Updated as on 15th December, 2018
Q.1 How are exports be treated under GST?
Ans. All exports are deemed as inter-State supplies. Exports of goods and services are treated as zero rated supplies. The exporter has the option either to export under bond/Letter of Undertaking without payment of tax and claim refund of ITC or pay IGST by utilizing ITC or in cash at the time of export and claim refund of IGST paid.
Q.2 What is Zero Rating?
Ans. By zero rating it is meant that the entire value chain of the supply is exempt from tax. This means that in case of zero rating, not only is the output exempt from payment of tax, there is no bar on taking/availing credit of taxes paid on the input side for making/providing the output supply. The concept of zero rating of supplies requires the supplies as well as the inputs or input services used in supplying the supplies to be free of GST. This is done by employing the following means:
a) The taxes paid on the supplies which are zero rated are refunded;
b) The credit of inputs/ input services is allowed;
c) Wherever the supplies are exempted, or the supplies are made without payment of tax, the taxes paid on the inputs or input services i.e. the unutilised input tax credit is refunded.
Q.3 How is zero rated supply different from exempted supply?
Ans. The difference between zero rated supplies and exempted supplies is tabulated as below:
| Exempted Supplies | Zero rated Supplies |
| “exempt supply” means supply of any goods or services or both which attracts nil rate of tax or which may be wholly exempt from tax under section 11 of CGST Act, 2017 or under section 6 of the IGST Act, 2017 and includes non-taxable supply | “zero-rated supply” means export of goods or services or both or supply of goods or services or both to a SEZ developer or a SEZ unit as per section 16 of IGST Act, 2017 |
| No tax on the outward exempted supplies, however, the input supplies used for making exempt supplies to be taxed | No tax on the outward supplies; Input supplies also to be tax free |
| Credit of input tax needs to be reversed, if taken; No ITC on the exempted supplies | Credit of input tax may be availed for making zero-rated supplies, even if such supply is an exempt supply ITC allowed on zero-rated supplies |
| Value of exempt supplies, for apportionment of ITC, shall include supplies on which the recipient is liable to pay tax on reverse charge basis, transactions in securities, sale of land and, subject to clause (b) of paragraph 5 of Schedule II, sale of building. | Value of zero rated supplies shall be added along with the taxable supplies for apportionment of ITC |
| Any person engaged exclusively in the business of supplying goods or services or both that are not liable to tax or wholly exempt from tax under the CGST or IGST Act shall not be liable to registration | A person exclusively making zero rated supplies may have to register as refunds of unutilised ITC or integrated tax paid shall have to be claimed |
| A registered person supplying exempted goods or services or both shall issue, instead of a tax invoice, a bill of supply |
Normal tax invoice shall be issued |
Q.4 Can a person claim input tax credit in case of export of exempted goods?
Ans. Yes, any zero rated supply is eligible for input tax credit paid by such supplier. As per section 16(2) of the IGST Act, credit of input tax may be availed for making zero-rated supplies, notwithstanding that such supply may be an exempt supply.
Q.5 What is the impact on importer-exporter code(IEC)?
Ans. All IECs issued with effect from 1.07.2017 reflect PAN as IEC. There will be no separate IEC number allotted to the exporters. PAN number itself would be the IEC number and would be authorised as IEC.
The GSTIN is the key identifier at the transaction level. The importer/exporter need to declare only GSTIN (wherever registered with GST) at the time of import/export of goods. The PAN level aggregation of data would automatically happen in the system. The IEC holders shall quote their PAN number (instead of IEC) in all their future correspondence as well as documentation with DGFT.
Q.6 What IEC number is to be used for special category of importers like government, individual importing for personal use etc in terms of para 2.07(b) of Handbook of Procedure by DGFT?
Ans. DGFT has modified the para 2.07(b) and has allotted revised permanent IEC number for such category of importers vide DGFT Public Notice No. 09/2015-20 dated 29th June, 2017. The same can be used for import /export by the categories of importers/exporters mentioned therein.
For instance, persons /Institutions /Hospitals importing or exporting goods for personal use, not connected with trade or manufacture or agriculture, earlier using IEC no. 0100000053 now have to use IIHIE0153E as IEC.
Q.7 What is export of goods?
Ans. The definition of “export of goods” in section 2(5) of IGST Act has been straight taken from section 2(18) of the Customs Act, 1962 and means taking goods out of India to a place outside India.
Q.8 What is India in the context of GST?
Ans. The term “India” as per section 2(56) of CGST Act, 2017 means-
“the territory of India as referred to in article 1 of the Constitution, its territorial waters, seabed and sub-soil underlying such waters, continental shelf, exclusive economic zone or any other maritime zone as referred to in the Territorial Waters, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976, and the air space above its territory and territorial waters”
Under Article 1 of the Constitution of India, ‘India’ is defined as under:
1. Name and territory of the Union
(1) India, that is Bharat, shall be a Union of States
(2) The States and the territories thereof shall be as specified in the First Schedule
(3) The territory of India shall comprise
(a) The territories of the states
(b) The Union Territories specified in the First Schedule
(c) Such other territories as may be acquired
Article 1 of the Constitution makes it clear that the territories of the States and that of the Union Territories are fixed in terms of First Schedule to the Constitution. India is a Union of States however the territory of India is not limited to the territories of the respective States but also includes other territories as may be acquired.
The Maritime Zone Act vide section 3(1) thereof provides that the sovereignty of India extends to territorial waters, sea bed and subsoil underlying such waters and the air space over such waters. The limit of territorial waters is fixed at 12 nautical miles from the baseline as per Section 3(2) of the Maritime Zone Act.
The continental shelf of India comprises the seabed and subsoil of the submarine areas that extend beyond the limit of its territorial waters throughout the natural prolongation of its land territory to the outer edge of the continental margin or to a distance of two hundred nautical miles from the baseline where the outer edge of the continental margin does not extend up to that distance.
The Exclusive Economic Zone (‘EEZ’) of India is an area beyond and adjacent to the territorial waters, and the limit of such zone is two hundred nautical miles from the baseline.
Q.9 What is a State in the context of GST?
Ans. The definition of Union Territory in Article 366 (30) of the Constitution means any Union Territory specified in the First Schedule of the Constitution and includes any other territory comprised within the territory of India but not specified in that Schedule. The territorial water is not referred to in the First Schedule of the Constitution, and therefore, as per the Constitutional provision, territorial waters up to twelve nautical miles is part of Union Territory.
In case of Great Eastern Shipping Company … vs State of Karnataka and Ors. on 23 January, 2004 before Karnataka High Court, the Court held that State of Karnataka had taxation powers over territorial waters. The matter was appealed against before the Supreme Court and the Supreme Court in Civil Appeal No. 3383/2004 has stayed the order of the High Court. The Hon’ble Supreme Court on 13.1.2016 while hearing this case had observed as follows: “any pronouncement of the court would have far reaching implications not only for central state relationship but the federal character and separation of legislative powers of the union and the States”.
