This Article amplifies and decodes the scope and applicability of Goods and Service Tax (GST) on export of goods and services.
1. Exports are priority of every country, since it is one of the largest source of earning foreign currency. To promote export of goods and services, tax exemption is granted by the government, like earlier regime GST regime also provides relief of tax (GST) to exports.
2. Export benefits under GST –
(i) Exemption from GST on final products
(ii) Refund of GST paid on inputs.
3. Under GST exports have been termed as zero-rated supply. Zerorated supply has been defined under Section 16(1) of Integrated Goods and Service Tax Act, 2017 (IGST Act) in the following words:
“zero rated supply” means any of the following supplies of goods or services or both, namely:––
(a) export of goods or services or both; or
(b) supply of goods or services or both to a Special Economic Zone developer or a Special Economic Zone unit.
Under GST, supplies to SEZ Developer and SEZ Units are treated at par with physical exports.
4. the registered person making zero rated supply can claim refund under either of two options –
(i) Supply goods under bond or LUT (Letter of Undertaking) without payment of IGST and claim refund of unutilized ITC (Input Tax Credit)
(ii) Supply goods on payment of IGST and claim refund of IGST paid on goods and services.
Refund of GST Compensation Cess under zero rated supply
CBEC (now CBIC) vide Circular No. 1/1/2017-Compensation Cess dated 26-7-2017 clarified that exporters can claim refund of GST Compensation Cess and Compensation Cess will not be charged on goods exported under bond or LUT.
CBIC vide Circular No. 45/19/2018-GST dated 30-5-2018 has clarified that if GST compensation cess is payable on inputs but not on output supply of goods exported, refund of ITC of GST compensation cess can be claimed.