CA Ramandeep Singh Bhatia

CA RAMANDEEP SINGH BHATIA

Introduction

Exports have been the area of focus in all policy initiatives of the Government for more than 30 years. Now with the Make in India initiative, exports continue to enjoy this special treatment because exports should not be burdened with domestic taxes. On the other hand, GST demands that the input-output chain not be broken and exemptions have a tendency to break this chain. Zero-rated supply is the method by which the Government has approached to address all these important considerations.

In this article, I have tried to explain the basic provision, rules as well as notification which are very important to understand the GST on the export of Goods as well as services.

What is Export of Goods under GST?

As per IGST Act Section 2(5) Export of goods with its grammatical variations and cognate expressions, means taking goods out of India to a place outside India. Export means trading or supplying of goods and services outside the domestic territory of a country.

What is Export of Services under GST?

As per IGST Act Section 2(6) “Export of services” means the supply of any service when, –

(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 exchange;

(v) the supplier of service and the recipient of service are not merely establishments of a distinct person

Supply of services having place of supply in Nepal or Bhutan, against payment in Indian Rupees is exempted even if the payment is received in Indian Currency looking at the business practices and trends.

Notification No. 42/2017-Integrated Tax (Rate) 27th October 2017

How are Exports treated under GST Law?

Under the GST Law, export of goods or services has been treated as:

  • Inter-State supply (7(5) IGST act) and covered under the IGST Act. Export is treated as Inter-state supply under GST and IGST is charge on export.
  • ‘zero rated supply’ (Sec.16 (1) IGST act) i.e. the goods or services exported shall be relieved of GST levied upon them either at the input stage or at the final product stage.

GST will not be levied in any Kind of Exports of Goods or Services.

What is Zero rated Supply? – Sec.16 (1) IGST ACT

(1) “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.

Zero-rated supply does not mean that the goods and services have a tariff rate of ‘0%’ but the recipient to whom the supply is made is entitled to pay ‘0%’ GST to the supplier.

In other words, as it has been well discussed in section 17(2) of the CGST Act that input tax credit will not be available in respect of supplies that have a ‘0%’ rate of tax. However, this disqualification does not apply to zero-rated supplies covered by this section.

These provisions of zero-rated supplies are introduced in the statute on the basis of the prevalent Central Excise and Service Tax laws. It is widely believed that introduction of this provision will alleviate the difficulty of a supplier who exempts goods or services or both in terms of export competitiveness.

This provision also specifically expresses that taxes are not exported. Care must be exercised that while paying taxes, such taxes are not collected from the recipient of goods or services or both. This would result in unjust enrichment.

The exporter may utilize such credits for discharge of other output taxes or alternatively, the exporter may claim a refund of such taxes as per section 54 of CGST or Rules made there under. .

How Exporter can claim refund for Zero rated supply?

A guidance note relating was released by the Indian government which has helped in clearing doubts regarding the claim of input tax credit on zero-rated exports. An exporter dealing in zero-rated goods under GST can claim a refund for zero-rated supplies as per the following options:

How Exporter can claim refund under Option -1 LUT Method?

He may export the Goods/services under a Letter of Undertaking, without payment of IGST and claim refund of unutilized input tax credit; (Rule 96A of CGST Rules)

(1) Any registered person availing the option to supply goods or services for export without payment of integrated tax shall furnish, prior to export, a bond or a Letter of Undertaking in FORM GST RFD-11 Bond and LUT Format 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—

Who can export without payment of IGST by furnishing only Letter of Undertaking (LUT) in place of Bond?  Who can export without payment of IGST

(a) fifteen days after the expiry of three months 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

(2) The details of the export invoices contained in FORM GSTR-1 furnished on the common portal shall be electronically transmitted to the system designated by Customs and a confirmation that the goods covered by the said invoices have been exported out of India shall be electronically transmitted to the common portal from the said system.

