Introduction: Embarking on an export venture in India requires a thorough understanding of the Goods and Services Tax (GST) provisions that govern the export of goods and services. The GST regime offers a favorable environment for exporters by classifying exports as “zero-rated supplies,” allowing for the export of goods and services without the burden of tax. This feature aims to enhance the competitiveness of Indian exports in the global market. Whether you are considering starting a new export business or planning to expand your existing operations internationally, familiarizing yourself with the GST framework for exports is crucial. This guide simplifies the GST requirements and procedures for exporters, ensuring a smooth and compliant export process.
Are you considering launching a new export venture or expanding your existing business beyond Indian borders? Understanding GST provisions for exporters is crucial. Let us understand it in easy language for a new /existing Exporter.
In the framework of India’s Goods and Services Tax (GST), provisions exist for exporting goods and services without taxation, termed “zero-rated supplies.” These supplies are considered exports and are taxed at a rate of 0%, aiming to bolster India’s competitiveness in the global market by encouraging exports.
In order to export goods or services and properly claim this benefit, businesses have a couple of options:
1. They may furnish a bond or Letter of Undertaking (LUT) without paying IGST fees. (Note: a LUT is valid only for one financial year. Exporters must apply for fresh LUTs yearly); or
2. They may include payment for IGST and later claim a refund for the same.
Exporting goods: Documents and Procedures
- Obtain the Import Export Code (IEC);
- If exporting without paying IGST, furnish a bond or LUT;
- Ensure relevant purchase orders are attached to other documents;
- Issue tax invoices containing the following details:
- Endorsement describing whether the supply is for export with or without payment of integrated tax
- Name, address, and GSTIN of the supplier
- Invoice number and date
- Name and address of the recipient, including delivery address and destination country
- Harmonized System of Nomenclature (HSN) Code of goods, along with the relevant description
- Quantity of the goods and the number of units
- The total value of the goods, with the breakdown of the value into the price per unit
- Signature of the authorised signatory of the supplier;
- File the shipping bill and include the same details listed on the tax invoice.
- The shipping bill can also act as a refund claim provided that:
- The person carrying the export good files an export manifest; and
- Applicant has filed forms GSTR-3 or GSTR-3B appropriately.
Exporting services: Documents and Procedures
As per Section 2(6) of the 2017 IGST Act, services qualify as exports when:
- Suppliers of services are in India
- Recipients of services are situated outside India
- The place of supply (POS) of services is outside India. For cross-border transactions, unless specifically mentioned, the default POS for services is the location of the recipient of service;
- Suppliers of such services have received payment for such services in convertible foreign exchange; and
- Suppliers of services and the recipients of services are not merely establishments of a distinct person.
- If exports are made without payment of IGST, furnish a bond or LUT
- Ensure that the relevant service agreement is attached to other documents;
- Issue a tax invoice containing the following details:
- Endorsement describing whether the supply is meant for export with or without payment of integrated tax;
- Name, address, and GSTIN of the supplier;
- Invoice number and date;
- Name and address of the recipient;
- HSN Code of services along with a relevant description;
- The total value of services with stage-wise breakdown, if any; and
- Signature of the authorised signatory of the supplier
- To avoid incurring GST charges, maintain documents such as the Foreign Inward Remittance Certificate or Bank Realisation Certificate to act as a proof of receipt of convertible foreign exchange within the prescribed period (typically one year from the date of export). GST will be made applicable to transactions in which exporters do not take this step.
Conclusion: Navigating the GST landscape for exports is essential for businesses looking to tap into international markets. By utilizing the provisions for zero-rated supplies, exporters can benefit from tax exemptions on exports, making their goods and services more attractive on the global stage. Key to a successful export operation under GST is the adherence to the prescribed documentation and procedures, including obtaining an Import Export Code (IEC), furnishing a bond or Letter of Undertaking (LUT), and ensuring proper tax invoice issuance. Additionally, maintaining necessary documentation like the Foreign Inward Remittance Certificate ensures compliance and facilitates the smooth processing of exports. Armed with this knowledge, Indian exporters are well-equipped to expand their reach globally, contributing to the growth of India’s export sector.
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You can also avail refund of the GST paid by you on the purchase of Goods/services done during the year for the purpose of the export of the above said Goods/ services. You can file a application for refund for each Financial year and maintain the purchase bills and payments made details for the purchases which are utilized for the above said exports.
– CA Ashwini Sonawane
Mob: 99304 11304
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