplies and not exempt altogether under GST. This is the key confusion among small exporters that they understand exports to be exempt. On the other hand, section 16 of the same act talks about zero rated supply of goods where exports are classified into the same class vide clause (a) of section (1). Now we can say that exports are interstate taxable supplies but zero rated hence no upfront exemption is available for the same.
Modes of exports under GST:
So far in terms of rule 96A of CGST Rules, 2017 export of goods and services can be done in two ways, first on payment of IGST and second on bond and LUT (Letter of undertaking). In case first option is being exercised by the exporters refund of IGST paid shall be available within 7 days and accordingly. The second option in this case shall be to opt for bond or LUT where export can be done without payment of IGST. The eligibility criteria for filing of bond and LUT was given in circulars of board where LUT was available for status holder exporters and those having exports proceeds of 10% of previous year exports and minimum of Rs. 1 crore.
Big relief in by notification no. 37/2017 and circular no. 08/2017:
All registered persons who intend to supply goods or services for export without payment of integrated tax shall be eligible to furnish a Letter of Undertaking in place of a bond except those who have been prosecuted for any offence under the Central Goods and Services Tax
Act, 2017 (12 of 2017) or the Integrated Goods and Services Tax Act, 2017 (13 of 2017) or any of the existing laws in force in a case where the amount of tax evaded exceeds two hundred and fifty lakh rupees;
The Letter of Undertaking shall be furnished on the letter head of the registered person, in duplicate, for a financial year in the annexure to FORM GST RFD – 11 referred to in sub-rule (1) of rule 96A of the Central Goods and Services Tax Rules, 2017 and it shall be executed by the working partner, the Managing Director or the Company Secretary or the proprietor or by a person duly authorized by such working partner or Board of Directors of such company or proprietor;
Circular No. 08/2017 dated 04-10-2017:
The facility of export under LUT has been now extended to all registered persons who intend to supply goods or services for export without payment of integrated tax except those who have been prosecuted for any offence under the CGST Act or the Integrated Goods and Services Tax Act, 2017 or any of the existing laws and the amount of tax evaded in such cases exceeds two hundred and fifty lakh rupees unlike Notification No. 16/2017-Central Tax dated 7th July, 2017 which extended the facility of export under LUT to status holder as specified in paragraph 5 of the Foreign Trade Policy 2015-2020 and to persons receiving a minimum foreign inward remittance of 10% of the export turnover in the preceding financial year which was not less than Rs. one crore.
Time for acceptance of LUT/Bond:
As LUT/Bond is a priori requirement for export, including exports to a SEZ developer or a SEZ unit, the LUT/bond should be processed on top most priority. It is clarified that LUT/bond should be accepted within a period of three working days of its receipt along with the self-declaration as stated in para 2(d) above by the exporter. If the LUT / bond is not accepted within a period of three working days from the date of submission, it shall be deemed to be accepted.
Conclusion:
There is a huge blockage of funds to the tune of thousands of crores on account of IGST and input tax credit. The recent council meeting on 06th of October has given a big relief by enhancing the refund process and introduction of e-wallet from 01 April 2018. The refunds for July shall be released immediately for IGST and for input tax credit shall from 18th October 2017. Overall, it’s good news for entire export community and excellent lobby by associations.
Disclaimer: Views expressed are strictly personal. The content of this document are solely for informational purpose. It doesn’t constitute professional advice or recommendation. The Author does not accept any liabilities for any loss or damage of any kind arising out of information in this article and for any actions taken in reliance thereon.
(Author can be reached at [email protected], +91-9953236278)
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