Procedural Requirement for LUT Method:

Format of Letter of
Undertaking in
: FORM GST RFD-11 (as per Rule 96A CGST Rule)
Submission to : The jurisdictional Commissioner,
Validity Period : Financial Year
How : On letter head of the registered person
Executed by : Working partner, Managing Director or the Company Secretary, Proprietor, A person duly authorized by such working partner or Board of Directors of such company or proprietor.
  • How Exporter can claim refund under Option -2 Refund of IGST?

Refund of integrated tax paid on goods or services exported out of India. – Rule 96 CGST Rules.

(1) The shipping bill filed by an exporter of goods shall be deemed to be an application for refund of integrated tax paid on the goods exported out of India and such application shall be deemed to have been filed only when:-

(a) the person in charge of the conveyance carrying the export goods duly files an export manifest or an export report covering the number and the date of shipping bills or bills of export; and

(b) The applicant has furnished a valid return in FOR1L GSTR-3 or FOR1L GSTR-3B, as the case may be;

(2) The details of the relevant export invoices in respect of export of goods 48 contained in FORM GSTR-1 shall be transmitted electronically by the common portal to the system designated by the Customs and the said system shall electronically transmit to the common portal, a confirmation that the goods covered by the said invoices have been exported out of India.

  • How tax will be charged when sold to merchant Exporter or in the course of Penultimate Sale.

Notification No. 41/2017-Integrated Tax (Rate) 23rd October 2017

Exempts the inter-State supply of taxable goods (hereafter in this notification referred to as “the said goods”) by a registered supplier to a registered recipient for export, from so much of the integrated tax leviable thereon under section 5 of the Integrated Good and Services Tax Act, 2017 (13 of 2017), as is in excess of the amount calculated at the rate of 0.1 per cent. Subject to fulfillment of the following conditions, namely –

(It is to be noted there are similar notification in Central rate vide no. 40/2017- Central Tax (Rate), date 23-10-2017 issued and in respective state as well)

Important Condition for the above notification are as follows:

(i) The registered supplier shall supply the goods to the registered recipient on a tax invoice;

(ii) The registered recipient shall export the said goods within a period of ninety days from the date of issue of a tax invoice by the registered supplier;

(iii) The registered recipient shall indicate the Goods and Services Tax Identification Number of the registered supplier and the tax invoice number issued by the registered supplier in respect of the said goods in the shipping bill or bill of export, as the case may be.

  • What is Deemed Export?

The Government may, on the recommendations of the Council, notify certain supplies of goods 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, if such goods are manufactured in India.

Notification No. 48/2017-Central Tax

Some supplies have been notified as deemed export vide above notification as below:

1. Supply of goods by a registered person against Advance Authorization
2. Supply of capital goods by a registered person against Export Promotion Capital Goods Authorization
3. Supply of goods by a registered person to Export Oriented Unit
4. 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 Authorization.

He is chartered accountant from Raipur Chhattisgarh practicing in indirect tax and is national empanelled faculty of indirect tax committee of ICAI, New Delhi.

(Author may be contacted at caramandeep.bhatia@gmail.com or on  + 91 9827152729)

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Category : Goods and Services Tax (6438)
Type : Articles (16480)
Tags : goods and services tax (4930) GST (4533)

18 responses to “GST on Export Of Goods & Services”

  1. Virag Shah says:

    Hello,
    One of our client, providing consultancy services to outside India.He received all payments in foreign currency to directly in Indian bank.Our concerns are as follows:
    1. GST registration require for the same under export of services.
    2. If yes, whether he can claim all input tax credits which he paid as GST

    Thanks in advance.
    Virag Shah

  2. DIPALI DODHIA says:

    ONE OF MY ASSESSEE IS PROVIDING SERVICE OF MANPOWER SUPPLY OUTSIDE INDIA COMPANY.
    SOME OF MAN POWER IS SUPPLIED OUTSIDE INDIA AND SOME WITH IN INDIA TO AND COMPANY SITUATED OUTSIDE INDIA.
    IS MY ASSESSEE IS ELIGIBLE FOR BENEFIT OF EXPORT UNDER GST FOR ABOVE SUPPLIES?