The GST Council in its ninth meeting held on 16th January, 2017 took the decision that the territorial water within the twelve nautical miles shall be treated as the territory of the Union of India unless the Hon’ble Supreme Court decides otherwise in the on-going litigation on the issue but the power to collect the State tax in the territorial waters shall be delegated by the Central Government to the States.
Accordingly, for supplies in territorial waters, section 9 of IGST Act gives powers to States to levy GST. Section 9 is reproduced below:
Notwithstanding anything contained in this Act, ––
(a) where the location of the supplier is in the territorial waters, the location of such supplier; or
(b) where the place of supply is in the territorial waters, the place of supply, shall, for the purposes of this Act,
be deemed to be in the coastal State or Union territory where the nearest point of the appropriate baseline is located.
Further, explanation clause to section 25(1) of CGST Act, 2017 on registration provisions provides that every person who makes a supply from the territorial waters of India shall obtain registration in the coastal State or Union territory where the nearest point of the appropriate baseline is located.
Q.10 Can an exporter purchase goods without payment of tax on furnishing of a declaration form?
Ans. No, there is no such provision in GST. Tax has to be payable on their inward supplies and they can claim refund of the accumulated ITC.
However, there is a 0.1% scheme in which a supplier can supply goods to an exporter by paying only 0.1% GST and claim refund of unutilised ITC. The exporter in such a scenario cannot export on payment of integrated tax and take refund. He has to adopt the LUT/Bond route only.
Q.11 What is the 0.1% scheme for procurement of exports by merchant exporters?
Ans. It is a scheme for merchant exporters who have an option to pay nominal GST of 0.1% for procuring goods from domestic suppliers for export vide notification no. 40/2017-Central Tax (Rate) and 41/2017-Integrated Tax (Rate) both dated 23.10.2017.
Exemption from payment of GST on so much of the tax leviable on such goods as is in excess of the amount calculated @0.1%, is granted, subject to fulfilment of following conditions:
- Supply on a tax invoice
- Recipient to export goods within 90 days from issue of invoice by supplier
- Recipient to indicate the GSTIN number of the registered supplier & tax invoice number issued by the registered supplier in the shipping bill or bill of export as the case may be
- the registered recipient shall be registered with an Export Promotion Council or a Commodity Board recognised by the Department of Commerce
- the registered recipient shall place an order on registered supplier for procuring goods at concessional rate and a copy of the same shall also be provided to the jurisdictional tax officer of the registered supplier.
- the registered recipient shall move the said goods from place of registered supplier –
- (a) directly to the Port, Inland Container Deport, Airport or Land Customs Station from where the said goods are to be exported; or
- (b) directly to a registered warehouse from where the said goods shall be moved to the Port, Inland Container Deport, Airport or Land Customs Station from where the said goods are to be exported;
- if the registered recipient intends to aggregate supplies from multiple registered suppliers and then export, the goods from each registered supplier shall move to a registered warehouse and after aggregation, the registered recipient shall move goods to the Port, Inland Container Deport, Airport or Land Customs Station from where they shall be exported;
- in case of situation referred to in above condition, the registered recipient shall endorse receipt of goods on the tax invoice and also obtain acknowledgement of receipt of goods in the registered warehouse from the warehouse operator and the endorsed tax invoice and the acknowledgment of the warehouse operator shall be provided to the registered supplier as well as to the jurisdictional tax officer of such supplier; and
- when goods have been exported, the registered recipient shall provide copy of shipping bill or bill of export containing details of Goods and Services Tax Identification Number (GSTIN) and tax invoice of the registered supplier along with proof of export general manifest or export report having been filed to the registered supplier as well as jurisdictional tax officer of such supplier.
Q.12 What are the provisions for refund of taxes for exporters in GST?
Ans. Provisions relating to refund are contained in section 54 of the CGST Act, 2017. It provides for refund of tax paid on zero-rated supplies of goods or services or on inputs or input services used in making such zero-rated supplies, or refund of tax on the supply of goods regarded as deemed exports, or refund of unutilized input tax credit. Identical provisions exist under the IGST Act, 2017 and relevant SGST/UTGST Acts.
Q.13 Can unutilized input tax credit be allowed as refund to exporters?
Ans. Yes. Section 54(3) of the CGST Act, 2017 provides for refund of any unutilised input tax credit of inputs and input services at the end of any tax period except where
- i) the goods exported out of India are subjected to export duty; or
- ii) the exporter claims drawback of CGST or refund of IGST paid on such export.
Q.14 Will the principle of unjust enrichment apply to exports?
Ans. The principle of unjust enrichment is not applicable in case of exports of goods or services as the recipient is located outside the taxable territory.
However, in respect of supplies to SEZs, section 54(8) has been amended vide CGST (Amendment) Act, 2018 so as to make the principle of unjust enrichment applicable. Thus, from the date of coming of the CGST(Amendment) Act, 2018 into force, the principle of unjust enrichment will be applicable inin case of refunds against supplies to SEZs, even though such supplies are zero rated.
Q.15 What is deemed export under GST Law? Whether any supply has been categorized as deemed export by the Government?
Ans. Deemed export has been defined under Section 2(39) of CGST Act, 2017 as supplies of goods as may be notified under section 147 of the said Act. Under section 147, the Government may, on the recommendations of the Council, notify certain supplies of goods manufactured in India as deemed exports, where goods supplied do not leave India, and payment for such supplies is received either in Indian rupees or in convertible foreign exchange. Notification No. 48/2017-Central tax dated 18th October, 2017 has been issued notifying the following supplies of goods as deemed exports.
(i) Supply of goods by a registered person against Advance Authorisation
(ii) Supply of capital goods by a registered person against Export Promotion Capital Goods Authorisation
(iii) Supply of goods by a registered person to Export Oriented Unit
(iv) Supply of gold by a bank or Public Sector Undertaking specified in the notification No. 50/2017-Customs, dated the 30th June, 2017 (as amended) against Advance Authorisation.
Q.16 What are the documents to be submitted as evidence of supplies as deemed export supplies?
Ans. A supplier of deemed export supplies has to submit following documents for claiming refund:
(i) Acknowledgment by the jurisdictional Tax officer of the Advance Authorisation holder or Export Promotion Capital Goods Authorisation holder, as the case may be, that the said deemed export supplies have been received by the said Advance Authorisation or Export Promotion Capital Goods Authorisation holder, or a copy of the tax invoice under which such supplies have been made by the supplier, duly signed by the recipient Export Oriented Unit that said deemed export supplies have been received by it.
(ii) An undertaking by the recipient of deemed export supplies that no input tax credit on such supplies has been availed of by him.
(iii) An undertaking by the recipient of deemed export supplies that he shall not claim the refund in respect of such supplies and the supplier may claim the refund.
(Notification No. 49/2017-Central Tax dated 18th October, 2017)
Q.17 When an exporter cannot use the route of payment of IGST and taking refund under Rule 96 of CGST Rules, 2017?
