Section 54 of the Central Goods and Services Tax Act, 2017 contains provisions for claiming refund of Goods and Services Tax (GST). One of the situations in which refund can be claimed is in respect of supplies regarded as ‘Deemed Exports’. This Article discusses the provisions and procedure for claiming refund for Deemed Exports.

A. Supplies treated as Deemed Exports:

Section 147 of the CGST Act provides that 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.

In exercise of the powers conferred by Section 147 the Govt. issued notification 48/2017 – Central Tax dated 18th October 2017 notifying the following supplies as deemed exports:

Sl.No. Description of Supply
1 Supply of goods by a registered person against Advance Authorisation
2 Supply of capital goods by a registered person against Export Promotion Capital Goods Authorisation
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 Authorisation.

The terms Advance Authorisation, Export Promotion Capital Goods Authorisation and Export Oriented Unit are explained in the notification as under:

1. “Advance Authorisation” means an authorisation issued by the Director General of Foreign Trade under Chapter 4 of the Foreign Trade Policy 2015-20 for import or domestic procurement of inputs on pre-import basis for physical exports.

2. Export Promotion Capital Goods Authorisation means an authorisation issued by the Director General of Foreign Trade under Chapter 5 of the Foreign Trade Policy 2015- 20 for import of capital goods for physical exports.

3. “Export Oriented Unit” means an Export Oriented Unit or Electronic Hardware Technology Park Unit or Software Technology Park Unit or Bio-Technology Park Unit approved in accordance with the provisions of Chapter 6 of the Foreign Trade Policy 2015-20.

Hence to qualify as Deemed exports the following conditions should be fulfilled:

1. The supply is of goods. Supply of services is not covered.

2. The goods should be manufactured in India. The term manufacture has been defined under Section 2(72) as processing of raw material or input in any manner that results in emergence of a new product having a distinct name, character and use.

3. The supply of goods should fall under any of the above categories of supply of goods.

B. Refund for Deemed Exports

B.1: Person eligible to claim refund:

Third Proviso to Rule 89(1) of Central Goods and Service Tax Rules provides that in respect of supplies regarded as deemed exports, the application for may be filed by, –

(a) the recipient of deemed export supplies; or

(b) the supplier of deemed export supplies in cases where the recipient does not avail of input tax credit on such supplies and furnishes an undertaking to the effect that the supplier may claim the refund.

B.2: Documents to be filed with application for Refund:

♠ The application for refund in case of Deemed Exports supplies has to be filed in Form GST RFD-01.

♠ Clause g of Sub-rule 2 to Rule 89 prescribes that a statement containing the number and date of invoices along with such other evidence as may be notified in this behalf has to be furnished along with the application for refund in a case where the refund is on account of deemed exports.

♠ Vide notification 49/2017 – Central Tax dated 18th October 2017 the Central Government has notified the following documents under Rule 89(2)(g) to be furnished as evidence by the Supplier of Deemed Export supplies:

1. 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

2. An undertaking by the recipient of deemed export supplies that no input tax credit on such supplies has been availed of by him.

3. 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.

♠ In addition to this Declaration prescribed under clause l of Rule 89(2) the effect that the incidence of tax claimed as refund has not been passed on to any other person, in a case where the amount of refund claimed does not exceed two lakh rupees or a Certificate prescribed under clause m of Rule 89(2) in Annexure 2 of FORM GST RFD-01 issued by a chartered accountant or a cost accountant to the effect that the incidence of tax claimed as refund has not been passed on to any other person, in a case where the amount of refund claimed exceeds two lakh rupees has to be furnished.

Explanation to Rule 89 provides that where the amount of tax has been recovered from the recipient, it shall be deemed that the incidence of tax has been passed on to the ultimate consumer.

B-3: Procedure to be followed to claim Deemed Exports Benefits:

Circular No. 14/14 /2017 – GST dated 6th November 2017 was issued prescribing the procedure to be followed regarding procurement of supplies of goods from DTA by Export Oriented Unit (EOU) / Electronic Hardware Technology Park (EHTP) Unit / Software Technology Park (STP) Unit / Bio-Technology Parks (BTP) Unit under deemed export benefits under section 147 of CGST Act, 2017.

For supplies to EOU / EHTP / STP / BTP units in terms of Notification No. 48/2017- Central Tax dated 18.10.2017, the following procedure and safeguards are prescribed –

(i) The recipient EOU / EHTP / STP / BTP unit shall give prior intimation in a prescribed proforma in “Form–A”  bearing a running serial number containing the goods to be procured, as pre-approved by the Development Commissioner and the details of the supplier, before such deemed export supplies are made. The said intimation shall be given to –

(a) the registered supplier;

(b) the jurisdictional GST officer in charge of such registered supplier; and

(c) its jurisdictional GST officer.

(ii) The registered supplier thereafter will supply goods under tax invoice to the recipient EOU / EHTP / STP / BTP unit.

(iii) On receipt of such supplies, the EOU / EHTP / STP / BTP unit shall endorse the tax invoice and send a copy of the endorsed tax invoice to –

(a) the registered supplier;

(b) the jurisdictional GST officer in charge of such registered supplier; and

(c) its jurisdictional GST officer.

(iv) The endorsed tax invoice will be considered as proof of deemed export supplies by the registered person to EOU / EHTP / STP / BTP unit.

(v) The recipient EOU / EHTP / STP / BTP unit shall maintain records of such deemed export supplies in digital form, based upon data elements contained in “Form-B”. The software for maintenance of digital records shall incorporate the feature of audit trail. While the data elements contained in the Form-B are mandatory, the recipient units will be free to add or continue with any additional data fields, as per their commercial requirements. All recipient units are required to enter data accurately and immediately upon the goods being received in, utilized by or removed from the said unit. The digital records should be kept updated, accurate, complete and available at the said unit at all times for verification by the proper officer, whenever required. A digital copy of Form – B containing transactions for the month, shall be provided to the jurisdictional GST officer, each month (by the 10th of month) in a CD or Pen drive, as convenient to the said unit.

The above procedure and safeguards are in addition to the terms and conditions to be adhered to by a EOU / EHTP / STP / BTP unit in terms of the Foreign Trade Policy, 2015- 20 and the duty exemption notification being availed by such unit.

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