  3. Girija says:

    Dear sir,
    I have started working as a translator for a US based organisation. Complete work will be done online through a website. I will get money directly in the savings account in INR.
    Can you tell me about GST applicability in this case? Do i have to register or will be exempted according to turnover limit?

  4. CA Kapil dev agrawal says:

    Dear Sir,

    Really very good article.

    Thank you very much your valuable article.

    Regards,
    CA Kapil dev agrawal
    7405210223

  5. Rohan Dalvi says:

    Thank you for the article. It was very informative. I make training videos which are sold in Europe and USA . I make no sales in India. I get payment via PayPal.
    1. Does this come under export of services?
    2. How much tax do I have to pay?
    3. How do I file for refund?

  6. ASHOK MEHTA says:

    Very informative article. Please clarify whether in case of sample sent to overseas for approval, IGST is payable or it will be treated as Export & exempted.

  7. Ajay Bothra says:

    Dear Sir,
    A very good Article, however some queries are there.
    (1) suppose I filed a shipping Bill on 28th JAn 2018 the export took place on 16th of Feb 2018. Then what Tax Period I should consider?
    (2) For Dry Bulk cargo we are not sure what will be the exact quantity to be shipped, suppose I filed Shipping Bill for 22000MT but actually the export took place for 20000MT in this case how will I get refund? As the qty, value in Shipping Bill, Invoice and EGM will mismatch.

    Kindly throw light on the above instances.

    Regards,

  8. MITESH KUMAR GUPTA says:

    Fabulous Article sir. I enjoyed reading the whole article, and Thanks for such a good explaination.

  9. phoolkumar Jangra says:

    Sir, i went to inter sate purchase a machine so this input rec. in nest month

  10. Arun Goyal says:

    It is a complicated subject. Many exporters re not getting the refund even after doing all the paper work.
    There are many who have paid IGST on imports for export production. Now they are having a problem in getting refunds. there is the issue of nexus between exports and the inputs which have suffered the duty.
    Suggest readers look at all aspects, that is, FTP, DBK, GST and circulars. They may have to even coach the officials who have a tunnel visions, that is, they know only the area of their respective jurisdiction but not other related law.
    More information is in the post Budget 2018 Exports, Imports and GST books now coming on the market

  11. JAGDISH RUPARELIYA says:

    I WANT TO JOIN YOUR GST ONLINE CERTIFICATION COURSE..

  12. KETAN PARIKH says:

    HOW CAN WE RECONCILE GSTR 2, ON THE PORTAL

  13. ASHOK KHADE says:

    Sir, I want to import the material and want to export the same material to other country without clearing in india. May i know the tax impact on me and my exporter.
    Shall i pay the import duty in india or my export will clear the material in his country?
    Please help.

  14. Shanmugham Kundan says:

    Dear Mr.RS Bhatia,
    Many thanks for detailed explanation, it would make people to understand the provision of rules in terms of GST on Export of goods and services.

  15. MD says:

    Thanks a lot for the detailed information (with reference to provisions of law and notification) on refund of ITC on export of goods and services. Very easy to understand with illustrative flow chart.
    Thanks once more.

  16. Ca nikunj bhangaria says:

    Excellent article , Ramandeep ji. Very clearly explains the concepts.
    Could you please also give us the implications on sending free samples to say, Bhutan,Brazil, etc.from India. What if in this case the receiver is ready to pay the transit expenses?

  17. Tinku Jain ( ca final student) says:

    Good article sir.
    I have one doubt. In case of export of goods can a exporter can also claim duty drawback under customs law…???

    • Arun Goyal says:

      Yes, you can claim both now since DBK is covering only the customs portion after GST. Latest amendment in DBK was at end Jan 2018, please see this in the DBK/RSOL incentive rates in the post Budget 2018 books in the market.

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