Ans. Position from 23rd October, 2017 to 8th October, 2018: An exporter cannot use the route of payment of IGST and taking refund under Rule 96 of CGST Rules, 2017 if he receives supplies on which following benefits are availed:
If Supplier Claims benefit of –
(i) Deemed Exports( Notn No. 48/2017-CT)
(ii) 1% scheme (Notn No. 40/2017-CT(R) and 41/2017-IGST(R))
(iii) EOU Scheme (Notn 78/2017-Customs)
(iv) AA/EPCG etc. (Notn No. 79/2017-Customs)
Position from 9th October, 2018: An exporter cannot use the route of payment of IGST and taking refund under Rule 96 of CGST Rules, 2017 if he receives supplies on which following benefits are availed-
(i) Deemed Exports (Notn No. 48/2017-CT)
(ii) 1% scheme (Notn No. 40/2017-CT(R) and 41/2017-IGST(R))
Or, if the exporter avails following benefits-
(i) EOU Scheme (Notn 78/2017-Customs)
(ii) AA/EPCG etc. (Notn No. 79/2017-Customs, except for capital goods)
In the above cases, he needs to avail refund of unutilised ITC as per Rule 89(4A) / (4B)
(Notification No. 54/2018 – Central Tax dated 09.10.2018)
Q.18 What would be the GST rate if the product procured by merchant exporter at 0.1 per cent is further exported on payment of IGST?
Ans. The option of payment of IGST and taking refund is not available in case the exporter has procured the goods under 0.1% scheme. He should avail the LUT facility while exporting such goods so that there is no tax liability at the time of export.
Q.19 Can we export under normal procedure without availing the benefit of 0.1 per cent while procuring goods for exports?
Ans. Yes, the facility of procuring goods at 0.1 per cent is an optional facility which is available subject to adhering to the conditions mentioned in Notification no. 41/2017-Integrated Tax (Rate) dated 23rd October, 2017. In case, an exporter wants to procure the goods for exports on payment of applicable GST and subsequent exports either on LUT or on payment of IGST, the exporter can do it and claim back ITC or IGST, as the case may be.
Q.20 Can duty credit scrips received as incentive by exporters such as MEIS, SEIS etc be utilised for payment of all duties at the time of import?
Ans. No, these scrips can be utilised only for payment of Basic Customs duty and Safeguard Duty, Transitional Product Specific Safeguard Duty, and Antidumping Duty. In case of non-GST supplies like petroleum products etc, the scrips can also be used for payment of duties like central excise, CVD/ SAD.
The scrips cannot be used for payment of any type of GST-IGST/CGST/SGST/UTGSTor compensation cess.
Q.21 How can a manufacturer exporter of exempted goods take input stage credit on raw materials used in the manufacture of exported goods?
Ans. Under IGST law a person engaged in export of goods which is an exempt supply is eligible to avail input stage credit for zero rated supplies. He needs to choose the Bond/LUT route and not payment of integrated tax route. Once the goods are exported, refund of unutilized credit can be availed under Section 16(3)(a) of IGST Act, 2017 and Section 54 of the CGST Act, 2017 and the rules made there.
Q.22 What is the rate of duty on sale of MEIS/SEIS scrips?
Ans. The MEIS/SEIS scrips are classifiable under HSN code 4907 and the sale of such scrips is exempted vide S. No. 122A of Notification No. 2/2017-Central Tax (Rate) dated 28.06.2017, as amended vide Notification No. 35/2017-Central Tax (Rate) dated 13.10.2017.
Q.23 Whether sale of DFIA scrips liable to GST?
Ans. As per Notification No. 35/2017-Central Tax (Rate) dated 13.10.2017, “Duty Credit scrips” are exempted from GST. DFIA scrips are not “Duty Credit scrips” and therefore are leviable to GST @ 12%.
Q.24 Can a person opting for composition scheme make supply of goods to SEZ?
Ans. No, because all supplies to SEZ are treated as inter-State supplies. A person paying tax under composition scheme cannot make inter-State outward supply of goods.
Q.25 An exporter gets an order from a Selling agent to whom he pays commission. Will it be taxable under GST?
Ans. Situation I- Selling agent is located in India: The selling agent in India is providing service to the exporter. Supplier and recipient are in India, therefore place of supply would be governed by the default provision in section 12 of IGST Act, 2017 and would be location of exporter. Thus, it would be taxable in GST.
Situation II- Selling agent is located outside India: The foreign agent, who facilitates the supply of goods, is covered within the definition of intermediary. Since the supplier is outside India and recipient is in India, place of supply would be as per section 13 of IGST Act, 2017. The place of supply of service for services provided by intermediary would be the location of service provider, i.e. the place where he is registered. Since a foreign agent is located outside India and not registered in India, the commission paid to him will not be taxable.
Q.26 Whether commission received by a buying agent for helping procuring goods from an exporter is exempted from GST?
Ans. Situation I- Buying agent is located in India: The buying commission received by buying agent in India from the importer overseas in foreign exchange will be taxable as the agent is covered in definition of intermediary and therefore place of supply is in India.
Situation II- Buying agent is located outside India: The buying commission received will not be taxable as place of supply will be outside India.
Q.27 Does GST be payable on goods not intended to be sold, taken out for participation in overseas exhibitions and trade fairs and brought back into India after exhibition?
Ans. GST is not payable in such cases. Exporters will need exhibition participation letter and no foreign exchange involved letter from the concerned bank for the purpose of exchange control requirements.
At the time of re-import of the subject goods, identity of goods with respect to the export documents needs to be established to seek exemption from import duty in accordance with Customs provisions.
Q.28 What is e-wallet scheme?
Ans. Concept of “e-Wallet” is being worked upon by a committee appointed by GST Council. The e-wallet of the exporter would be credited with a notional amount on the basis of the past export performance. An exporter could use the balance in e-Wallet to pay tax liability and then adjust the credit against the refund paid to him. The notional credit in e-Wallet is like an advance refund, with the restriction that this could only be used to pay taxes and would be adjusted against final payment of refunds. The credit in e-Wallet could be used for payment of IGST on imports thus ensuring that there was no additional burden of working capital. As regards payment of GST on domestic purchases, the e-Wallet system would permit transfer of balances from the exporter’s account to his supplier’s account so that GST could be paid by the supplier on the basis of the amount transferred in his e-Wallet by the exporter. The working capital requirement in the eco-system would get reduced by the amount of the notional credit given in the e-Wallets. This credit would be used to pay IGST, GST etc. The details of the scheme are being worked out and will be announced later.
Q.29 Whether section 16 of the IGST applicable to exports in respect of compensation cess?
Ans. Section 11(2) of the GST (Compensation to States) Act, 2017 provides that provisions of IGST Act, and the rules made thereunder, shall, mutatis mutandis, apply in relation to the levy and collection of the cess leviable under section 8 on the inter-State supply of goods and services as they apply in relation to the levy and collection of integrated tax on such inter-State supplies under the said Act.
Thus, provisions of section 16 of the IGST Act, 2017, relating to zero rated supply will apply mutatis mutandis for the purpose of Compensation Cess. Exporter will be eligible for refund of Compensation Cess paid on goods exported by him and/or no Compensation Cess will be charged on goods exported by an exporter under bond and he will be eligible for refund of input tax credit of Compensation Cess relating to goods exported [on similar lines as refund of input taxes under section 16(3) (a) of the IGST, 2017.
(Circular No. 1/1/2017-compensation cess dated 26th July, 2017)
21.2 Export of Services
Q.30 What is supply of services in the GST?
Ans. As in the earlier service tax regime, five conditions have been prescribed for a service to be treated as exports in GST. The five conditions comprised in the definition of the term “Export of Services” are cumulative and are to be fulfilled in totality in order to consider a transaction of supply of service as an export supply. They are as under:
(i) the supplier of service is located in India;
(ii) the recipient of service is located outside India;
(iii) the place of supply of service is outside India;
(iv) the payment for such service has been received by the supplier of service in convertible foreign exchangeor in Indian rupees wherever permitted by the Reserve Bank of India; and
(v) the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8;
[Section 2 (6) of IGST Act read with IGST (Amendment) Act, 2018]
Q.31 What is location of supplier of service?
Ans. The location of supplier of service has been defined in section 2(15) of the IGST Act, 2017 and is to be determined by applying the sequential test given in the definition which is reproduced hereunder:
(a) Where a supply is made from place of business for which the registration has been obtained, the location of such place of business
(b) Where a supply is made from a place other than the place of business for which registration has been obtained (a fixed establishment elsewhere), the location of such fixed establishment.
(c) Where a supply is made from more than one establishment, whether the place of business or fixed establishment, the location of the establishment most directly concernedwith the provision of the supply.
(d) In absence of such places, the location of the usual place of residence of the supplier.
A “place of business” is defined in section 2(85) of the CGST Act, 2017 and includes––
(a) a place from where the business is ordinarily carried on, and includes a warehouse, a godown or any other place where a taxable person stores his goods, supplies or receives goods or services or both; or
(b) a place where a taxable person maintains his books of account; or
(c) a place where a taxable person is engaged in business through an agent, by whatever name called;
A fixed establishment is defined in section 2(50) of the CGST Act, 2017 and “means a place (other than the registered place of business) which is characterised by a sufficient degree of permanence and suitable structure in terms of human and technical resources to supply services, or to receive and use services for its own needs.
Q.32 How is condition 5 viz the supplier of service and the recipient of service are not merely establishments of a distinct person in accordance with Explanation 1 in section 8 of the IGST Act, 2017 impacts the taxability?
Ans. Explanation I in section 8(2) of the IGST Act, 2017 states that where a person has an establishment in India and any other establishment outside India then such establishments shall be treated as establishment of distinct persons. Where the Indian arm is set up as a liaison office or a branch they would be treated as establishments of the same entity and hence the supply inter se shall not qualify as export of services.
However, if the Indian arm is set up as a wholly owned subsidiary company incorporated under the Indian laws, the foreign company and the Indian subsidiary would not be governed by the provisions of distinct person or related person as both are separate legal entities.
Q.33 Whether supply of services to Nepal and Bhutan in Indian rupees are liable to GST?
Ans. No. Supply of services where place of supply is Nepal & Bhutan against payment in Indian Rupees are exempted from GST vide Sr. No.10D of notification no. 09/2017-Integrated Tax (Rate) dated 28.06.2017 as amended by Notification 42/2017-Integrated Tax (Rate) dated 27.10.2017.
Further, requirement of remittance in foreign exchange has been relaxed by amendment in the definition of “export of services” in section 2(6) of the IGST Act, 2017 vide the IGST (Amendment) Act, 2018. The payment for such service can now be received by the supplier of service in Indian rupees wherever permitted by the Reserve Bank of India.
Q.34 Whether services supplied by an establishment of a person in India to any establishment of that person outside India, which are treated as establishments of distinct persons in accordance with Explanation 1 in section 8 of the Integrated Goods and Services Tax Act, 2017 taxable?
Ans. No. Such services are exempted with a condition that the place of supply should be outside India as per section 13 of the IGST Act, 2017 (Notification No. 15/2018-Integrated Tax (Rate) dated 26th July, 2018)
21.3 Duty Drawback Scheme
Q.35 Is there any impact of GST on the Duty Drawback Scheme for exporters?
Ans. Following changes have been done in the Duty Drawback scheme in Customs:
(i) No amendments have been made to the drawback provisions (Section 74 or Section 75) under Customs Act 1962 in the GST regime.
(ii) However, the duty drawback rules have substantially been amended and new Customs and Central Excise Duties Drawback Rules, 2017 with effect from 01.10.2017, have been issued. (Notification No. 88/2017-Customs (N.T) dated 21st September, 2017)
(iii) The definition of drawback has been amended to exclude Integrated Tax and GST Compensation Cess, hence no refund of any of the GST taxes.
(iv) A new Duty Drawback schedule, comprising of only one rate for every product irrespective of whether ITC is taken by the exporter or not has been introduced with effect from 01.10.2017. (Notification No. 89/2017-Customs (N.T) dated 21st September, 2017)
(v) The rates of drawback have substantially been reduced. The earlier rebate had been done away with. Instead now, refund of integrated tax, if paid by the exporter, is refunded by Customs.
(vi) The refund of integrated tax is irrespective of whether drawback is taken by the exporter or not.
(vii) The drawback scheme will continue in terms of both section 74 and section 75. Option of All Industry Rate (AIR) as well as Brand Rate under Section 75 shall also continue.
(viii) Drawback under Section 74 will refund Customs duties as well as Integrated Tax and Compensation Cess paid on imported goods which are re-exported. However, a part of the Integrated Tax and Compensation Cess paid on imported goods would have gone to the respective States/UT, therefore, the same can only be refunded only if the concerned State/UT has not refunded it and the importer has not taken ITC of the same.
Q.36 Will drawback at higher rate be available to exporters who do not avail Input Tax Credit (ITC) like presently available to those who do not avail CENVAT credit?
Ans. Prior to GST, there were two All Industry Rates (AIRs) of duty drawback on exports. The higher rate rebated Customs duties, Central Excise duties and Service tax on inputs or input services used in the manufacture of export goods subject to the condition that no input credit i.e. CENVAT credit was claimed. The lower rate rebated Customs duties on inputs and Central excise duty on fuel for generation of captive power, used in the manufacture of export goods.
In the post GST era, as Central Excise duties and Service Tax have been subsumed in GST, for which full input tax credit is available, only single rate of AIRs have been continued.
Therefore, there will be no difference in rate of Drawback for exporters not availing ITC in GST regime. In GST regime, drawback will be admissible only at lower rate determined on the basis of customs duties paid on imported materials used in the manufacture of export goods.
However, as an export facilitation measure, for the transition period of 3 months from July to September, 2017, drawback at higher composite rates were continued to be granted subject to the condition that no input tax credit of CGST/IGST was claimed, no refund of IGST paid on export goods was claimed and no CENVAT credit was carried forward.
Q.37 Do state taxes also are refunded through duty drawback scheme?
Ans. No. The central taxes which are outside GST but are embedded in exports namely Customs, Central Excise are refunded under the Duty Drawback Scheme. The State taxes are only refunded in respect of apparel and clothing under the Refund of State Levies (RoSL) scheme wherein the amount is refunded from the budget of Ministry of textiles.
21.4 Special Economic Zone(SEZ)
Q.38 How are supplies by and to SEZs treated in GST?
Ans. There is no change in the SEZ scheme. All imports by SEZs are exempted from any duty/tax.
As per section 7(5)(b) of the IGST Act, 2017, a supply of goods or services or both to or by a SEZ developer or a SEZ unit is treated to be a supply of goods or services or both in the course of inter-State trade or commerce.
Further as per section 16 of IGST Act, 2017 supply of goods or services or both to a SEZ developer or a SEZ unit is considered as zero rated supply.
Q.39 What will be the IGST rates when goods or services or both are supplied to SEZ unit?
Ans. Supplies to SEZ unit or developer are considered as zero rated. As such, the supplier can choose to either supply on payment of IGST and claim refund or supply without payment of IGST and in that scenario can only claim the refund of unutilized ITC, if any.
The IGST rates when supplying goods and services to SEZ unit on payment of tax and taking refund route, will be as per rate Notifications No. 01, 02 and 03/2017-Integrated Tax (Rate) dated 28.06.2017 (for goods) and rate Notifications No. 08 and 09/2017 dated 28.06.2017(for Services) as amended from time to time.
Q.40 An SEZ unit in Mumbai avails hotel accommodation in Goa. Whether such supply is intra-state or inter-state supply?
Ans. It is an established principle of interpretation of statutes that in case of an apparent conflict between two provisions, the specific provision shall prevail over the general provision. section 7(5)(b) of the IGST Act is a specific provision relating to supplies of goods or services or both made to a SEZ developer or a SEZ unit, which states that such supplies shall be treated as inter-State supplies.
Accordingly, CBIC vide Circular No. 48/22/2018-GST dated 14.06.2018 has clarified that services of short term accommodation, conferencing, banqueting etc., provided to a SEZ developer or a SEZ unit shall be treated as an inter-State supply.
Q.41 Whether SEZ unit or developer needs to pay IGST when it received supplies which are under reverse charge mechanism?
Ans. All supplies to SEZs are zero rated. However, the suppliers are given two options. In this case, the supplier is not liable to pay GST as the supply is under reverse charge mechanism. The recipient is considered as deemed supplier. Therefore, SEZ has to pay GST in this case.
Q.42 What is the refund mechanism when a DTA supplier supplies goods/services to SEZ Unit?
Ans. The supplier to SEZs has following two options:
(i) Supply goods or services or both to SEZ unit or developer on payment of Integrated tax and claim refund
(ii) Supply goods or services or both to SEZ unit or developer without payment of Integrated tax under LUT/Bond and claim refund of unutilized ITC
Option I: Supply goods or services or both to SEZ unit or developer on payment of Integrated tax and claim refund
The supplier has to follow the procedure outlined in rule 89 of the CGST Rules, 2017. The refund in respect of supplies to a SEZ unit or a SEZ developer, the application for refund shall be filed by the –
(a) supplier of goods after such goods have been admitted in full in the Special Economic Zone for authorised operations, as endorsed by the specified officer of the Zone;
(b) supplier of services along with such evidence regarding receipt of services for authorised operations as endorsed by the specified officer of the Zone
The refund application in form GST RFD-01 shall be accompanied with:
(i) a statement containing the number and date of invoices as provided in rule 46 along with the evidence regarding the endorsement specified in the second proviso to sub-rule (1) in the case of the supply of goods made to a Special Economic Zone unit or a Special Economic Zone developer;
(ii) a statement containing the number and date of invoices, the evidence regarding the endorsement specified in the second proviso to sub-rule (1) and the details of payment, along with the proof thereof, made by the recipient to the supplier for authorised operations as defined under the Special Economic Zone Act, 2005, in a case where the refund is on account of supply of services made to a Special Economic Zone unit or a Special Economic Zone developer;
(iii) a declaration to the effect that the Special Economic Zone unit or the Special Economic Zone developer has not availed the input tax credit of the tax paid by the supplier of goods or services or both, in a case where the refund is on account of supply of goods or services made to a Special Economic Zone unit or a Special Economic Zone developer;
(Section 89(1) of CGST (Rules), 2017.)
Option II: Supply goods or services or both to SEZ unit or developer without payment of Integrated tax under LUT/Bond and claim refund of unutilized ITC
The supplier has to follow the procedure outlined in rule 96A of the CGST Rules, 2017. He needs to submit a bond/LUT in FORM GST RFD-11 to the jurisdictional Commissioner, binding himself to pay the tax due along with the interest specified under sub-section (1) of section 50 within a period of —
(a) fifteen days after the expiry of three months, or such further period as may be allowed by the Commissioner,] from the date of issue of the invoice for export, if the goods are not exported out of India; or
(b) fifteen days after the expiry of one year, or such further period as may be allowed by the Commissioner, from the date of issue of the invoice for export, if the payment of such services is not received by the exporter in convertible foreign exchange.
Q.43 Whether a DTA supplier has to furnish a Bond or LUT while supplying goods/services without payment of integrated tax?
Ans. Yes, a DTA supplier has to furnish a Bond or LUT while supplying goods/services without payment of integrated tax as per Section 16 of the Integrated Tax Act, 2017.
Q.44 Whether the Bond/LUT by a DTA supplier should be submitted to the Development Commissioner SEZ or the jurisdictional proper officer of GST?
Ans. As per Circular No.2/2/2017-GST dated 04.07.2017 Bond/LUT shall be furnished to the jurisdictional Deputy/Assistant Commissioner having jurisdiction over the principal place of business of the exporter.
Q.45 What are the requirement for submitting Bond/LUT?
Ans. The requirement of Bond/LUT will be as prescribed under Circulars No. 4, 8 and 40/2017.
The registered person (exporters) shall fill and submit FORM GST RFD-11 on the common portal. An LUT shall be deemed to be accepted as soon as an acknowledgement for the same, bearing the Application Reference Number (ARN), is generated online. No document needs to be physically submitted to the jurisdictional office for acceptance of LUT.
If it is discovered that an exporter whose LUT has been so accepted, was ineligible to furnish an LUT in place of bond as per Notification No. 37/2017-Central Tax, then the exporter’s LUT will be liable for rejection. In case of rejection, the LUT shall be deemed to have been rejected ab initio.
[Circular 8/2017 as amended by 40/2018 dated 06.04.2018].
Q.46 Whether Bond/LUT is required to be submitted in case of exempted /non-GST goods?
Ans. In case of zero rated supply of exempted or non-GST goods, the requirement for furnishing a bond or LUT cannot be insisted upon. In this regard, the circular no. 45/19/2018-Central Tax dated 30-05-2018 clarifies that in respect of refund claims on account of export of non-GST and exempted goods without payment of integrated tax, LUT/bond is not required
Q.47 If a DTA supplier is supplying the goods to SEZ unit without payment of integrated tax what will the taxable value as per the format prescribed for SEZ supply?
Ans. The taxable value will be the invoice value of the goods supplied to the SEZ unit.
Q.48 Whether Bank as a nominated agency in the non-processing area of SEZ will be eligible for exemption granted to SEZs?
Ans. No. Bank as a nominated agency in the non-processing area of SEZ will not be eligible for exemption granted to SEZ.
Q.49 Whether the exemption granted to nominated agency pre GST regime will continue in the post GST regime for importing gold?
Ans. The bank as a nominated agency will continue to get the exemption of Customs duty as prevailed before the GST regime vide Notification No. 57/2000-Cus dated 08.05.2000. Import of gold by specified banks and specified PSUs as mentioned in Notification No. 77/2017-Cus dated 13.10.2017 attracts Nil IGST. However, other banks will have to pay the IGST as per the Notification No. 26/2017-Cus dated 28.06.2017 as no exemption has been granted for payment of IGST duty to these.
Q.50 Can bank recover the IGST rate from the SEZ Unit while supplying gold to the SEZ Unit?
Ans. No. The banks cannot recover IGST rate from the SEZ Unit. However, the Banks can claim the refund of the IGST paid on imports after supplying the goods to the SEZ Unit.
Q.51 Whether services of short term accommodation, conferencing, banqueting etc., provided to a SEZ developer or a SEZ unit shall be treated as an intra or inter-State supply?
Ans. Even though as per section 12(3)(c) of the IGST Act, the place of supply of services by way of accommodation in any immovable property for organising any functions is the location at which the immovable property is located and therefore the above supply should be intra state supply, it is an established principle of interpretation of statutes that in case of an apparent conflict between two provisions, the specific provision shall prevail over the general provision.
Section 7(5)(b) of the IGST Act is a specific provision relating to supplies of goods or services or both made to a SEZ developer or a SEZ unit, which states that such supplies shall be treated as inter-State supplies. Therefore, the services of short term accommodation, conferencing, banqueting etc., provided to a SEZ developer or a SEZ unit shall be treated as an inter-State supply.
(CBIC Circular No. 48/22/2018- GST dated 14th June, 2018)
Q.52 Whether the benefit of zero rated supply can be allowed to all procurements by a SEZ developer or a SEZ unit such as event management services, hotel and accommodation services, consumables etc?
Ans. Subject to the provisions of section 17(5) of the CGST Act, if event management services, hotel, accommodation services, consumables etc. are received by a SEZ developer or a SEZ unit for authorised operations, as endorsed by the specified officer of the Zone, the benefit of zero rated supply shall be available in such cases to the supplier.
(CBIC Circular No. 48/22/2018- GST dated 14th June, 2018)
Q.53 Whether a company having a unit in SEZ and a unit in DTA require separate registration for both the units?
Ans. Yes, as per Section 8(1) of CGST (Registration) Rules, 2017 a person having a units(s) in a Special Economic Zone or being a Special Economic Zone developer shall make a separate application for registration as a business vertical distinct from his other units located outside the Special Economic Zone.
In the CGST Amendment Act, 2018, the concept of business vertical has been removed. However, following proviso has been inserted in section 25(2), making it mandatory for SEZs to have separate registration.
“Provided further that a person having a unit, as defined in the Special Economic Zones Act, 2005, in a Special Economic Zone or being a Special Economic Zone developer shall have to apply for a separate registration, as distinct from his place of business located outside the Special Economic Zone in the same State or Union territory.”
Q.54 Whether a SEZ unit or SEZ developer procure any goods or services from an unregistered supplier, and whether these will be zero rated supplies?
Ans. Supplies to SEZ unit or SEZ developer have been accorded the status of inter-State supplies under the IGST Act. Under the GST Law, any supplier making inter-State supplies has to compulsorily get registered under GST. Thus anyone making a supply to a SEZ unit or SEZ developer has to necessarily obtain GST registration.
Q.55 Whether SEZ Act/Rules are aligned with the GST?
Ans. SEZ Rules, 2006 have been synced with the GST Provisions vide SEZ (Amendment) Rules, 2018. The terms like Service Tax, Stamp Duty etc replaced with CGST/SGST/IGST/UTGST etc. GST registration certificate required instead of Sales tax registration earlier for establishment / setting up of SEZ unit(s)
Q.56 Whether duty drawback is admissible on supplies by DTA units to SEZs?
Ans. Yes. Supplies made by DTA unit to SEZ Unit or developer are eligible for drawback in cases where the SEZ Unit or developer issues a disclaimer to the DTA supplier and drawback is claimed by the DTA supplier.
Drawback shall be processed and paid by the office of Principal Commissioner or Commissioner of Customs/ Customs (Preventive) in whose jurisdiction the DTA Unit falls. Brand rate fixation also to be done by the office of Principal Commissioner/ Commissioner of Customs/ Commissioner of Customs (Preventive).
21.5 Export Oriented Units
Q.57 Whether the exemption granted to EOUs pre GST regime will continue in the post GST regime?
Ans. Imports by EOUs: The EOUs will continue to get the exemption of Customs duty as prevailed before the GST regime vide Notification No. 52/2003-Cus dated 31.03.2003.
The imports by EOUs are to be levied IGST and compensation cess as per the Notification No. 59/2017-Cus dated 30.06. 2017. However, as part of export package, imports by EOUs have been temporarily exempted from payment of IGST and compensation cess up to 31st March, 2019 vide Customs Notification No. 65/2018-Customs dated 24.09.2018.
Supply to EOUs: A supply to EOU is considered as deemed exports in terms of Notification No. 48/2017-Central tax dated 18th October, 2017. Supply has to be made on payment of GST following the procedure as prescribed vide Circular No. 14/14/2017-GST dated 06.11.2017 but the refund of such GST can be claimed either by supplier or receiver EOU.
Q.58 Is there any procedural change in import clearance by EOUs post introduction of GST?
Ans. For import of goods, EOUs are required to follow Rule 5 of Customs (Import of goods at Concessional rate of Duty) Rules, 2017 instead of earlier procedure of obtaining procurement certificate. Under this, EOU has to submit a copy of requirement of goods to be imported to the jurisdictional Customs Officer as well as to the Customs Officer at port of import. On the basis of the declaration by EOU, Customs Officer at port will allow the clearance of goods giving benefit of exemption notification No. 52/2003 dated 31.03.2003. There is no requirement of separate continuity bond to be submitted by EOU as per the requirement under Customs (Import of goods at Concessional Rate of Duty) Rules, 2017 as B-17 bond, being a general purpose bond will serve the said purpose.
The inter unit transfer would be on invoice on payment of applicable GST taxes. However, such transfer would be without payment of custom duty. The supplier unit will endorse on such documents the amount of custom duty, availed as exemption, if any, on the goods intended to be transferred. The recipient unit would be responsible for paying such basic customs duty, as is obligated under Notification no. 52/2003-Cus dated 31-3-2003 (as amended), when the finished goods made out of such goods or such goods are cleared in DTA.
(Circular No. 35/2016-Customs dated 29.06.17 and
29/2017-Customs dated 17.07.2017)
Q.59 Can EOUs take input tax credit of the IGST paid on imports?
Ans. Yes. EOUs can avail credit of IGST paid which can be used by them for payment of IGST for local supply of goods manufactured by them.
Q.60 Are EOUs entitled for refund of IGST and what is the time limit for obtaining refund on the IGST paid?
Ans. Yes. EOUs are entitled for refund of IGST paid on export or refund of accumulated input tax credit(ITC) on account of exports made under bond/LUT. As per section 54 of CGST Act, 2017, a refund application may be filed within two years from the relevant date by EOUs. The application in form RFDOIA has to accompanied with the documents as prescribed under Rule 89 of CGST Rules, 2017 for claiming refund of ITC. Refund of IGST on exports is available as per Rule 96 of CGST Rules and shipping bill filed is deemed to be application filed for refund. 90% of the total amount claimed as refund will be granted within 10 days of making application or within 7 days of issuance of acknowledgement of refund application. Balance amount of 10% will be granted after verification of documents furnished by the applicant.
Q.61 Will supply of goods from one EOU to another EOU termed as inter unit transfer and whether the same will attract IGST?
Ans. Yes, the EOUs have to pay applicable IGST on inter unit transfer also. The basic customs duty exempted on inputs of supplier unit utilised in such transferred goods would have to be reversed by the recipient EOU at the time of clearance into DTA.
Q.62 What are the conditions for DTA sales by EOUs?
Ans. DTA sale of goods by EOU is subject to fulfilment of following conditions:
(i) Fulfilment of maintaining positive Net Foreign Exchange Earnings (NFE)
(ii) Payment of applicable GST on the product under DTA sale
(iii) Reversal of the Basic Customs Duty exemption availed by the unit on the inputs used in the manufacture of products under DTA Sale.
Q.63 Can the EOU use MEIS/SEIS scrips for payment of IGST or CGST?
Ans. No, the scrips cannot be used for payment of IGST or CGST.
Q.64 What will be the value to be taken for levy of IGST on goods imported by EOUs?
Ans. IGST is levied on the value of imported goods including Customs duty and Customs Cess levied thereon.
21.6 Imports
Q.65 How will imports be taxed under GST?
Ans. Import of Goods and Services are treated as deemed inter-state supplies and IGST is levied on import of goods and services in to the country. The IGST on import of goods is leviable under the provisions of Section 5 of the IGST Act, 2017 read with Section 3(5) of the Customs Tariff Act, 1975 and shall be levied at the time of imports along with the levy of the applicable Customs duties on the value in accordance with Section 3 of the Customs Tariff Act, 1975.
Q.66 What is import of goods under the GST regime? How are they taxed?
Ans. The import of goods has been defined in sub-section (10) of Section 2 of the IGST Act, 2017 as bringing goods into India from a place outside India.
The IGST Act, 2017 provides that the integrated tax on goods shall be in addition to the applicable Basic Customs Duty (BCD) which is levied as per the Customs Tariff Act. In addition, GST compensation cess, may also be leviable on certain luxury and de-merit goods under the Goods and Services Tax (Compensation to States) Cess Act, 2017.
Q.67 What valuation is to be adopted for levying integrated tax and compensation cess?
Ans. The value of the goods for the purpose of levying Integrated tax as well as compensation cess shall be assessable value plus Customs Duty levied under the Act, and any other duty chargeable on the said goods under any law for the time being in force as an addition to, and in the same manner as, a duty of customs.
For instance: Suppose the assessable value of an article imported into India is Rs. 100/-. Basic Customs Duty is 10% ad-valorem; SWC- 10%; Integrated tax rate is 18% and compensation cess is 15%. The taxes will be calculated as under:
| Particulars | Duty |
| (A) Assessable Value | Rs. 100/- |
| (B) Basic Customs Duty@10% | Rs.10/- |
| (C) Social Welfare Charge
@10% |
Rs.1/- |
| (D) Value for Integrated Tax | Rs.111/- |
| (E) Integrated Tax @18% | Rs.19.98 |
| (F) Value for Compensation Cess | Rs.111 |
| (G) Compensation Cess @ 15% | Rs. 16.65 |
| (H) Total Duty ( B+C +E+G) | Rs. 47.63 |
Q.68 Whether Anti-dumping duty/ safeguard duty are to be added for determining the value for integrated tax?
Ans. Yes. In cases where imported goods are liable to Anti-Dumping Duty or Safeguard Duty, value for calculation of IGST as well as Compensation Cess shall also include Anti-Dumping Duty amount and Safeguard duty amount. Let’s say in the above case if Safeguard duty is Rs.20/-, the assessable value for integrated tax as well as compensation cess shall be Rs. 131/-. The taxes calculation chart is as under:
| Particulars | Duty |
| (A) Assessable Value | Rs. 100/- |
| (B) Basic Customs Duty@10% | Rs.10/- |
| (C) Social Welfare Charge
@10% |
Rs.1/- |
| (D) Safeguard Duty | Rs.20/- |
| (E) Value for Integrated Tax | Rs.131/- |
| (F) Integrated Tax @18% | Rs.23.58 |
| (G) Value for Compensation Cess | Rs.131/- |
| (H) Compensation Cess @ 15% | Rs. 19.65 |
| (I) Total Duty ( B+C +D+F+H) | Rs. 74.23 |
Q.69 Whether GST is leviable on baggage imports?
Ans. Passenger Baggage are exempted from IGST as well as compensation cess. The basic customs duty at the rate of 35% and the applicable education cess shall be leviable on the value which is in excess of the duty free allowances provided under the Baggage Rules, 2016.
Q.70 Please explain the tax treatment of goods imported into India and deposited in a warehouse and sold while in warehouse before clearance from Customs
Ans. The Customs Act, 1962 provides for removal of goods from a customs station to a warehouse without payment of duty. The said Act has been amended to include ‘warehouse’ in the definition of “customs area” in order to ensure that an importer would not be required to pay the Integrated tax at the time of removal of goods from a customs station to a warehouse.
The “transfer/sale of goods while being deposited in a customs bonded warehouse” is a common trade practice whereby the importer files an into-bond bill of entry and stores the goods in a customs bonded warehouse and thereafter, supplies such goods to another person who then files an ex-bond bill of entry for clearing the said goods from the customs bonded warehouse for home consumption.
As per section 7(2) of the IGST Act, 2017, the supply of goods imported into the territory of India, till they cross the customs frontiers of India, is treated as a supply of goods in the course of inter-State trade or commerce. Further, the proviso to section 5(1) of the IGST Act provides that the integrated tax on goods imported into India would be levied and collected in accordance with the provisions of section 3 of the Customs Tariff Act, 1975. Thus, in case of supply of the warehoused goods, the point of levy would be the point at which the duty is collected under section 12 of the Customs Act, 1962 which is at the time of clearance of such goods under section 68 of the Customs Act.
The Customs Tariff Act has been amended and a sub-section (8A) has been inserted in section 3 of the CTA vide Finance Act, 2018, with effect from 31st March, 2018, so as to provide that the valuation for the purpose of levy of integrated tax on warehoused imported goods at the time of clearance for home consumption would be either the transaction value or the value as per section 3(8) of the CTA (i.e. valuation done at the time of filing the into-bond bill of entry), whichever is higher.
Thus, the integrated tax shall be levied and collected at the time of final clearance of the warehoused goods for home consumption i.e., at the time of filing the ex-bond bill of entry and the value addition accruing at each stage of supply shall form part of the value on which the integrated tax would be payable at the time of clearance of the warehoused goods for home consumption. In other words, the supply of goods before their clearance from the warehouse would not be subject to the levy of integrated tax and the same would be levied and collected only when the warehoused goods are cleared for home consumption from the customs bonded warehouse.
Q.71 Whether high seas sales treated as supply in GST?
Ans. ‘High Sea Sales’ is a common trade practice whereby the original importer sells the goods to a third person before the goods are entered for customs clearance. After the High sea sale of the goods, the Customs declarations i.e. Bill of Entry etc. is filed by the person who buys the goods from the original importer during the said sale. IGST on high sea sale (s) transactions of imported goods, whether one or multiple, shall be levied and collected only at the time of importation i.e. when the import declarations are filed before the Customs authorities for the customs clearance purposes for the first time. Further, value addition accruing in each such high sea sale shall form part of the value on which IGST is collected at the time of clearance.
Q.72 How are import of goods and services by EOUs and SEZs treated in GST?
Ans. Goods imported by a unit or a developer in the Special Economic Zone for authorised operations are exempted from the whole of integrated tax under section 3(7) of the Customs Tariff Act, 1975 vide Notification No. 64/2017-Customs dated 05.07.2017.
Services imported by a unit or a developer in the Special Economic Zone for authorised operations, are exempted from the whole of the integrated tax leviable thereon under section 5 of the IGST Act, 2017 vide Notification No. 18/2017-Integrated tax dated 30th June, 2017.
Import of goods by 100% EOU’s are governed by Notification no. 52/2003-Customs as amended by Notification no. 78/2017-Customs dated 13.10.2017. EOUs are allowed duty free import of goods (exempt from Customs duties, IGST & Compensation Cess) under the said notifications. However, exemption from IGST is only available till 01.10.2019.
Q.73 What are import of services? How are they treated in GST?
Ans. Import of services has specifically been defined under IGST Act, 2017 and refers to supply of any service where the supplier is located outside India, the recipient is located in India and the place of supply of service is in India.
As per the provisions contained in Section 7(1) (b) of the CGST Act, 2017, import of services for a consideration whether or not in the course or furtherance of business shall be considered as a supply. Thus, in general, import of services without consideration shall not be considered as supply. However, business test is not required to be fulfilled for import of service to be considered as supply.
Furthermore, in view of the provisions contained in Schedule I of the CGST Act, 2017, the import of services by a taxable person from a related person or from a distinct person as defined in Section 25 of the CGST Act, 2017, in the course or furtherance of business shall be treated as supply even if it is made without any consideration.
In view of the provisions contained in Section 14 of the IGST Act, 2017, import of free services from Google and Facebook by individuals without any consideration are not considered as supply. Import (Downloading) of a song for consideration for personal use would be a service, even though the same are not in the course or furtherance of business. Import of some services by an Indian branch from their parent company, in the course or furtherance of business, even if without consideration will be a supply.
Thus, import of services can be considered as supply based on whether there is consideration or not and whether the service is supplied in the course or furtherance of business. The same has been explained in the table below:
| Nature of Service |
Consideration | Business Test |
| Import of services | Necessarily Required | Not required |
| Import of services by a taxable person
from a related person or from a distinct person |
Not required | Necessarily Required |
Q.74 As per the Customs Act, 1962, royalty and license fees are includible in the assessable value of goods. Whether GST is also payable on such royalty and license fees which is already included in the value of goods and IGST is already paid at the time of import?
Ans. No. As per the notification no. 06/2018-Integrated tax dated 25th January, 2018, supply of services, imported into the territory of India covered by such temporary transfer or permitting the use or enjoyment of any intellectual property right are exempted from payment of integrated tax to the extent that royalties and license fees have been included in the transaction value as specified under rule 10(1)(c) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 on which the appropriate duties of Customs have been paid.
Q.75 What procedure will be followed by EOU to import goods without payment of Customs duty in the GST regime?
Ans. To avail such import benefits, EOUs will have to follow the procedure under the Customs (Import of Goods at Concessional Rate of Duty) Rules, 2017
Q.76 Is the registered person procuring goods or services from a supplier outside India required to raise a self-invoice, debit note or credit note in respect of the price or value of services and adjustments thereto?
Ans. As the import of goods are under the cover of a bill of entry, there is no need to raise a self-invoice.
In case of import of services, a self-invoice on the date of receipt of such supplies is required to be issued. [ Section 31(3)(f) of CGST Act read with section 20 of the IGST Act]
Q.77 An airline imports aircrafts into India on lease basis. Whether integrated tax is to be charged on such supplies as such supplies are supply of services under item 1(b) or 5(f) of Schedule II of the CGST Act?
Ans. In case integrated tax is paid on the lease charges under the IGST Act, the goods imported are exempted from payment of integrated tax at the time of import subject to the importer undertaking to pay integrated tax on lease charges and other conditions as stipulated in notification no. 65/2017-Customs dated 8th July, 2018
Q.78 Whether import of rigs and ancillary goods imported under lease is chargeable to IGST?
Ans. Import of rigs and ancillary goods imported under lease is exempted from IGST, subject to payment of appropriate IGST on the supply/import of such lease service and fulfilment of other specified conditions.
Q.79 Whether bona fide gifts imported through post or air are exempted?
Ans. Bona fide gifts up to CIF value limit of Rs. 5000 imported through post or air are exempted from payment of basic customs duty and integrated tax.
Q.80 How are supplies by SEZs to DTA treated in GST?
Ans. Supplies by SEZs to DTA units are liable to GST. Supplies from SEZs to DTA can be categorised as under:
Supply under Bill of Entry: The supplies made by SEZ on cover of a bill of entry shall be reported by DTA unit in its GSTR-3B as imports.
Supply without Bill of Entry: Any supply made by SEZ to DTA, without the cover of a bill of entry is required to be reported by SEZ unit in GSTR-1. The liability for payment of IGST in respect of supply of services is created from this Table.
Q.81 Whether imports by UINs are taxable?
Ans. The exemption in respect of Import of goods by UN bodies was available through Notn No. 03/57-Customs which has been suitably amended vide Customs Notifications No. 39/2017-Customs dated 30th June, 2017. Thus, the import of goods by UN Bodies shall not be subjected to integrated tax.
Similarly, import of services by Foreign diplomatic mission or consular post in India, or diplomatic agents or career consular officers posted therein; United Nations or a specified international organisation are exempted vide Notification No. 09/2017- Integrated Tax(Rate) dated 30th June, 2017.
Q 82. Whether services provided by the Central Government, State Government, Union territory by way of deputing officers after office hours or on holidays for inspection or container stuffing or such other duties in relation to import export cargo on payment of Merchant Overtime charges are taxable?
Ans. No. These services have specifically been exempted vide Notification No. 09/2017- Integrated Tax(Rate) dated 28th June, 2017
Source- FAQs on GST updated till 15th December 2018
INDEX OF ALL FAQs ON GOODS AND SERVICE TAX
excellent compilation. wish it is updated as on 31st Dec 2019